Financial Detectives Work Overtime in Crisis

BOSTON (TheStreet) -- The stock-market crash, tattered banks and Ponzi schemes haven't been good for investors. But for investigators -- that's another story.

Ken Springer, a former Federal Bureau of Investigation agent and founder of New York-based Corporate Resolutions Inc., and Steve Lee, who runs Steve Lee & Associates in Los Angeles, have been working overtime investigating fraud at hedge funds, performing due diligence for banks and looking into competitive-intelligence work for consumer-credit companies.

"Years ago, financial risk used to be the biggest concern," Springer says. "Now it is reputational because you don't want your name in the papers. If you get taken by a fraudster, you are probably not going to get other investors down the road."

Companies often fail to check references and verify the veracity of information on resumes, and find out if people have a history of suing others or being sued, Springer says. "Past history is indicative of future performance," he says.

A useful tool Springer helps clients implement are "whistle blower" hotlines. He cites the example of a chief executive who was stealing from his company but was outed by a controller.

Steve Lee's expertise includes fraud investigation, asset tracking and recovery, computer forensics and research for class-action suits.

His firm is best known for its role in Discover Financial Services'(DFS Quote) $2.75 billion antitrust settlement with credit-card giants Visa(V Quote) and MasterCard(MA Quote) last year.

The Discover case turned on whether Visa and MasterCard had blackballed their smaller rival from doing business with whom Lee calls "the big boys of banking," such as Citigroup(C Quote) and Bank of America(BAC Quote). After Discover received a favorable ruling on restraint of trade, Lee and his team were tasked with illustrating the scope of the damages. To do so, they crafted a financial model that recreated the financial landscape as if Discover had been able to freely compete alongside the other companies.