As your father probably always told you, if something seems too good to be true, it probably is too good to be true. In the investing world, everyone is looking for returns to be a pot of gold at the end of the rainbow. Just as such folly can lead to a very large loss of your investment dollars, such blindness can also allow any person or entity not to look long or hard enough at the facts on the ground and engage in an appropriate level of due diligence. Here you can think of H-P and its nearly $8bn write off from its purchase of the U.K entity Autonomy. Closer to home and a with a bit less dollars at risk, are the companies that invested in Outcome Health.

Reports have noted that several investors such as Goldman Sachs Group, Google’s parent Alphabet, among others are now suing Outcome, claiming “they were duped by fraudulent documents that inflated Outcome’s product and financial performance.” Yet, in addition to allegations of fraud in the financial documents, a key failure seems to be the lack of oversight in the company, as there was no board of directors to ride herd over the founders, Shradha Agarwal and Rishi Shah.

For The Man From FCPA, such a sign would have presented a clear red flag for any U.S. company seeking to use a third-party sales representative or as a distributor. The U.S. corporate governance system, with some type of board oversight is a key good governance indication. In the case of Outreach, not only would the founders reap a huge financial windfall from the investments but, more surprisingly, there was no attendant oversight from the investors in the form of board seats or other formal oversight. This is a clear lesson for the anti-corruption compliance practitioner: Levels of oversight not only provide a backup to make sure that no mistake should slip through, but also the rigor of financial oversight. 

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