How to do a background check like a pro — it could save you money … and much more
How to do a background check like a pro — it could save you money … and much more ·CNBC
Scott Cohn
During the most chaotic days of North Dakota's shale oil boom, James Henrikson seemed like a reliable bet.
Thirty-two years old and exuding charisma, Henrikson had something everyone wanted during those go-go days in 2006. At a time when half the battle in North Dakota was getting workers, equipment and oil from place to place, Henrikson owned a trucking business — Blackstone Trucking.
Kristopher "KC" Clarke, an old motorcycle racing buddy of Henrikson's from Washington state, agreed to sign on as operations manager. Then a few years later, when Henrikson decided to branch out into oil drilling, he took on a partner — construction contractor Doug Carlile.
But in a story told on the next episode of CNBC's "American Greed," Clarke and Carlile would end up dead — extreme examples of the danger of not doing a proper background check, which in Henrikson's case would have turned up multiple arrests for assault, drugs, weapons violations and fraud.
Today, Henrikson is serving two life sentences at the federal Supermax prison in Colorado, convicted on 11 murder-for-hire counts.
New York private investigator Brian Willingham, founder of the Diligentia Group, says no matter how well you think you know a person, once the relationship moves to a position of trust, you need to protect yourself.
"Anytime there's a lot of risk, whether it's financial, personal, you might want to look into somebody's background to see if there's any potential red flags that you may identify about what they've done in their past," Willingham said.
But that does not have to mean hiring an expensive private eye. Willingham, a private investigator with more than 15 years experience and a Certified Fraud Examiner, shared some of his secrets exclusively with "American Greed."
Burn some shoe leather
Sometimes there is no substitute for some good old-fashioned legwork. That may mean going to the local courthouse to see if the person has a criminal past.
"Criminal history is one of ... the basic steps to determine whether somebody or not has any issues in their past," Willingham said.
It may seem intimidating at first, but most court documents are public records, and you have every right to see them. Of course, it helps to know what you are looking for. Willingham says many states have central repositories where you can search for criminal records. In many states — and the number is increasing all the time — the records are available online. So you can start at the state level and see if you need to make a trip to the courthouse.
Willingham says beware of commercial web sites that claim to allow you to do a complete background check — one-stop shopping — for a price.
"There's no such thing as sort of a nationwide criminal records search," Willingham said. "A lot of these databases will claim to have records that cover the entire nation, but the reality is that something like 70 or 80 percent of criminal records are not available online."
But you can do your own nationwide search of the federal courts, where some of the most serious criminal cases are tried. Most federal court records — particularly from cases in the past 20 years — are available online through a government database known as Pacer, for public access to court electronic records.
"Pacer is a phenomenal source, partly because you can access court documents directly from there," Willingham said.
The first step is to set up a Pacer account online. The service is not free, but it is not expensive either — just 10 cents per page, with a maximum of $3 per document. And if your charges do not exceed $15 in a quarter, you won't get billed at all.
In addition to criminal cases, Pacer allows you to search civil cases. That can uncover disputes your subject might have had with previous business partners. It will also show whether your subject has had trouble with regulatory agencies like the Securities and Exchange Commission, which bring charges in civil rather than criminal courts.
Federal court is also where all bankruptcy proceedings take place — business and personal — so you can use Pacer to see if your subject or any of his companies ever went bankrupt, who his creditors were and how things turned out.
License, please
You might be surprised to know how many jobs require a license in many states.
Even if the job has nothing to do with the reason you and your new business partner are getting together, you can learn a lot from his or her history with state regulators. Maybe he was a barber, a contractor, or an auto mechanic. Wouldn't it be good to know how he got along with his customers? Check with your state's office of professional regulation or secretary of state's office to get started. And if the subject is involved in a profession, there is a treasure trove of information available.
"As an investment professional you need to be licensed," Willingham said. "A private investigator needs to be licensed, doctors, lawyers, and each state has boards that regulate these licenses. So that would be one of the first things I would check on somebody's background is to verify that one, that they have a license, and two, whether any of these licenses have any regulatory actions, complaints filed against them."
In the case of an attorney, be sure to check with the bar association in the state where he or she is licensed. The American Bar Association has an online directory of state chapters where you can see if the attorney is operating in good standing.
For a financial professional, check out the Financial Industry Regulatory Authority's (FINRA) online Broker Check, which will give you the person's employment and disciplinary history.
Give me the news
There was a time when private investigators looking for dirt on a subject would have to go to the local newspaper, trying to get an overworked employee to let them search through back issues for bad publicity.
Nowadays, of course, there is Google. But Willingham says that should just be your starting point.
Some newspapers will let your search their entire archives online for free, or for just the cost of a subscription. There are also paid databases such as LexisNexis, but they can be expensive. So Willingham suggests a seemingly old school approach: going to the library.
"A lot of times you'll find local libraries will have access to historical newspaper databases, so you can go down to your local library and in many cases you can log in through your local library and get that information," he said. "So it's a great source of information that should not be missed."
And while you are online at the library or at home, do not forget social media, where pretty much everyone — intentionally or otherwise — reveals things about themselves.
"In some cases, they're posting things to make themselves look bigger and grander than they really are. For example, an investment professional might be posting pictures of their beautiful house, or their beautiful cars, to kind of show the public that they are very wealthy or they have an enormous amount of wealth to give the impression that they have a lot of things," Willingham said. "Obviously you want to look for the red flags. If they're saying horrible things about certain groups of people or types of people, if they are sort of flashing their wealth, that's something that I certainly would be concerned about."
The personal touch
Do not limit yourself to searching online. Sometimes there is no substitute for personal contact.
If your subject has provided references, by all means check them out. But Willingham says do not stop there.
"What I tend to do is I find people who are independent, who may have worked with them, been business partners, had some sort of relationship with them, and to call them sort of out of the blue, and to get sort of the real story," Willingham said, "because what you tend to find is when you catch people who are not waiting for a phone call for a reference, they'll give you a more unvarnished opinion about somebody."
Penny wise, pound foolish
Now that you have these new tools, use them wisely. They can provide a starting point, but it still may make sense to get some experienced help.
"You want to do your homework, and you want to do as much information as you can, But at some point, you may want to consult a professional," Willingham said. "It's like any professional business."
Of course, all of this comes too late for KC Clarke and Doug Carlile. There is no telling whether a little bit of homework would have saved their lives, but it might have given them a fighting chance against a slick operator in North Dakota's oil patch.
Find out how John Henrikson's past finally caught up with him on an ALL NEW Episode of "American Greed," Monday, July 17 at 10pm ET/PT, only on CNBC.
