Grammy award winner Ne-Yo and several professional athletes are among those set to testify in federal court against the principals of Ohio-based sports drink company Imperial Integrative Health Research & Development. Preston Harrison and Thomas Jackson are charged with defrauding investors out of $9.5 million. Harrison’s wife, Lovena Harrison, was hit with related tax fraud charges.
Imperial Integrative Health Research & Development made OXYwater, a drink they claimed was highly-oxygenated and would improve energy and mental clarity. Jackson and Harrison allegedly misled investors about the expertise of the company’s staff, as well as the company’s sales and profits. Federal prosecutors claim that, all the while, Jackson and Harrison were diverting company funds into their own accounts, and Lovena Harrison was hiding their ill-gotten income from the IRS.
Due diligence is always an essential first step before investing in a company. Just because the company is private does not mean that you need accept the information they give you at face value. While independently verifying information about sales and profits is difficult, it is not impossible. Former employees, investors, or people who had disputes with the company are often willing to share information. A few well-crafted interview questions posed to a disgruntled ex-employee or former litigation opponent might supply you with all the information you need.
You can also find out crucial information about the company’s principals and employees by searching the public record. In this case, had investors done even a cursory public record search, they would have seen that both of the Harrisons and Jackson all had multiple lawsuits (many involving nonpayment of debts), judgments, and tax liens against them in the past. This information may or may not have influenced the investors’ decision to put money into the company, but I, for one, would think twice about handing over my savings to someone whose financial choices had repeatedly landed them in hot water.