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DUE DILIGENCEINVESTIGATIONS293 Eisenhower ParkwaySuite 290Livingston, NJ 07039-1711973-994-9494www.sobel-cpa.com

Table of ContentsSECTIONSDue Diligence Overview of Services1. Biographies of the Teama. James Mottola, MS, CISM, CPPb. Kim Miller, Ph.D., CFE2. Business Due Diligencea. Article – “Business Risk Mitigation Strategies: Red Flags and theFine Art of Vetting Your Vendor”b. Sample Report – Business Due Diligence Investigation3. E-Commerce Due Diligencea. Article – “E-Commerce Due Diligence: Supply Chain Management”b. Sample Report – E-Commerce Investigation4. C-Suite Due Diligencea. Article – “What They Don’t Tell You in the Interview: Not asAdvertised”b. Sample Report – C-Suite Due Diligence Investigation

The reason investment fraud succeeds is because people are lured intoemotional decisions by the con artist without first completing their duediligence. Due diligence is what forces you to look behind the façade,uncover the facts, and make a well reasoned decision; however, duediligence takes time and effort.The Financial MentorAccording to a new survey by Career Builder reported inNovember 2016, 75% of employers have employed a bad hire inthe last year. The average loss, per bad hire, is estimated at 17,000.The cost for a bad executive hire can be substantially higher,frequently costing companies over 2 million.Infortal Worldwide

Biographies

James Mottola, MS, CISM, CPPDirector, Forensic Investigations and Risk Mitigation ServicesJames Mottola is a Director in Forensic Investigations and Risk Mitigation Services, bringingan extensive background spanning nearly three decades in leading and managing personnel inboth criminal and civil investigations in national and international environments. Jim’s uniqueforensic investigation skills were honed during his years serving in the United States SecretService, evolving from his earliest experiences as a Special Agent in the New York, Phoenixand Frankfurt, Germany office and culminating in his role as the Special Agent in Charge ofthe Newark Field Office in New Jersey.Jim adds significant value for the firm and its clients combining a hands-on approach with astrategic perspective and a wide range of investigative situations covering multiplescenarios including white collar investigations, financial fraud prevention, and cyber-crimethreat mitigation. His expertise in investigative, protective and administrative operationscomplements the training and expertise of the professional team in place in the Fraud andForensic Practice and broadens the scope of services we can provide.Professional Designations Certified Information Security Manager (CISM) Certified Protection Professional (CPP)Specializations Corporate internal investigationsCriminal and civil fraud investigationsAnti-Fraud prevention, detection and employee awareness trainingInformation security risk assessmentsInternal control and policy assessmentsPhysical security and anti-fraud assessmentsStrategic business consultingEducation MS, Management, College of Saint Elizabeth BA, Political Science , Whittier CollegeProfessional Associations Information Systems Audit and Control Association, ISACAUnited States Secret Service, Electronic Crimes Task ForceAmerican Society for Industrial Security, ASISOverseas Security Advisory Council (OSAC), US Department of StateInternational Association of Financial Crime Investigators, IAFCIAssociation for Corporate Growth, ACGAdvisory Board Member, VigitrustBoard Member, New Jersey Women in Law Enforcement (NJWLE)

Kim Miller, Ph.D., CFEConsultantForensic Investigations/Due DiligenceDr. Miller holds a Ph.D. in Public Safety and Leadership/Emphasis in Criminal Justice. Herdissertation is entitled The Legal, Community Policing, and Resource Challenges of Dealing withAdvance Fee Fraud.Dr. Miller is an Open Source Intelligence (OSINT) Specialist utilizing the dark, deep and surfaceweb focusing on business and personal due diligence, as well as online risk assessment analysis.She is a Certified Fraud Examiner and a New Jersey Licensed Private Detective. Dr. Miller is alsoa Certified Paralegal and a former Special Detective Intern, Division of Criminal Justice State ofNew Jersey–Gangs and Organized Crimes.Licenses and Certifications New Jersey Licensed Private Detective, State of New Jersey (2015)Certified Fraud Examiner, Association of Certified Fraud Examiners (2013)Paralegal Certification, American Institute for Paralegal Studies (AIPS) (2004)Certificate of Distinction Tort Law and Legal Research (AIPS) (2004)Certified Litigation Specialist, American Institute for Paralegal Studies (AIPS) (2004)Post Cert. Diploma, Advanced Litigation and Torts/Personal Injury Law/ADR (AIPS) (2004)Education Ph.D., Public Safety and Leadership/Emphasis in Criminal Justice, Capella University,Graduated with Distinctions (2016)M.S. Criminal Justice, Kaplan University, Graduated Summa Cum Laude (2010)B.S. Criminal Justice, Kaplan University, Graduated Summa Cum Laude (2007)Professional Associations Association of Certified Fraud ExaminersAssociation of Certified Anti-Money Laundering SpecialistsNew Jersey Licensed Private Investigators AssociationAmerican Society of CriminologyNJ Chapter of Association of Certified Fraud Examiners (Membership Chair)New Jersey Women in Law EnforcementPublications Don't Touch that Enter Key! Warn the Victim. Stop the Fraud. Green LegacyPublishing Company, LLC (2017)Terrorism Inside America’s Borders Explored in New Research Paper (2016)FRAML (Fraud and Money Laundering) (2016)Fighting Fraud with Warnings and Information (2016)China - International Online Research Document (2016)Know Your Candidate (2016)

Business Due Diligence

Business Risk Mitigation Strategies: Red Flags and the Fine Art ofVetting Your VendorBy: James Mottola, MS, CISM, CPPDirector of Forensic InvestigationsRisk Mitigation Services, Sobel & Co. LLCKim Miller, Ph.D.Certified Fraud ExaminerSobel & Co. LLCIn order for a business to reduce risk associated with fraud, waste and abuse, it must routinely evaluatethe many vendor relationships it relies upon to achieve its financial goals and objectives. Throughongoing evaluative assessments, businesses can identify the risks and benefits of vendor relations tostrategically increase value and maintain business continuity.According to Kroll in their recent Fraud and Risk Report, one out of five companies surveyed had fallenvictim to fraud as a result of a vendor relationship, while almost half "felt particularly at risk of threatssuch as vendor, supplier or procurement fraud."Contracting with an outside third party subjects a business to risks with the potential for significantfinancial and reputational harm. These can take the form of fraud, breach of contract, error, breach ofconfidentiality, data loss and so on. The risks associated with vendor relationships, however, can beunique and may vary depending on the vendor as well as the service or process outsourced.The good news is that these risks can be mitigated or reduced through investigative research andassessment which will provide information to support management in the decision making processbefore there is a problem.Be on the lookout for these warning signs or "Red Flags":Sobel & Co., LLC 293 Eisenhower Parkway Livingston, New Jersey 07039973-994-9494 www.sobel-cpa.com

Red Flag: Don't Knock on My DoorIn a recent vendor management engagement, the vendor's address appeared to be valid. However, asearch of the address noted it was a residence owned by a different person than the vendor. A furthersearch of state databases indicated that the company was registered at another address. The addresswas determined to be a closed down warehouse.Red Flag: Sorry, I Can't Take Your Call Right Now, Please Leave a Message .Good vendor management consists of verifying all the information, to include the various phonenumbers. For instance, are you constantly receiving voice mails and return calls from a "blocked"number?Red Flag: Who Really Owns the Company?Vetting the principals is important. Be sure to ask a few key questions, such as who they are, do theyown assets and who are their spouses. Additional queries should include: Do their social media profilesmatch their business profiles and why is a company name missing on the business profile of a principalbut clearly noted on the social media profile? The details matter! For example, in a recent case, theprincipal spelled his name differently on different social media profiles.Red Flag: The Numbers Just Don't Add UpIn another case, net sales for 2015 were reported at 2.3M. Interesting information and worrisome atthe same time when it was revealed that the company was in business for only six months. This becameproblematic when a search of tax information indicated the business filed a welfare benefit Form 5500to report their financial condition, investments and operations and depicted 400,000 in assets in 2014while other documents indicated the company was not actually opened until 2016.Red Flag: The Pieces Just Don't FitInconsistent reporting was glaring in the same case cited above where a merger and acquisition wasnoted in 2015 yet political donations were recorded for a candidate in 2012! A search of patents andtrademarks located a result for one of the principals . Again, this was in contrast with information notedon the business profile and social media profile.

Red Flag: Show Me the MoneyIn another matter, a search of liens and judgments noted multiple occurrences highlighting possiblefinancial issues.Red Flag: The Truth is InconvenientSearches of residential property may not match other documents provided by the principal of thecompany. The principal states they have professional licenses and while registration was located, it hadexpired.Red Flag: It Is Not What You Know, But Who You KnowIn one case, a search of the principal's business partner indicated a possible criminal history for fraud. Insuch a circumstance, the principal's loyalty might be compromised in favor of the partner regardingfinancial transactions.So what do these red flags teach us?It is important to be proactive, rather than reactive when considering working with any vendor.Whether a company is considering a new vendor or has questions regarding a current vendor'sbehavior, an on-going evaluative assessment process can often take only a few hours of investigation inorder to avoid many hours of lost time, headaches and costly mistakes. Don't ignore the waving redflags. Good vendor management, present and future, makes good dollars and good sense.For more information on this critical topic, please visit www.sobel-cpa.com or call Jim at 973-994-9494or email james.mottola@sobel-cpa.com or Kim Miller at 908-399-8386 or email kim.miller@sobelcpa.com

BUSINESS DUE DILIGENCE INVESTIGATIONSAMPLE REPORTSubmitted to: Law Firm of Smith and JonesOne Main StreetAnytown, USAPertaining to: John DoeXYZ Company, LLCPrepared by:Sobel & Co., LLCDate prepared: (Date)293 EISENHOWER PARKWAY SUITE 290LIVINGSTON NEW JERSEY 07039-1711(973) 994-9494(973) 994-1571 FAXwww.sobel-cpa.com

TABLE OF CONTENTSEXECUTIVE SUMMARY . - 1 -I.ASSIGNMENT . - 1 -II.QUALIFICATIONS . - 1 -III.PROFESSIONAL STANDARDS . - 1 -IV.BACKGROUND . - 1 -V.DOCUMENTS REVIEWED . - 1 -VI.SCOPE OF WORK: DUE DILIGENCE INVESTIGATION . - 2 -VI.LIMITATIONS . - 11 -VII.PROPOSED ADDITIONAL FOLLOW-UP INVESTIGATION .-14-