When it comes to vendors, many companies have policies in place to get a handle on the risks these vendors represent. Many rely on third-party compliance firms to essentially outsource all their needs. Compliance Depot, for example, offers aid in searches for bankruptcy, lien, collection issues and judgments; vendor executive qualifications; basic due diligence; government watch lists (Patriot Act The Money Laundering Control Act) and the like. They also educate their clients and vendors on compliance laws. 

But at far-flung companies with nationwide presences, you have to wonder how effectively they can control the legitimacy of all their vendors. A nationwide company could end up with hundreds if not thousands of vendors. Consider Bank of America (NYSE: BAC), the largest retail bank, which has run into lots of problems recently and is likely pondering ways to better control for all this. At a minimum, local vendor problems have embarrassed the bank and added to their headline risks. 

--Foreclosure law firms: Bank of America often turns to local law firms for specialized local work. In Florida, it--along with Wells Fargo, GMAC Mortgage and six other servicers--retained lawyer David Stern, who has amassed a fortune foreclosing on the homes for lenders. He's now under state investigation for dubious practices including robo-signing and improper documentation. Citigroup, Fannie Mae and Freddie Mac have already announced they are no longer using Stern, pending the outcome of the state investigation. Bank of America may be wise to also ponder its options in the state. You can bet it is looking into other lawyers and foreclosure firms elsewhere. Stern recently told the New York Times that "there has not been submission of fraudulent documents" and that the investigations are politically motivated. All in all, once state attorneys general start opening probes and releasing transcripts of depositions that allege numerous errors about your top vendor, it's too late. You need a better grip before this happens. 

--Debt collection agencies: Bank of America recently was stung by bad PR over one of its myriad debt collection contractors who used some shockingly foul debt collection techniques. An employee of Advanced Call Center Technologies, of Philadelphia, used racist and obscene language to get people to pay up on behalf of the bank. One victim ended up recording the language--and going to the media. The result was a story by ABC News, which noted that the bank stuck by the agency until CEO Brian Moynihan was given copies of the language and asked to defend it. He couldn't. You have to ask whether any bank could really be responsible for the actions of a single employee of a lesser vendor of a small office. It's probably not fair to the bank to expect it to sniff out such employees. But perhaps policies could be revisisted. 

--Eviction vendors: Bank of America has suffered lawsuits and bad PR for a sorry string of wrongful evictions and foreclosures--even before the foreclosure madness set in. Shockingly, the bank's hired contractors have sometimes sought to evict the wrong people. It happened in Pittsburgh recently and Atlanta. In one case in Florida, the homeowners owed no money on the house, but Bank of America evicted the owners anyway. They removed belongings and changed the locks on the doors. This despite the fact that a real estate employee informed it there was an error. The contractor apparently had the wrong address; it should have seized the house across the street. This all but guarantees suits for trespass, conversion of property and emotional distress as well as libel and defamation, as owners reputations are harmed. 

I doubt a company as large as Bank of America can control for very potential occurrences in every locale in which it does business. But it does seem like the bank could do better. - Jim