Case Studies
Investment Due Diligence &
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Litigation Support &
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Political Risk &
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Investment Due Diligence & Risk Assessment
Upstream Oil Investment in Africa
Client Requirement: An investor in emerging markets asked Veracity to conduct comprehensive, qualitative due diligence on a listed oil company and its principals operating in a major African oil-producing country.
Approach: Utilizing sources in the oil sector and documentary material, Veracity discovered that the company had been involved in litigation arising from prior operations in South America and that one member of the management team was implicated in corruption in another African country. We also learned that the company and its principals had impeccable political connections in the country of immediate interest and that the company possessed highly prospective exploration acreage. Additionally we confirmed that the company was in good standing with the national oil company, a requirement for successful project execution.
Real Estate Partners in Russia
Client Requirement: The principal investment desk of a major European bank asked Veracity to assess the political connections and backgrounds of its potential real estate partners in Russia.
Approach: Initial research on the local partners revealed that controlling shareholders, unknown to the client, were involved in the prospective transaction. The involvement of these parties, if not discovered in time, would have created an acute violation of the Client's internal "know-your-client" regulations, invalidating the deal and exposing the Managing Director involved to severe career repercussions. In addition, through local sources we learned that the potential partners had advantageous political connections, but thin real estate development experience with a designated real estate consultant who had only completed one previous project and was not considered a serious player in the Moscow market. Based on this discovery, we advised the client to replace this particular team member before proceeding with the investment.
Biotechnology Opportunity in China
Client Requirement: An investor approached Veracity to gain a better understanding of the ethical record and business practices of a NYSE-listed Chinese biotech company in which it was considering a significant investment.
Approach: Veracity deployed personnel on site in China to develop a first-hand understanding of the probity of the company's officials and its business practices. While we uncovered no instances of corruption or other criminal behavior, we learned that the company was not competing well in the marketplace as a result an inferior distribution network and ineffective, overpriced goods. Veracity's detailed report prompted the client to sell its position in the company.
Anti-Corruption/FCPA
Assessing Corruption in a BRIC Country
Client Requirement: In the course of conducting advisory work for a multinational firm in a BRIC country, Veracity discovered allegations against the firm's local agent. We immediately brought the concerns to the attention of the client, who then commissioned Veracity to conduct a comprehensive investigation.
Approach: Under client instructions to work discreetly, Veracity made quiet inquiries with locals connected to the agent and learned that a previously undisclosed person was acting as an intermediary on behalf of the agent. Based on these findings, the client was able to make appropriate disclosures and adjust its business practices in this important market.
Responding to Corruption in an African Country
Client Requirement: After learning of a kickback scheme run by its local employees, a US-based company asked Veracity to investigate. The client's subsequent delay in invoicing for its product angered the local officials that were due to receive the kickback and prompted threats against the client's employees. Further complicating matters, the goods in question were to be purchased with a grant from a European country's development aid program.
Approach: Veracity identified sources with long-standing experience in the country obtained details on the figures involved in the scheme and contacted reliable sources in a foreign embassy to develop an accurate assessment of the danger posed by the physical threats to the client's employees. Veracity concluded that there was little direct risk to the employees, but as a precautionary measure informed the police via local contacts so that they could discreetly monitor the client's office. Veracity then worked closely with both the host country's government and with diplomats from the European donor embassy to avert the bribe, maintaining complete discretion at all times.
Vetting Third-Party Vendors and Agents
Client Requirement: A multinational client commissioned Veracity to vet existing and prospective local agents and sales representatives across several countries. The client had specific concerns about bribery issues, particularly given its operations in countries with reputations for corruption.
Approach: Veracity designed a customized reporting solution that allowed the client to conduct a phased review of existing relationships. In light of the varied geography involved, Veracity developed a host of knowledgeable local contacts in several regions, including the former Soviet Union, Sub-Saharan Africa, the Middle East, and Asia. Each review included reputation analysis and inquiries into undisclosed governmental relationships. Veracity completed over 50 inquiries for this client, allowing it to control its exposure to potential bribery issues, terminate suspect relationships, and implement an efficient process for vetting new agents.
Evaluating Allegations in South America
Client Requirement: A law firm acting on behalf of a multinational corporation engaged Veracity to investigate corruption allegations against one of its local agents involved in government purchasing. The client commissioned Veracity to mount a full and discreet investigation into its local representatives and into the parties behind the allegations.
Approach: Veracity's team scoured local press and deployed to the region to conduct circumspect interviews with individuals familiar with the client's local agent. We concluded that it was unlikely that the agent was involved in bribery and learned that a national police investigation of local agents had yielded no negative findings on the client's agent. Veracity also discovered that the allegations likely originated with a competitor. Using this information, the client was able to preemptively disclose appropriate information to authorities, continue its relationship with its agent, and participate in the government tender.
Political Risk & Geopolitical Analysis
Political Risk Assessment and Problem-Solving in Turkey
Client Requirement: An investor with assets in eastern Turkey retained Veracity for comprehensive risk assessment and problem-solving services to address a series of political and commercial challenges.
Approach: Veracity personnel traveled to Turkey multiple times to gain first-hand understanding of the client's issues and produced a series of detailed risk analysis reports on specific people, political developments, and security concerns. We also provided strategic guidance and risk assessments to help the client engage with key figures who had influence over critical projects and we designed an intelligence collection and reporting system to keep the client informed on local, regional, and national developments.
Middle East Leadership Analysis
Client Requirement: A major energy firm asked Veracity to develop a detailed brief on a key Middle Eastern country's energy decision-making process and its leadership in preparation for a visit by the client's CEO.
Approach: Through multiple well-placed sources, Veracity provided detailed reporting and analysis on the personalities of the leaders, national decision-making methodology, and the status of key energy initiatives. We recommended approaches to engaging the country's leadership and provided the CEO with talking points that presented the relevant issues with the necessary level of nuance. The report gave the client a measure of confidence and preparation for the visit that it had previously lacked.
Mining Investment Risk Assessment in Southeast Asia
Client Requirement: A mining client with a significant investment in Southeast Asia asked Veracity to assess political risk emanating from government activities and security threats raised by militant groups.
Approach: Veracity personnel spent four days in the subject country, both in the capital and near the mining site, meeting with a range of government and military officials, labor leaders, NGO and local groups, and local mining experts. We concluded that the host government's efforts to encourage mining activities and the investor's efforts to create goodwill with local entities created a favorable environment for mining activities, and outweighed the risks rebels posed to the operation. The report provided detail and context that gave the client a new level of comfort with the investment.
Mining Investment in West Africa
Client Requirement: An investor engaged Veracity to undertake a multi-phase project involving due diligence and political risk analysis for a major mining investment in West Africa.
Approach: Based on travel to the subject country and communication with several unique sources, Veracity initially provided a detailed assessment of national political dynamics and the country's recently-elected leadership. We then analyzed local political conditions and officials in specific areas slated for mining development and conducted due diligence on the local executives of the subject mining company. Subsequently, we made recommendations for revamping the company's Board of Directors in order to enhance its stature and bring it into line with our overall political assessment of the country. We also developed a strategy and identified local partners for a major charitable effort focused on bolstering education and healthcare in areas near the mines. After completion of the baseline reports, we provided regular monitoring and reporting to keep the client informed of important new developments.
Litigation Support & Complex Problem-Solving
Evaluating Allegations in South America
Client Requirement: A law firm acting on behalf of a multinational corporation engaged Veracity to investigate corruption allegations against one of its local agents involved in government purchasing. The client commissioned Veracity to mount a full and discreet investigation into its local representatives and into the parties behind the allegations.
Approach: Veracity's team scoured local press and deployed to the region to conduct circumspect interviews with individuals familiar with the client's local agent. We concluded that it was unlikely that the agent was involved in bribery and learned that a national police investigation of local agents had yielded no negative findings on the client's agent. Veracity also discovered that the allegations likely originated with a competitor. Using this information, the client was able to preemptively disclose appropriate information to authorities, continue its relationship with its agent, and participate in the government tender.
Embezzlement in the Former Soviet Union
Client Requirement: Veracity was retained by a law firm on behalf of a multinational client involved in a joint venture in the former Soviet Union. The client believed that the joint venture management team was embezzling funds and had established personal businesses operating within the company. The client needed to discreetly analyze the management team's wealth and determine how its members might have been embezzling funds.
Approach: Through discreet inquiries, Veracity discovered that key executives were living beyond their means – in extreme extravagance, in one case. After assembling a picture of the executives' lifestyles, Veracity worked to determine the means of embezzlement. We identified a number of contractors and vendors hired by the company that were controlled in part by the executives and paying kickbacks. Veracity also determined that a key executive was directly siphoning money from the company and moving it to offshore bank accounts through elaborate banking relationships and secret coded accounts. Using the information in our report the client was able to take appropriate action against the management team.
Asset Recovery in the Middle East
Client Requirement: A law firm retained Veracity to assist a Gulf-based commercial bank with large exposure to a major credit default by prominent investors and allegations of potential fraud. The client required assistance in locating worldwide attachable assets and identifying chains of ownership as quickly as possible.
Approach: Based on open source material Veracity developed conceptual connections between holding structures and potentially attachable companies, shareholdings, and associated financial holdings. In order to assess these assets' potential for attachment, we mapped the relationships between them showing how various assets were affiliated and through what structures they were controlled. In a second phase, we deployed local resources to collect specific supporting information and were able to confirm asset relationships, identify previously undisclosed holding structures, and provide other closely held information. Using this data, our client was able to pursue the assets with the highest probability of success.
Asset Manager Due Diligence
Manager Due Diligence – United States
Client Requirement: A major European pension fund asked Veracity to assess the backgrounds of two principals of a US- based hedge fund.
Approach: Veracity's New York office quickly identified a "red flag" issue: the two principals' previous fund had been cited by regulatory authorities for chronic minor infractions. We identified several sources who consistently noted that the two principals were brilliant investors but had a "tendency to cut corners" and "paid scant attention to rules and regulations." Based on Veracity's report, the client opted to avoid this investment.
Manager Due Diligence – United States and Asia
Client Requirement: A financial investor asked Veracity to conduct a background check on a manager who was about to launch a new Asia-focused fund.
Approach: Veracity's offices in New York and Singapore worked together and quickly determined that the hedge fund manager enjoyed a stellar reputation for investment performance and probity. However, we also learned that the manager had a difficult time retaining staff because he was not successful in managing people. The client used Veracity's report to suggest structural changes in the fund's operation, leading the manager to hire a research director who could more effectively supervise the analyst team.
Manager Due Diligence – India
Client Requirement: A financial investor asked Veracity to verify the qualifications of a hedge fund operating in India in which it planned an investment.
Approach: Our India office conducted sophisticated background checks on two top managers of the fund and was able to verify all aspects of the subjects' histories and prior work experiences. Most importantly, Veracity's targeted interviews provided insight into the investment style of the portfolio managers, confirming for our client that the managers had experience with the investment strategy they were advocating for a new fund.
Manager Due Diligence – Taiwan
Client Requirement: A fund-of-funds asked Veracity to conduct a background check on a hedge fund manager who had worked in the US and Taiwan.
Approach: Our Singapore office carried out direct inquiries in Taiwan and determined that the manager had a solid performance record; however, it also identified some inconsistencies in the structure of the fund. The client used our report to resolve these issues in its negotiations with the fund and the investment proceeded.
