Internet executives are four times more likely to have "unsavoury backgrounds" than corporate directors and officers of other industries, according to an investigation by business intelligence firm, Kroll Associates.
Over the past six months, the company carried out 70 "due diligence" background investigations on internet executives and board members in the US, Europe and Asia on behalf of private equity groups, investment bankers and corporations.
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
In almost 39 per cent of the cases (27 people), Kroll uncovered problems such as violations of Securities and Exchange Commission rules, insurance fraud, undisclosed bankruptcies and even connections to organised crime. Typically, Kroll expects to find problems in just 10 per cent of its investigations.
Ernie Brod, executive managing director of the firm's New York office commented: "We've been concerned for some time about the young founders of internet start-ups bringing in the 'grey beards' to add stature to their companies - without carefully checking them out."
According to Brod, it was the consultants, advisors and board members who were brought in to "add credibility" to dotcom ventures because of their age and experience, that had the most "distasteful histories".
Rather than leading young entrepreneurs to business success and "IPO riches", he argued that the "fraudsters" were instead more likely to be "looting the company".
"With systems and controls not yet in place, an experienced predator can suck exorbitant 'consulting' fees out of the start-up, and lead his life at the company's expense," Brod warned.