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Credit and Background Checks

Digging up dirt on the people that affect your business

In the hard-boiled version of private investigation, characters like Raymond Chandler's Philip Marlowe got information the old-fashioned way: by schmoozing leggy blonde secretaries and questioning thugs who grunted, "Keep your nose out of it, shamus." Today's private eyes have evolved beyond using the rumor mill as an intelligence source and getting important leads from matchbook covers. They're taking full advantage of the information age to help businesses hire wisely, choose reliable clients and monitor employees who may have poor definitions of "profit sharing" and "flex time." Although information-gathering isn't just for professionals, there are tricks to the trade that make it easier to think like a P.I. and, more importantly, act like one.

"The first thing to keep in mind is that the next person who comes in your door could be the reason for your [business'] success or failure," says Ed Pankau, a Houston private investigator and author of Check It Out! Everyone's Guide to Investigation (Contemporary Books, $19.95, 800-323-4900). Whether that person looks like a golden job candidate, a stellar client or a generous new investor, Pankau says your standard practice should be to follow the X-Files mantra, "Trust no one."

"There are several things every [entrepreneur] should check," says Pankau. "The first is the person's criminal and civil record. Call the county court clerk where they live and ask, Do they have a criminal history? Do they have any civil litigation, either as a defendant or plaintiff? Look at their resume and references to see where they've lived before, and call the county court clerk there. You can find out whether they make a [habit] of suing employers or if they've ever been charged with fraud."

Next, enter cyberspace for additional facts. Many newspapers have extensive archives online with powerful search engines just waiting for your query. Pankau says this technique works especially well when investigating potential clients or investors, since news about local companies and their key people frequently lands on the business page.

Credit checks are advised if a potential employee will handle funds. Although there are strict rules about running such reports, it's legally permissible if you're considering making a job offer. Order reports through the country's major credit bureaus, Experian (formerly TRW), Equifax Inc. and Trans Union.

To cut down on the time involved in all these searches, however, you can access all-encompassing databases by paying an investigative service to do the looking for you. Databases like Autotrack are restricted to investigators and law enforcement personnel but are easily plumbed by simply ordering a report from a local P.I. agency, or an online service like Automatic Check or Background Information Searches.

Always arm yourself with protection before starting your investigation. "If you don't disclose that you're going to run a series of checks, you're open to liability," says Janet Mercier, corporate counsel at American Investigative Services in Boston. Mercier suggests buying standard release forms, sold at most office supply stores: "They're usually vague enough to cover most [background] checks, and people seldom balk at signing them."

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This article was originally published in the July 1999 print edition of Entrepreneur with the headline: Get a Clue.

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