How nervous is Corporate America these days? Ask Gordon Grand, who leads the financial officers practice at New York-based executive recruiter Russell Reynolds Associates Inc. For the first time in his career, he says, he's fielding lots of requests to arrange in-depth background checks of CFO candidates.
Pinkerton's Inc., Kroll Inc., and other firms that do such checks say at least half of their referrals come from executive recruiters — and business is up. "We have seen an uptick in the CFO line," says Peter Turecek, a Kroll managing director.
Companies are going the gumshoe route not only because some CFOs have been accused of fraud, but because some weren't even who they were supposed to be. Veritas Software Corp.'s CFO, Kenneth Lonchar, for example, resigned in October after admitting he had lied about having an MBA.
Educational records, says David Grossman, managing director at Pinkerton's due-diligence unit, are a standard part of checks that dig far deeper, even looking at sex-offender databases.
Do CFOs really need to be checked for sex crimes? "We recommend it," states Grossman, an ex-FBI agent. "The CFO is often a public face of the company."
Background checks would have turned up Lonchar's phony MBA, but can they screen out a potential Andrew Fastow or Scott Sullivan? That's where "developed references" come in, says Grossman. References supplied by candidates are used as a starting point to identify a broader pool of people for questioning. "The most-thorough checks include reputational inquiries," adds Turecek. Barry J. Nadell, president of Chatsworth, California-based InfoLink Screening Services Inc., says such checks of one CFO candidate turned up evidence of embezzlement from a previous employer.
CFO candidates should know the law offers them certain protections. Under the Fair Credit Reporting Act, companies can't investigate candidates without permission, they must share the results if asked, and candidates have the right to dispute the findings.