A shocking story in the December 7, 2008, San Francisco Chronicle recounts how investors lost $340 million, over one-third of a billion dollars, invested in a start-up firm that went bankrupt due to a dysfunctional CEO named John P. Rogers that was only minimally background checked.
The firm was developing â€œpay by touchâ€ machines for biometric payment at checkout stands. â€œPay By Touchâ€ lost $137 million on $600,000 in revenues in 2007, according to the news story, and the firm was in total disarray.Â According to news reports, the CEO engaged in drug abuse, partying and other excesses, such as instructing his staff to give jobs and shares of stock to women he met.
Smart investors, including two billionaires and Venture Capitalists, were among the people hoodwinked into investing millions of dollars.Â A nationally known wealth management investment firm, according to the new story, continued to ensnare investors, including NFL players, even after the firm was in trouble and even though it did not do a background check.
According to the article, there was plenty in Rogerâ€™s past that would have demonstrated that no sensible person would have invested in this endeavor.Â The Chronicle uncovered civil judgments and other run-ins that would have been big red flags for rational investors.Â The matter is now in litigation.Â The full incredible story is available at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/12/06/MNIK147QU3.DTL
What is even more incredible is that the cost of doing a due diligence check on a CEO, partner, joint venture or other investment is de minimis.Â There are numerous sources of information available to professionals that could have potentially saved investors from this type of debacle for less than some of these investors may spend for a nice dinner.
ESR offers a service called an â€œIntegrity Check,â€ designed to conduct due diligence in critical business relationships, such as appointing members to a board of directors, entering into a joint venture or other business relationship, acquiring a business, investing in a business or numerous other situations where the integrity of who you are dealing with is critical.Â Â For more information on in-depth integrity checks when it comes to investment and business dealings, see: http://www.esrcheck.com/IntegrityCheck.php