To avoid scandals, companies hire corporate investigators to dig deep : The Indicator from Planet Money What's cooking in the executive suite? Today, delve deep into the world of corporate investigations. Learn how checking the facts can avoid some seriously salacious scandals.

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Every week, it seems like there is a new story of bad behavior from company leaders. Like, take Dan Price. He's that long-haired tech CEO who's kind of famous for his left leaning, feel-good posts on LinkedIn and Twitter.


Oh, a long-haired LinkedIn laureate.

WOODS: A left leaning, long-haired LinkedIn laureate, yeah. But, you know, there was some dark stuff behind the scenes. Dan Price recently faced sexual assault allegations and then resigned from his company, Gravity Payments.

MA: Remember Adam Neumann, the WeWork guy, he's actually now back courting investor money, and we could actually go on.

WOODS: And these aren't just salacious scandals. They really hurt everybody involved with the company. After WeWork canceled its IPO, it laid off 2,400 workers. And if you're a venture capitalist or on a company board, you probably want to avoid working with a CEO who's likely to implode or even defraud investors.

MA: Yeah, hopefully. And that is why before you make a big hire, you bring in a person like Jen Hoar, corporate investigator.


JEN HOAR: Investigative work is looking for connections between people and companies and mapping out relationships.

WOODS: Like, with strings on a chart? Like a serial killer chart?

HOAR: I mean, almost. Yeah.


WOODS: And I'm Darian Woods. Today's show, how to sniff out potential wrongdoing before it happens in the executive suite - corporate investigations, it's like a very deep background check. We investigate after the break.


MA: Jen Hoar used to work as a journalist. But nowadays, she talks to people for a living in a different kind of way.

HOAR: I'm managing director at Forward Risk & Intelligence in Washington, D.C.

MA: Jen pushes back on being called a private eye for business, but the reports she helps write would make any hardboiled detective salivate.

WOODS: So the way it works is that a company or a potential investor will come to Forward Risk & Intelligence, and they'll ask for information on, like, a new company they want to acquire or a new CEO candidate. They're looking for the kind of information that can't be found in corporate reports or just on Google.

HOAR: It's really developing at times almost a character study - if the CEO has an authoritarian approach to decision-making. Are they receptive to input? Does somebody have a proclivity for thinking the rules don't apply to them? Or are they given to personal excess in a way that would have relevance to how they behave in the corporate setting?

MA: And Jen's company answers to these questions in two ways. Someone does the desk research, and they sift through court records and filings. And meanwhile, Jen interviews former employees or colleagues of the person in question. She'll find interviewees through new searches or social media like LinkedIn. And then there's the cold call.

HOAR: People do want to help. And as long as you explain who you are and what you're doing and how you found them, people are very receptive to sharing what they know.

WOODS: And this is where Jen's special power comes in, her deep curiosity about people. Jen says she likes to keep her questions open-ended.

HOAR: What was it like to work there? What did you like about it and not like about it? What was your sense, even indirectly, of the leadership style of the executive in question?

WOODS: When you feel like somebody is not giving you the, you know, full picture, when you kind of sense that there's something else there, what are the kind of questions you use to kind of dig through that?

HOAR: I'm sure you have some good ones.

WOODS: Oh, yeah, I'm doing it right now sort of.

HOAR: I do love the use of tell me more about or can we go back to or you mentioned X or Y, can you say more about that? You know, you mentioned that you were concerned about some financial issues, and people weren't getting paid. Do you remember when that was, or can you tell me a little more about that? I think that was really important.

WOODS: OK. So let's say you call somebody up. They say, yeah, no, actually, the CEO was a bit dodgy. They had a secret lover that would come into the office and, you know, use the expense account and - you know, might sound like this person might have some real gossip here. What would happen next?

HOAR: That's quite a salacious set of claims. And you have to corroborate those claims in other places and ensure that there's some context given as well to if that source has an axe to grind. So each source needs to be properly contextualized for why and how and when they had access to the information they claim to have.

MA: So Jen pairs her findings from the interviews with whatever's uncovered from the desk research. It might be criminal records or information from other public databases. And if something from this executive's personal life is relevant, that's included, even down to parking tickets.

WOODS: This summer, Jen read some compelling research that showed that her work does matter for companies. This work was by Harvard professor Aiyesha Dey and her colleagues. Aiyesha had hired a traditional private investigator to look into more than a thousand executives for her research.

AIYESHA DEY: We gave them the entire list and said, can you access whatever databases you can?

WOODS: I'm picturing a very humid, rainy day with a fan whirring in the background and, you know, talking to a man in a trench coat saying, we've got a thousand names.

DEY: Yeah, I covered my hat low over my face. It was a - quite a sinister deal.

MA: And when she got her intel back and ran the numbers, Aiyesha was surprised by just the sheer magnitude of how much more likely being a rule breaker in your personal life bleeds through into your professional life.

WOODS: Aiyesha divided CEOs into two groups, one that had criminal convictions recently, personal infractions on anything related to traffic violations to domestic violence charges. And the other group didn't have any recent infractions. The group that had personal infractions were more than twice as likely to lead firms implicated in fraud.

DEY: That's huge. So it's a huge effect. So it's basically - it's kind of confirming this sort of underlying construct is - kind of gets revealed in your actions and your decisions.

WOODS: There's been a movement recently in the context of formerly incarcerated people to give them second chances in the workplace. And so do you think this idea of scrutinizing CEOs' past rule-breaking is kind of counter to this idea of possible rehabilitation and that kind of thing?

DEY: Yeah. So - and this is exactly why it's not OK to just not give people a - like, no, I'm not going to hire you if you have something in the past. So there are these ethical concerns. There are privacy concerns. There are issues like you're pointing out. But at least our data suggests - all these show is that if you take a large sample of individuals with personal infractions, it's very strongly correlated, causally so, with fraud and earnings manipulation and insider trading in the firm. So you can be aware of it, have good control systems in place, but not dismiss people because of their past. You know, leaders have a big impact on the firm. They shape the culture. It's kind of an important position of power. And so it doesn't hurt to be a little more diligent.

MA: Aiyesha's findings are evidence supporting the relevance of what our corporate investigator, Jen Hoar, does. But a company could still choose to ignore what Jen finds. They might say, yeah, sure, this person might be a higher risk for fraud or insider trading, but they also have the drive to take risks for the company. And that is what we need right now.

WOODS: And that's more or less what seems to have happened with Adam Neumann. When Andreessen Horowitz, the venture capital firm, announced a $350 million investment in Adam Neumann's new real estate company, it was no secret the kind of shenanigans he had been up to at WeWork. But Andreessen Horowitz seems to want to roll the dice. They said Adam Neumann had grown from lessons learned.

HOAR: If I had the opportunity, I would want to independently vet the lessons that he learned. What are those lessons? And did he, in fact learn them? You can learn that from other people with whom they've worked and gotten a sense of what's happened since he last ran WeWork.

MA: And Jen says that sometimes happens with her reports at Forward Risk & Intelligence. The company can hear all about the dirt she's found about a potential CEO. They will consider it and then still go ahead with the hire.

WOODS: Well, if they want to take the chance, they can.


MA: This show was produced by Noah Glick with engineering by Maggie Luthar. It was fact-checked by Kathryn Yang. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR's a production of NPR.

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