While many investigative companies are trying to catch cheating spouses, Lewis A. Eakins, president of Houston-based Eakins Investigative Services Inc., is hard at work combing through the public records of large corporations. The recent accounting scandals at companies like WorldCom and Tyco International have made him a busy man, scouring the Internet and other sources for information that might uncover whether a company is financially unstable or being mismanaged.
Ironically, Eakins’ company currently does employee background checks for Enron, one of the most well-known corporations to experience accounting irregularities. In fact, prior to Enron’s problems, Eakins Investigative Services used public records to conduct due diligence on companies Enron was interested in entering into a business relationship with.
Eakins has developed a five-step process that investors can use to research companies on their own. He explains that following his methods of due diligence can mean the difference between making a prudent investment or acting on a foolish stock tip.
Step 1. Identify the locations of the headquarters, branch offices, and operational facilities of the company you’re researching. Once you have this information, you can determine which licensing, regulatory agencies, and civil court entities may have information on the firm. Start your research at these places.
Step 2. Verify the entity’s structure, licensing, and registration requirements. First, check the company’s Website. If the site has limited information, try entering the company’s name into a Website like http://finance.yahoo.com/search to find information.
If it’s a sizable company, the Yahoo! site may pull up information about its key executives and industry statistics. Eakins says it’s important to understand the type of business the company is in as well as its industry, so you can pinpoint which regulatory agencies oversee it. If you aren’t sure which regulatory agency oversees the company, go to www.firstgov.gov, which lists federal agencies in alphabetical order.
Step 3. Research regulatory agency records. To find out which agency oversees a particular company, type that company’s name and the word “regulatory” into Google and it should pull up related Websites. Some of Eakins’ favorite places to check for regulatory data are the U.S. Securities and Exchange Commission (www.sec.gov) and the Occupational Safety & Health Administration (www.osha.gov). Records maintained by OSHA will provide the results of inspections and disclose violations or fines in multiple states. Multiple inspections or fines, Eakins says, could indicate faulty equipment, poor working conditions, an unsafe facility, or inattentive management.
Step 4. Conduct a local, state, and federal civil court search. “Any company that is actively doing business may eventually experience a lawsuit,” says Eakins, “but what you’re looking for is a history or trail of things like unpaid debt.” Investors can get federal documents, for a fee, through Public Access to Court Electronic Records or PACER (http://pacer.psc.uscourts.gov/), the Federal Judiciary’s Website. It provides access to U.S. District, bankruptcy, and appellate court records.
Step 5. Research current and archived news articles. In addition to Google, try other popular search engines and business news sites like Dow Jones (www.dowjones.com) or Bloomberg (www.bloomberg.com). Most newspapers and magazines have Websites