As SysAdmin he will control all the servers in my company, have access to all the data, all the passwords, all the personnel files. He will control $100Ks of investment.

I think this is basic due diligence. I have also had confirming advice this is a good idea from previous company owners (and stories about times when they did not).

Its like checking if your accountant has money troubles.

There is also lots of research that shows people are really really poor at detecting lies (http://www.youtube.com/watch?v=EXm6YbXxSYk). We all have made mistakes in judging people, I am pretty trusting actually and have been burnt. There is too much on the line this time.