&gt; Part of a due diligence process is looking at internal financial statements.<p>L&amp;H conducted accounting fraud; both of its founders received criminal convictions for doing so [0]. The whole point of accounting fraud is <i>falsifying internal financial statements</i>. It is true that investment banks conduct diligence by looking at a company&#x27;s financials, but this is for valuation purposes -- i.e., analyzing how the company has performed relative to other comparable companies. Investment banks do not employ forensic accountants who specialize in sniffing out fraud; accounting firms do. The issues in question were the kind that would be discovered in the diligence process by competent accountants, not competent investment bankers.<p>&gt; Also not recommending your client put in a collar after an all stock deal? Don&#x27;t know about Goldman but that was pretty much standard advice at mine.<p>As a matter of fact, GS did recommend a collar, and the Bakers ignored this advice: &quot;the Bakers did not take steps to hedge the Lernout stock they received when advised of their ability to do so.&quot; [1]<p>[0]: <a href="http:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;SB10001424052748703989304575503500899087566" rel="nofollow">http:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;SB100014240527487039893045755035...</a><p>[1]: <a href="http:&#x2F;&#x2F;dealbook.nytimes.com&#x2F;2013&#x2F;01&#x2F;29&#x2F;lessons-for-entrepreneurs-in-rubble-of-a-collapsed-deal&#x2F;" rel="nofollow">http:&#x2F;&#x2F;dealbook.nytimes.com&#x2F;2013&#x2F;01&#x2F;29&#x2F;lessons-for-entrepren...</a>