It'd be like pitching an investor and then having them say: "I like what you're doing ... But it sounds like you might not be paying everyone proper overtime, a

It'd be like pitching an investor and then having them say: "I like what you're doing ... But it sounds like you might not be paying everyone proper overtime, and some of your contractors should probably be reclassified as employees." For a start, it's nothing like that and I think you're being a bit extreme with your counter example. Your example includes 'probably', ie subjective information on the part of the VC. I my original example it's likely that the founder out-right admitted his out-of-status. I don't know the back-story and I only heard it as secondary info (ie not from either party involved) but knowing the SEC and other regulations VCs are under they may well be legally bound to report this and other information. A closer to home example: I know my CPA is legally bound to inform the IRS and DHS of any issues with my immigration status, insider trading on my investments and any tax irregularities. To that end, keep in mind it is also hard to pay tax on income if you are working illegally and not get found out. And if you don't pay tax...