Making and Informed Business Decision Using Public Financial Records

by Brazilero2008

"They found him the same way we did.  Financial records.  They ran financials on everybody in that prison."    --- Castle¹

The plotlines of TV detective shows often involve the navigation of secure databases by nimble-fingered law enforcement agents seeking to investigate the finances of a questionable business entity.  In the real world, these rich sources of information do not necessarily require specialized training in data mining or digital forensics.  Some of this information is readily available through public servers via an anonymous login (so you won't need an official badge).  However, you should have a general idea of what you hope to discover before diving into online records.  The following purely hypothetical scenario provides the context for running a quick, basic-level financial investigation across multiple databases in New York State.  Of course, your particular situation will differ, so choose your sources of information accordingly.

The Offer

The coworker you met at an office party shares your interest in creating and marketing mixed-media art.  This individual says he is the owner of a licensed, service-based business that helps artists sell their work at craft shows.  If hired as your sales agent, he promises to increase your market visibility by placing your work in various scheduled shows across New York State.  He asks that you contact him to discuss contractual details.  Is there a reasonable level of risk exposure associated with accepting this offer?

Tax Liens

Start by visiting the Division of Corporations at the New York State Department of State (NYSDoS) to determine whether the target's business is a registered entity such as a professional or limited liability corporation.²  Next, the Uniform Commercial Code (UCC) database of the NYSDoS lists debt obligations of registered businesses, including commercial loans and IRS tax liens.  Check to see whether any liens are accompanied by a release indicating the debt has been satisfied.  Outstanding liens could be a red flag.³

The New York State Department of Taxation and Finance reports liens to the local county clerk's office based on the address used when the most recent tax return was filed.  If the business has relocated to a different county since the original filing date with the NYDoS, then you need to go to the clerk's office in that county.  The new business address may appear on the UCC database if there are recent debt obligations.  Incidentally, some municipalities have a paywall on their web page that requires a personal account before you can view or print documents; other municipalities may rely on a privately run, pay-to-access system.⁴

Court Records

There are many offices of the county clerk in New York State that only permit in-person access to public records.  In these situations, continue your investigation by clicking on "WebCivil Supreme" located on the e-Courts webpage.⁵  The State Supreme Court database lists civil actions against a business when creditors file a formal Summons and Complaint with the Court to attempt recovery of unpaid debts.  If the target is listed as the defendant, click on the index number to bring up the case detail page.  In a limited number of cases, legal counsel for each side will agree to e-file their respective documents.  Click on the "Show e-Filed Documents" link on the bottom right of the page if available to find the "Decision and Order" stating the judge's ruling on the case or the settlement agreement to read the out of court resolution of the dispute.

Public Access of Electronic Court Records (PACER) offers access to case and docket information from bankruptcy, as well as other courts across the nation.⁶  Set up a pay-to-access user account, then search for the target.  If the business filed a Chapter 11 claim, you should find a file containing schedules listing: the creditors, the debtor's income streams and expenditures, in addition to the reviewing attorney's case summary and final decision concerning the debtor's application for bankruptcy.

Conclusion

Finish your search by visiting the user friendly site, "Find Lost Money," maintained by the Office of the State Comptroller.⁷  You will see an extensive list of businesses as well as individuals who reportedly are owed $15 billion dollars from a variety of sources including unclaimed insurance policy disbursements, tax refunds, and utility company rebates.  A business that frequently appears on this list may signal an inattentive managerial style.  The information obtained from checking the databases cited can help assess some of the financial risks associated with a tempting business offer.

Sources

1. Castle: "Knockout"  May 16, 2012; S04, E23
2. appext20.dos.ny.gov/corp_public/corpsearch.entity_search_entry
3. appext20.dos.ny.gov/pls/ucc_public/web_search.main_frame
4. The Westchester County Clerk's Office, for instance, is an informative site featuring anonymous searching coupled with a paywall to view scanned documents: westchesterclerk.com
5. iapps.courts.state.ny.us/webcivil/ecourtsMain
6. www.pacer.gov
7. www.ny.gov/services/find-lost-money