Do Your Due Diligence

Most lawyers will do some sort of due diligence exercise during the course of their work. The most obvious example is in a Merger & Acquisition deal where the potential purchaser will do a deep dive into the financials and corporate health of the target company.

But due diligence can be required in a wide range of deals, from real estate to standard contracts where you will have to confirm the parties are whom they say they are.

When I worked at Al Jazeera Media Network and before BeIN Sports became BeIN Sports, I worked on a joint venture between a Spanish company and Al Riyahdiah (BeIN Sports' first iteration) in Doha. It was an extremely frustrating deal because the Spanish company refused to accept the valuation of the equipment done by a neutral third party and fought tooth and nail to reject the valuation. And in the end, we had to make a compromise. I remember this episode vividly even though it happened ten years ago because it was before I developed a brass neck. Don't get me wrong, I was tough, but I was not yet brass-necked. Had I been brass-necked, I would have dug my heels in and rejected the Spaniards' rejection. I was too polite, too nervous, and still a bit soft.

Fast forward to today. I am reading Billion Dollar Whale by Tom Wright & Bradley Hope. And although I am not yet finished, there are some serious lessons about due diligence peppered in the true account of Jho Low's fraudulent 1MDB fund and ancillary activities that recently sent the former Malaysian Prime Minister, Najib Razak, to jail and saw his wife, Rosmah Mansor, get sentenced to ten years for graft just last week. Jho Low spent several years trying to become a "player" and finally did so after having convinced Rajaz to form a Malaysian Sovereign Wealth Fund and to work with the Saudis and Emiratis in the related deal-making. At the very start of the ill-fated project, the various banks and law firms involved in the project questioned the murky deal terms, but ultimately fell for the nonsensical excuses and transferred money illicitly to the wrong accounts (but the right ones vis-a-vis Low's heist.) The bank - Deutsche Bank - in particular its compliance department - pushed back but ultimately acquiesced with the bidding of Low - but White & Case did everything possible, per the account, to placate their client, even if it didn't make sense.

What the 1MBD scandal has taught us, if it has taught us anything, is that grand heists can be pulled off with a whole lot of confidence and the too-polite compliance of the lawyers and bankers brought in to lend dodgy deals legitimacy. It happens all too often.

Here's a quick cheat sheet on how to avoid causing your own 1MDB scandal by following the following rules of thumb:

• Deep dive. Due diligence requires a deep dive - make sure you have the patience to do it and don't cut corners;
• Patience & fortitude. Don't allow yourself to be bullied into reaching the "right" conclusions to appease the parties who stand to gain from such conclusions. Follow the facts and don't be conned by some lines of "b.s." that may be provided;
• A brass neck. Let's say you find something that you can't get past and you cannot approve, you're going to need a brass neck to fight it out and fight your corner. Depending on where you are n the chain of the hierarchy, you may have to defer to senior management or higher-ups to approve or not;
• Document everything. If you start getting into some sticky weeds and getting push-back on your findings and advice, you need to document every interaction, every email, i.e., every step of the process - for your protection especially;
• Follow your intuition. Humans have the unbelievable ability to intuit when things are off. Use your gut instincts if you find yourself in a due diligence pickle;
• Observe everything. If you find yourself doing due diligence on a project that seems shady, start observing the behavior of the respective players involved - does anything strike you as odd? If so, the likelihood is that it is off;
• Don't be afraid. You may be a junior lawyer relatively inexperienced in corporate dealings, but being a lawyer will mean you have a modicum of common sense (hopefully) and will know when something is out of whack. In this case, speak up and be forthright if you're being brushed off.

A commercially savvy lawyer? will never allow a deal to go through if the information provided points to a bad deal.