Conducting Background Checks on Board of Directors and Executive Directors

December 1, 2009

Best Practices for D&O Background Checks: The Application
No matter what the level, all potential employees should be asked to sign a waiver to allow the pulling of their consumer credit report both initially and routinely as the need arises. That way the waiver is in place when needed.

Additionally all applicants should prepare a thorough background information form to include all residence addresses used, all names used, and any convictions of either misdemeanors or felonies. As long as the above requisite information is in place, a thorough background investigation can be conducted not only more efficiently but with greater accuracy. Potential felonies are frequently pled down to a misdemeanor; without knowing the totality of the convictions, important historical information about your applicant may never be known.

Applicants will do most anything to land a job in today’s economy and those already employed may succumb to temptation to fraudulent activities if they are financially stressed. The application must be fine tuned to ask all the questions an employer would want to know, and ask them in a detailed fashion so the applicant is unable to provide vague answers. Education questions should include not only the name of the school but also the city, state, hours earned, name used while in school (important for females) and honors achieved.

The more information that is requested, the more information that can be validated.

Best Practices for D&O Background Checks: Ongoing Risk Management Tool
Background checks are an important risk-management tool not just for the applicants but for current employees as well, performed on a periodic basis. Not only is it embarrassing when a high-ranking officer turns out to have a criminal past, there may be legal consequences as well.

Employers have a duty to protect their employees, customers, clients, and visitors from harm caused by employees. If a reasonably diligent reference check and background investigation would have revealed that the applicant lied, is unfit for the position, or may be a threat to others, then the employer’s failure to investigate with reasonable diligence may result in the employer being held legally liable to an injured party.

Best Practices for D&O Background Checks: Due Diligence
Due diligence in validating information involves a thorough investigation. Several areas are typically examined, as identified below.

Reference Checking
Reference checking, a critical component of the hiring process, is complicated by potential legal ramifications. Prospective employers need to obtain as much information as possible with respect to potential new hires, including detailed checks of their references.
When the position to be filled has significant visibility, involves a high degree of trust, or involves interacting with the public or other important constituents, the use of a professional who specializes in interviewing is highly recommended.

Interviewing
Interviewing is a skill that is only achieved through experience and training. A trained interviewer can often detect deception, ruses and other schemes used by an applicant to corroborate false information. This can include individuals used as references when in fact they had no working relationship with the applicant but are a friend or friend for hire in disguise.
Tough times put applicants under stressful conditions, causing some to do almost anything to land a job, including falsifying references or work history.

Educational Credentials
Educational credentials are commonly misrepresented on job applications and résumés. Accordingly, all claims with respect to education (including such things as degrees earned, honors conferred, and rank in class) must be verified. Where authorship of published works has been claimed, such claims should be verified and the works checked for evidence of plagiarism.

Best Practices for D&O Background Checks: Red Flags
Certain issues should raise red flags. A degree from an unaccredited institution or a “diploma mill” is one red flag. Various agencies, including those authorized by the U.S. Department of Education’s Council for Higher Education Accreditation, can provide assistance.
Schools rarely lose student records. Thus, any claim that the records cannot be found should be checked with the institution. Claims by a candidate that his school is “out of business” should be verified with the Department of Education (DOE) of the state in which the school allegedly operated. DOE should be able to verify that the school existed, when it closed, and also should be able to direct the investigator to the custodian of that school’s student records.
Embezzlement can occur at any level of an organization. Even mid-level employees with financial problems can succumb to the pressures and commit fraud. Of course, this could be damaging for an employee who handles funds or is in a position of trust or responsibility. Obtaining financial background information on all candidates and on board employees periodically is essential.

Best Practices for D&O Background Checks: Conducting Due Diligence Interviews

Interviewing is important in due diligence investigations.

Preparation is key to a successful interview, be it once a fraud is suspected or perhaps during a routine background investigation. Consider the following safeguards to reduce risks in the interviewing process and to better protect not only the interviewer but the employees as a whole. These safeguards should be applied to all interviewees, whether they are witnesses, references or the final interview of the applicant or employee suspected of wrongdoing:

Notify someone as to the name of interviewee as well as exact interview location, include time of interview and expected time of return
Attempt at all possible to conduct interviews with a partner. This partner can take notes, and more importantly will act as a witness so as to reduce the likelihood of false accusations.
Conduct interviews in public places if at all possible, view the situation with caution should the venue be a home or non public place. Consider an interview in a government building (i.e. courthouse, federal or state building) as this may offer screening devices to detect firearms and other weapons.
Avoid disclosing personal information about yourself during an interview as word may travel eventually to a person you would not want to have this information.

Preparing in advance for potential dangers in an interview may be the difference between valuable information obtained and a dangerous incident. If fraud is uncovered, a consultation with legal counsel will direct the next steps, be it a criminal referral and/or a termination.

This article was contributed to Corporate Compliance Insights by Ms. Theresa Mack, a Senior Manager at Cendrowski Corporate Advisors. To read entire aticle please click here.




Subscribe to News RSS Subscribe to Blog RSS	« Back to Blog Conducting Background Checks on Board of Directors and Executive Directors December 1, 2009 Author Theresa Mack Best Practices for D&O Background Checks: The Application No matter what the level, all potential employees should be asked to sign a waiver to allow the pulling of their consumer credit report both initially and routinely as the need arises. That way the waiver is in place when needed. Additionally all applicants should prepare a thorough background information form to include all residence addresses used, all names used, and any convictions of either misdemeanors or felonies. As long as the above requisite information is in place, a thorough background investigation can be conducted not only more efficiently but with greater accuracy. Potential felonies are frequently pled down to a misdemeanor; without knowing the totality of the convictions, important historical information about your applicant may never be known. Applicants will do most anything to land a job in today’s economy and those already employed may succumb to temptation to fraudulent activities if they are financially stressed. The application must be fine tuned to ask all the questions an employer would want to know, and ask them in a detailed fashion so the applicant is unable to provide vague answers. Education questions should include not only the name of the school but also the city, state, hours earned, name used while in school (important for females) and honors achieved. The more information that is requested, the more information that can be validated. Best Practices for D&O Background Checks: Ongoing Risk Management Tool Background checks are an important risk-management tool not just for the applicants but for current employees as well, performed on a periodic basis. Not only is it embarrassing when a high-ranking officer turns out to have a criminal past, there may be legal consequences as well. Employers have a duty to protect their employees, customers, clients, and visitors from harm caused by employees. If a reasonably diligent reference check and background investigation would have revealed that the applicant lied, is unfit for the position, or may be a threat to others, then the employer’s failure to investigate with reasonable diligence may result in the employer being held legally liable to an injured party. Best Practices for D&O Background Checks: Due Diligence Due diligence in validating information involves a thorough investigation. Several areas are typically examined, as identified below. Reference Checking Reference checking, a critical component of the hiring process, is complicated by potential legal ramifications. Prospective employers need to obtain as much information as possible with respect to potential new hires, including detailed checks of their references. When the position to be filled has significant visibility, involves a high degree of trust, or involves interacting with the public or other important constituents, the use of a professional who specializes in interviewing is highly recommended. Interviewing Interviewing is a skill that is only achieved through experience and training. A trained interviewer can often detect deception, ruses and other schemes used by an applicant to corroborate false information. This can include individuals used as references when in fact they had no working relationship with the applicant but are a friend or friend for hire in disguise. Tough times put applicants under stressful conditions, causing some to do almost anything to land a job, including falsifying references or work history. Educational Credentials Educational credentials are commonly misrepresented on job applications and résumés. Accordingly, all claims with respect to education (including such things as degrees earned, honors conferred, and rank in class) must be verified. Where authorship of published works has been claimed, such claims should be verified and the works checked for evidence of plagiarism. Best Practices for D&O Background Checks: Red Flags Certain issues should raise red flags. A degree from an unaccredited institution or a “diploma mill” is one red flag. Various agencies, including those authorized by the U.S. Department of Education’s Council for Higher Education Accreditation, can provide assistance. Schools rarely lose student records. Thus, any claim that the records cannot be found should be checked with the institution. Claims by a candidate that his school is “out of business” should be verified with the Department of Education (DOE) of the state in which the school allegedly operated. DOE should be able to verify that the school existed, when it closed, and also should be able to direct the investigator to the custodian of that school’s student records. Embezzlement can occur at any level of an organization. Even mid-level employees with financial problems can succumb to the pressures and commit fraud. Of course, this could be damaging for an employee who handles funds or is in a position of trust or responsibility. Obtaining financial background information on all candidates and on board employees periodically is essential. Best Practices for D&O Background Checks: Conducting Due Diligence Interviews Interviewing is important in due diligence investigations. Preparation is key to a successful interview, be it once a fraud is suspected or perhaps during a routine background investigation. Consider the following safeguards to reduce risks in the interviewing process and to better protect not only the interviewer but the employees as a whole. These safeguards should be applied to all interviewees, whether they are witnesses, references or the final interview of the applicant or employee suspected of wrongdoing: Notify someone as to the name of interviewee as well as exact interview location, include time of interview and expected time of return Attempt at all possible to conduct interviews with a partner. This partner can take notes, and more importantly will act as a witness so as to reduce the likelihood of false accusations. Conduct interviews in public places if at all possible, view the situation with caution should the venue be a home or non public place. Consider an interview in a government building (i.e. courthouse, federal or state building) as this may offer screening devices to detect firearms and other weapons. Avoid disclosing personal information about yourself during an interview as word may travel eventually to a person you would not want to have this information. Preparing in advance for potential dangers in an interview may be the difference between valuable information obtained and a dangerous incident. If fraud is uncovered, a consultation with legal counsel will direct the next steps, be it a criminal referral and/or a termination. This article was contributed to Corporate Compliance Insights by Ms. Theresa Mack, a Senior Manager at Cendrowski Corporate Advisors. To read entire aticle please click here.	Tenant PI puts credit reports, nationwide criminal background checks and unique landlord history reports just one click away.