December 21, 2003
Due Diligence and Fraud
Why is fraud so hard to avoid? I have spent over six years interviewing several hundred people in the U.S.A. and Canada who have lost their entire investment when purchasing a business opportunity. The investments range from payphones, vending machines, and various distributorships.
I have formed the hypotheis that there are common flaws to their due diligence.
For example, I always ask if they contacted their local BBB or some other BBB. Over 85% proudly state that this was part of their "due diligence".
They report that since the BBB didn't have anything bad on the company, then they felt comfortable with investing. I have explained elsewhere why this is a poor approach, contacting the BBB is unlikely to detect fraud.
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