Stephen Greer hired the first general manager for his fast-growing company’s Mexican operations after several evenings drinking tequila with the man in Guadalajara. Impressed by the candidate’s industry contacts and apparent honesty, Greer thought he’d found the perfect person to help him expand his Hong Kong–based scrap-metal-processing enterprise, Hartwell Pacific—until nine months later, when he realized the new hire was scamming him for thousands of dollars. The second general manager in Mexico wasn’t in the job much longer before suppliers began telling Greer he was taking kickbacks. The third set up a fake supplier bank account in his wife’s name and siphoned off more money. And as this was going down in Mexico, Hartwell Pacific was experiencing similar pilferage in Malaysia. All told, fraud and theft in emerging market locations cost the company several million dollars—and imperiled its founder. “By the time I was 28, I was a multimillionaire. By the time I was 30, I was almost bankrupt,” Greer says. “That happened because we lost control of our business.”
A version of this article appeared in the December 2010 issue of Harvard Business Review.