Situation – A large European and multinational accounting firm on behalf of their client, a Fortune 500 company, a multinational corporation and producer of pharmaceutical products, hired MADPI GLOBAL to conduct an enhanced due diligence on a prospective vendor in Canada. They didn’t suspect anything in particular but felt that their reputation could be questioned if they decided to deal with this vendor.
Action – The MADPI GLOBAL team was provided with the name of the vendor and names of the two representatives who were negotiating on the vendor’s behalf. We started by gathering basic information on the company, its shareholders, its financial standing, reputation, organized crime affiliations, politically exposed persons affiliations, and checking their offices and warehouses for any red flags.
To begin, the corporation was only established 4 years ago and their tax returns for the first two years were not provided. The credit history was empty and for some reason, they dealt with two banks, although their annual income was very low.
We then discovered that one of the shareholders was another corporate entity whose shareholders were not even Canadian citizens and did not reside in Canada. The other shareholder was a person who lived in a rental apartment, did not own any properties, was not married, did not have any children, and was driving a very expensive car which was financed for an 8-year term.
We then investigated the representatives and learned that one of them had a prior criminal record for possession of stolen goods of a high value and had served a sentence in prison. Through our business network, we learned that the same representatives were reaching out to various local vendors with propositions of partnership but sounded suspicious and didn’t seem to have the experience or the knowledge necessary to arrange contracts.
Several other inconsistencies in regard to the existence and operations were identified as well.
Results – MADPI GLOBAL provided the report to the client identifying red flags and recommendations. Both the accounting firm and their client were very happy with our investigation and have not moved forward with this vendor. Upon their next request at a later time, we conducted another due diligence on another vendor and the client proceeded establishing successful contractual relationship with them in Canada.
