Background Investigation Check Lists Keep Clients Smiling

Consider this situation. You’re conducting a routine audit and you notice some discrepancies in the vendor payment records. You’re tempted to launch into employee and supplier interviews that day. But you remember what happened the last time you rushed an inquiry – you missed pertinent information and delayed the case while you played catch-up. This time you take a deep breath and refer to your background investigation check lists.

Background investigation check lists (see at end of article) can ensure that you’ll complete the appropriate searches and quickly collect the right data the first time. A check list for investigating multiple entities (see at end of article) can be used in conjunction with the background investigation check list. The multiple entity log ensures every category is checked for each searched entity, especially if these searches are conducted on different dates.

These check lists are the tools that will uncover a paper trail to the illegal flow of funds or other financial diversions. Now you have some ammunition to bring with you into your interviews.

At the onset of an investigation it’s essential to record on the background investigation check list all the names and other identifying information for the entities to be searched in each category. For example, if there are several listings for an individual entity (such as similar names or derivatives of a name), a crosscheck of previous addresses, dates of births, or other information will either verify or eliminate particular listings. Any listing that isn’t eliminated by this process should be included in the report but with a qualifying statement saying that without further verification it’s not certain that the listing is the actual subject in question. Pre-planning your entities will help you visualize your assignment before conducting your research.

You should use a separate background investigation check list for each county searched so you won’t mix information from different jurisdictions. You can circle either the “POS” or “NEG” on the form to indicate whether or not you received information for each source. You can circle “OVER” to remind yourself that you wrote information on the reverse side of the check list.

The check list includes various sources, from the county clerk’s office to the secretary of state corporate records office. Following are items to look for in each of these areas.

County Clerk 

This is the jurisdiction that handles lower-level civil litigation cases.
1. Assumed name certificates
Assumed name certificates – also known in some jurisdictions as fictitious business names or D.B.A.s (doing business as) – are filed for 10-year increments for entities that are conducting business in the county. These records can be searched by both business name and individual’s name.  

• name of business
• business address
• name of owner
• address of owner
• signature of owner
• date filed (valid for 10 years)
• file number
• registered agent and address

2. Civil index to lawsuits – both plaintiff and defendant (under $100,000)
These would include, for example, lawsuits involving civil disputes or cases that don’t fall into the state district court’s criteria. 

• plaintiff
• defendant
• case number
• date filed
• type of lawsuit
• plaintiff attorney
• defendant attorney
• disposition
• date of disposition

3. Criminal records – misdemeanors
In some jurisdictions these records are referred to as criminal minutes or criminal filings.  

• plaintiff
• defendant
• defendant’s address
• defendant’s date of birth
• case number
• date filed
• type of offense
• disposition
• date of disposition
• docket sheet

4. Debtor index financing statements/Uniform Commercial Codes (UCC)
For example, if a debtor obtained a secured loan for office furniture, equipment, household furniture, jewelry, or similar assets, a financing statement would be filed to alert the public that a debt is owed. This listing would include a detailed description of the asset. 

• name of debtor
• address of debtor
• secured party
• secured party address
• file number
• date filed
• collateral asset

5. State tax liens
Even though this is a county-level court record, any debtor owing state taxes that are unpaid may have a state tax lien filed against him in the county where he resides. To properly collect the tax, this tax lien must be filed in the same forum as the real property section. 

• plaintiff
• defendant
• address of defendant
• defendant’s tax ID or Social Security number
• Case number
• date filed
• amount of lien
• type of tax unpaid
• disposition
• date of disposition

6. Federal tax liens
Even though this is a county-level court record, any debtor owing federal taxes that are unpaid may have a federal tax lien filed against him in a particular county. To properly collect the tax, this tax lien must be filed in the same forum as the real property section. 

• plaintiff
• defendant
• address of defendant
• defendant’s tax ID or Social Security number
• case number
• date filed
• amount of lien
• type of tax unpaid
• disposition
• date of disposition

7. Liens, judgments, and abstracts of judgments
These liens refer to the state and federal tax liens described above. A civil judgment is filed after it’s obtained in a litigation case. To properly collect the outstanding judgment, an abstract of judgment also must be obtained and filed. This abstract can be filed not only in the same jurisdiction where the judgment was obtained, but in every possible county where assets are available to satisfy the judgment. To properly collect the tax, these liens, judgments, and abstracts of judgments must be filed in the same forum as the real property section.  

• plaintiff
• defendant
• case number
• date filed
• amount of lien of judgment
• disposition
• date of disposition

8. Real property records
These include UCC financing statements filed against real property, warranty deeds, quit claim deeds, deeds of trust, mortgages, judgments, mechanic’s liens, federal tax liens, state tax liens, powers of attorney, and releases. 

• buyer
• seller
• document number
• date document filed
• date document recorded
• description of property

9. Marriage licenses (including applications)

• name of male
• name of female
• female’s alias or maiden name
• date of birth of each party
• driver’s license number of each party
• date of application
• Social Security number of each party
• signature of each party
• document number
• address of each party

10. Tax office appraisal district
This office often is known in many jurisdictions as the central appraisal district. The records obtained include a listing of all real property owned by an individual, and all real property and business furniture, fixtures, and equipment owned by a business that utilizes these assets in producing income.

• owner’s name
• owner’s address
• document number
• date purchased
• appraised value of property
• legal description of property

11. Probate court

• deceased party
• executor
• case number
• date filed
• listing of assets
• heirs and their addresses
• voter registration – birthday, address, former address

District Clerk 

This office is a state court that deals with higher-level civil litigation or matters of state importance. It includes lawsuits in excess of $100,000 but may be less.

1. Civil index to lawsuits – both plaintiff and defendant (includes family law cases)
Examples of these types of lawsuits are divorce, child custody matters, suit on debt, contracts, liability litigation, civil disputes, and more. 

• plaintiff and address
• defendant and address
• cause number
• date filed
• type of lawsuit
• plaintiff attorney
• defendant attorney
• disposition
• date of disposition
• docket sheet

2. Criminal minutes – felony
These records are the state criminal cases filed in the county. The plaintiff will be the state in which the case is filed. Criminal cases include all felonies including murder, theft, and financial crimes, which aren’t filed in federal criminal court.  

• plaintiff
• defendant
• defendant’s address
• defendant’s date of birth
• case number
• date filed
• type of offense
• disposition
• date of disposition

U.S. Clerk 

This office is the source for the federal court system. It deals with federal civil litigation and/or federal crimes against the United States. There are often numerous federal districts in each state. Information obtained is limited to the specific area of jurisdiction.  

1. Civil index to lawsuits – both plaintiff and defendant
Federal civil litigation cases such as civil disputes involving interstate parties, and federal civil rights violation are filed in this court.  

• plaintiff and address
• defendant and address
• case number
• date filed
• type of lawsuit
• plaintiff attorney
• defendant attorney
• disposition
• date of disposition
• docket sheet

2. Criminal minutes
Federal criminal cases such as mail fraud, wire fraud, and interstate crimes are filed in this court. 

• plaintiff and address
• defendant and address
• defendant’s date of birth
• case number
• date filed
• type of offense
• disposition
• date of disposition

U.S. Bankruptcy Clerk 

This office is the source for the federal bankruptcy court system. The federal bankruptcy districts are also limited to the specific area of jurisdiction.  

• plaintiff and address
• defendant and address
• case number
• date filed
• list of debtors
• list of assets
• disposition
• date of disposition
• docket sheet

State comptroller (sales tax permits)  

This office maintains records of every sales tax permit and sales tax report filed in that particular state. This includes not only the headquarters’ offices but also the branch offices.  

• name of business
• charter number
• tax identification number
• corporate officers
• address of business
• branch office addresses
• status (good or bad standing)
• date of incorporation
• assumed names
• owned or owning entities

Secretary of State Corporate Records
This office maintains records on all domestic and foreign corporations doing business within that state.  

• name of business
• charter number
• tax identification number
• corporate officers
• address of business
• branch office addresses
• status (good or bad standing)
• date of incorporation
• owning corporations
• subsidiaries
• assumed names
• registered agent
• corporate history

Other Sources of Information 

• Social Security verification
  Social Security verifications will determine if a number is valid and when and where it was issued. 
• Social Security trace
  This trace will show the “header” information that contains personal data such as the current and former address of an individual.  
• driver’s license information
  A driver’s license check will produce an individual’s date of birth and address. 
• driving record (department of motor vehicle records)
  A driving record contains a three-year driving history, which includes an individual’s accidents, DWIs, and DUIs. 
• sex offender
  Lists of convicted sex offenders often are found at state attorneys general offices and on Internet Web sites found through search engines.  
• U.S. Postmaster, U.S. Postal Service
  The Freedom of Information Act allows certain persons access to forwarding addresses from the U.S. Postal Service. There are many reasons for needing the addresses, but normally when an individual must first be found prior to proceeding with the actual filing of a lawsuit, a request is filed “in anticipation of litigation.”  
• county and state occupational licenses
  Often, professional state and county regulating bodies will have notice of licenses or certifications for such positions as real estate brokers, accountants, attorneys, pest control technicians, notary publics, beauticians, electricians, and plumbers.  
• telephone books
• city directories
• Cole’s directories
  These publications contain similar information found in city directories. 
• Internet Web sites
• Better Business Bureau
• justice of the peace
  This office contains the proceedings of small claims courts in civil disputes, eviction notices, and death notices.  
• birth records
  These records can be found not only in hospitals but also in state bureaus of vital statistics or equivalent. 
• death records
  These records can be found in hospitals, justice of the peace files, and state bureaus of vital statistics or equivalent. 
• professional associations
  These records usually include individuals’ names, business names and addresses, license numbers, and notes of “good or bad standing.” 
• churches
  Most churches maintain member directories with names and addresses. 
• neighborhood check
  Fraud examiners find information by interviewing neighbors in person or via the telephone. 
• education verification
  College registrars will verify the attendance, type of degree obtained, and graduation dates.  
• listed job references on suspects’ job applications
• developed job references
  References developed by fraud examiners will provide more accurate assessments. 
• surveillance
  These check lists will help you present a more detailed, thorough investigative report. They can help you identify sources of additional financial information that can be subpoenaed and uncover possible financial motives. Use these check lists and you’ll make your clients happy and enhance your professionalism. 

Douglas O. Crewse, CFE, TCI, is president of Investigative Associates Inc. of Plano, Texas.