Magazine article Insight on the News

Criminal Element Is Alive and Well in the Dot-Com Domain

Magazine article Insight on the News

Criminal Element Is Alive and Well in the Dot-Com Domain

Article excerpt

Critics of the runaway Internet sector of the stock market long have likened the dot-com world to the Wild West. Now, according to a leading corporate-security firm, the naysayers well may have a point.

According to Kroll Associates, Internet executives are four times more likely to have "unsavory backgrounds" than their counterparts from other industries. In 70 due-diligence background checks of dot-com executives and board members during the last six months, Kroll discovered that more than one-third had dark pasts, including links to organized crime. Other problems Kroll unearthed included violations of Securities and Exchange Commission rules, insurance fraud and bankruptcies.

In the broader commercial world Kroll would expect to find problems with about 10 percent of their due-diligence targets.

In one extreme case, two potential investors in a dot-com company were murdered. "In the course of the law-enforcement investigation they found the two were connected to penny-stock scams," said Kroll executive director Ernie Brod. …

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