Burns International Services Corporation

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Burns International Services Corporation

2 Campus Drive
Parsippany, New Jersey 07054
U.S.A.
Telephone: (973)397-2000
Web site: http://www.burnsinternational.com

Wholly Owned Subsidiary of Securitas AB
Incorporated: 1909
Employees: 75,000
Sales: $1.3 billion (1999)
NAIC: 561611 Investigation Services; 561612 Security Guards and Patrol Services; 561613 Armored Car Services

A provider of investigative services, security guard staff, and other related services, Burns International Services Corporation, formerly operating as a division of the Borg-Warner Security Corporation, was purchased by the Swedish company Securitas AB in August 2000. Before its purchase, Burns operated over 320 offices in the United States, Canada, Columbia, Mexico, and the United Kingdom, and its services included providing security guards, background and drug screening, armored transport services, and investigation. It had a client base of over 14,000 commercial, financial, industrial, residential, and government customers and sales of $1.3 billion. After the Securitas purchase, Burns teamed up with Pinkerton’s Inc.—another well-known U.S.-based security firm purchased by Securitas in March 1999; together, the firms operate over 600 U.S. offices, have 125,000 employees, and realize revenues of $2.5 billion.

Early 20th Century Origins

The company from which Burns International Services Corporation evolved, the William J. Burns National Detective Agency, was established in New York in 1909 by the son of Irish immigrant parents. Burns was born in Baltimore, Maryland, in 1861 and raised in Columbus, Ohio. He attended business college, and then joined his father in a tailoring enterprise, but became an amateur sleuth when, in 1878, his father began serving as police commissioner in Columbus. Although he had no official position with the police department, young William earned a reputation for detective work in forgery cases. For a brief period he worked for the Furlong Detective Agency in St. Louis, Missouri, then, in 1889, entered the U.S. Secret Service, where he had considerable success in tracking down counterfeiting operations, both in the United States and Costa Rica. He also uncovered bribery and land fraud by government employees, leading to the conviction of several federal, state, and municipal officials.

Burns left government service in 1906, with a growing reputation for incorruptibility and excellent detective work. For a time he continued to track down dishonest administrators, including the entire board of supervisors of San Francisco, California, and that city’s political boss, Abraham Ruef. Burns and his associates had tough going, having to fight corrupt money interests, including, among others, a national trolley car trust and newspaper magnate William Randolph Hearst, who employed the cartoonist Ed Fisher to caricature them in what would later develop into the “Mutt and Jeff” comic strip.

In 1909, the by then celebrated detective organized the William J. Burns National Detective Agency, and within a year convinced the American Bankers’ Association to terminate its association with the agency’s chief competitor, the long established and renowned Pinkerton Agency. The move gave the new Burns agency the job of protecting the 12,000 member banks. Somewhat later the agency also gained the responsibility of protecting the holdings of the American Hotel Association. Initially, however, the agency was engaged as much in detective and investigative work as in protection services.

William Burns, from time to time returning to government service, left interim control of the agency to his two sons, Raymond J. Burns, president, and William Sherman Burns, secretary and treasurer. In 1913, the agency changed its name to the Burns International Detective Agency. By this time, the company was becoming famous for innovative detective methods, which, in 1916, involved Burns himself in something of a scandal and began the tarnishing of his image. Hired by the millionaire, J.P. Morgan, Burns led a midnight raid on the law offices of Seymour and Seymour, a firm that, like Morgan, was handling the sale of munitions to France and Great Britain, soon to be the allies of the United States in World War I. The firm was suspected of stealing trade secrets from Morgan, and Burns was trying to obtain evidence of its crime. Burns installed a Detectophone in the offices, a primitive listening device and the ancestor of the modern day “bug.” Also, with the aid of New York City police, he wire tapped the firm’s telephones. The operation came to light when a disgruntled former employee of the Burns Agency disclosed it to the authorities. When the smoke created by newspaper coverage cleared, Burns was fined $100 for illegal entry.

In 1921, William J. Burns took the directorship of the Justice Department’s Bureau of Investigation, the forerunner of the FBI. However, his three-year service in that office did nothing to enhance his reputation, since during that time the Bureau became involved in the scandals that plagued the administration of President Warren G. Harding. Burns resigned in 1924, leaving the directorship to his chief assistant, J. Edgar Hoover. By that time he was a fallen idol, a “distinguished sinner,” under virulent attack as an agent provocateur whose anti-union and anti-Communist crime-fighting methods played havoc with civil liberties. Burns went into full retirement, moving to Sarasota, Florida, where he died on April 14, 1932.

When Burns died, his agency was the second largest such business in the United States. His sons, Raymond J. and W. Sherman, always more cautious than their controversial father, began the process of transforming the business from a general detective firm to one specializing in guard services. During the Great Depression the agency’s guards were used by industrialists, several of whom were under siege by desperate strikers. Some were also used to infiltrate unions as labor spies. In addition, Pinkerton and Burns both provided scabs during strikes, as a subcommittee of the Senate Committee on Education and Labor, chaired by Robert M. LaFollette, Jr., revealed in its investigations. When the practice came to public notice, both agencies ended it. Pinkerton even went so far as to refuse industrial guard services during strikes, but not Burns, which filled the need for some of Pinkerton’s former clients. Between 1933 and 1936, the company made almost $330,000 from providing security guards, and in 1936 alone netted close to $156,000 from the operation, an increase of 266 percent over the previous year. However, the notoriety surrounding labor espionage and charges of civil liberty abuse lodged against both Pinkerton and Burns left both companies publicity shy and much more circumspect in their policies.

Growth and Expansion: 1950s–60s

Raymond J. and W. Sherman Burns remained at the company’s helm through the Great Depression, World War II, and into the 1960s. In fact, the agency remained under direct family control into the late 1970s, when George E.B. King, the grandson of William J. Burns, became CEO. During that time the company had shifted its focus from crime investigation to protection service and continued to expand. By the end of the 1950s, Burns was grossing more than $20 million. Among its clients were General Motors, General Electric, Standard Oil of New Jersey, du Pont, A&P, and the American Bankers Association, the organization that had given the agency its first big contract back in 1909.

In 1959, in its 50th year, the company had 30 regional offices and close to 12,000 employees, about one-fourth of whom were either former FBI agents or policemen. Although it took on most protection and detective jobs, except divorce investigations, Burns declined to engage in labor espionage and cases involving politics, the areas in which it had previously been publicly embarrassed. The agency continued to use infiltration methods, and its Undercover Department remained at the core of the organization. Claiming to have the personnel and resources to take on an assignment “of any size, any time and place a client wants it,” Burns employees masqueraded undercover as everything from janitors to college professors, at rates of up to $25 per hour, depending on the assignment. Moreover, the company maintained enviable crime analysis laboratories and massive identification files, using an impressive array of state-of-the-art scientific equipment. By that time, supported by these resources, Burns was taking on about 5,000 assignments per year, some with considerable public fanfare, as when, in 1959, it was hired by the former Soviet Union to protect visiting Russian dignitaries, including Premier Khrushchev, and provide security at the Soviet trade fair in New York.

The business of Burns often necessitated clandestine or covert operations, which, as in the 1930s, subjected it to exposure and negative publicity. For example, in 1961, the agency went head to head with the American Association of University Professors (AAUP) when it circulated a letter indicating that it was ready to provide agents to infiltrate college student bodies in order to spy on faculty members. Burns apologized for what it maintained was the misguided scheme of a single operative in Houston and promised that academic espionage would be added to its list of taboo assignments.

As Burns continued to change its essential focus from criminal investigation to protection services, it led the way in what was a rapidly expanding industry. Undertaking some unique assignments, the agency agreed to protect the canine guards of the Dog Owners Guidance Service of New York against dognappers. That company’s watchdogs came equipped with collars announcing that they were under the protection of Burns. It was that sort of service that helped Burns improve its sometimes tarnished image.

Company Perspectives:

The company strives to be a world leader in security solutions, market by market; and pledges to offer the best security solutions, adapted to specific customer needs, precise in delivery, and cost efficient.

Competition Arises in the 1970s

In the 1970s, Pinkerton’s and Burns International Security Services were the two largest contract security companies in the United States but were being pushed hard by the Wackenhut Corporation, a relatively new player in the security service game. There was undoubtedly room for competition, though, for it was in that decade, fired by drug trafficking, that the crime rate began a rapid upwards spiral. In 1974, analysts estimated that a full two percent of the GNP was being lost to crime.

By 1978, Burns had 99 branch offices in North and South America. Both Pinkerton and Burns were grossing about $200 million in business, and both employed about 40,000 people. With emphasis on security rather than detective work, Burns and Pinkerton became known colloquially as rent-a-cop businesses. Although Burns continued to provide alarm installation and monitoring systems, by 1979 about 86 percent of its total sales came from its guard services.

Despite the industry’s growth, even the 1970s proved challenging for Burns. In 1971, a New York detective was convicted of selling police records to private businesses, including Pinkerton, Wackenhut, and Burns, and the security firms were fined for “giving unlawful gratuities” and “rewarding official misconduct.” Burns also came under scrutiny for its practice of hiring ex-FBI agents, although it was hardly alone in doing so. Competition was also growing, and Burns, Pinkerton, and Wackenhut, saw their combined share of the guard-service market drop from 39 percent in 1972 to about 23 percent by 1982. Of the three giants, Burns reportedly fared the worst. Still under the nominal control of the Burns family, its high net earning mark of about $8 million dropped to about $4 million in 1981. It then altered its market strategy somewhat, going after the business of large national and international firms, even using the equipment of its rivals to meet its customers’ demands.

Burns Joins Borg-Warner in the 1980s

In 1982, Burns International Security Services became a subsidiary of Baker Industries and moved its operation from its Briar Cliff Manor headquarters in Westchester County, New York, to Parsippany, New Jersey. Baker had itself been acquired by the Borg-Warner Security Corporation in 1978, a division of Borg-Warner that was originally created as part of a continuing diversification and expansion program begun in the 1950s. Baker, operating under the Wells Fargo name, was a provider of armored car services, and Burns added new investigative and security services, providing additional diversification within the security service arena.

The security business, still dominated by Burns, Pinkerton’s, and Wackenhut, picked up and boomed throughout the 1980s. By 1982, it had become a $3.3 billion industry, of which Burns had a $250 million share, second only to Pinkerton’s $300 million. With crime rapidly becoming the number one problem in the United States, the number of persons employed by private security firms grew from about 1.05 million in 1980 to 1.6 million by 1993. Many companies that had formerly hired their own security guards changed to using services that Burns and other firms offered.

However, the period proved difficult for Burns’s parent company. Straddled with a large debt, Borg-Warner had to take steps to downsize and restrict its operations. In 1986, it spun off York, one of its holdings, to its shareholders. The next year it was threatened with a hostile takeover from corporate raiders Irwin Jacobs and Samuel Heyman. It was saved when Merrill Lynch Capital Partners organized a leveraged buyout and converted Borg-Warner to a private company. Burdened with a $4.5 billion debt, Borg-Warner sold off all its holdings except its automotive and security divisions, including Burns. The company went public again in 1993, as Borg-Warner Security, and spun off Borg-Warner Automotive to its shareholders. With the restructuring, Burns initially remained a publicly traded subsidiary but was later converted to a division within the corporate infrastructure of Borg-Warner.

According to a 1993 study by industry analyst William Cunningham, growth in protection and security services was projected to continue into the 21st century. In fact, in the mid-1990s, there were over twice as many private-sector security personnel as there were public-sector law enforcement agents, and with a relative decline in public law enforcement funding, the demand on the private sector continued to increase.

Borg-Warner Adopts the Burns Name in the Late 1990s

Borg-Warner’s focus on its security operations continued into the late 1990s. In 1997, the firm created its “Total Security Solutions” division by integrating its electronic, physical, and armored services, into one unit. CEO J. Joe Adorjan applauded the new business unit in a company press release stating, “we created Borg-Warner Total Security Solutions to meet our customers’ growing demand for an integrated, comprehensive security package. As the largest security company in the nation, we believe the time is right to offer customers the ultimate total security service.”

Key Dates:

1909:: The William J. Burns National Detective Agency is established.
1913:: The firm changes its name to the Burns International Detective Agency.
1932:: Burns dies and his sons take over what is now the second largest detective firm in the industry.
1959:: The firm has grown to over 30 regional offices and 12,000 employees.
1981:: Net earnings drop to $4 million due to increased competition.
1982:: The firm becomes a subsidiary of Baker Industries, a division of Borg-Warner Security Corporation.
1987:: Parent Borg-Warner is taken private.
1993:: Borg-Warner enters the public arena for the second time under the name Borg-Warner Security; Burns operates as a division of this firm.
1997:: Burns becomes part of Borg-Warner’s Total Security Solutions unit.
1999:: Borg-Warner unites its security operations under the name Burns International Security Services and adopts the corporate name Burns International Services Corporation.
2000:: Burns is purchased by Securitas AB.

In another move to strengthen its brand recognition and unify its operations, Borg-Warner announced in May 1999 that it would officially adopt the name Burns International Services Corporation and that its security operations would become Burns International Security Services. At the time of the change, business done under the Burns name was accounting for 60 percent of company revenues. Also during this time, the firm landed a large security services contract with the Immigration Service of the United Kingdom that year.

Amidst the changing corporate environment, Burns continued to secure large contracts including a deal with Motorola Inc. to provide security services. The firm also partnered with Cap Index Inc. in a deal that would allow Burns to access Cap’s crime risk database. In order to strengthen the company’s reach in Canada, Burns acquired Alberta-based Danfield Security Services Ltd.

Strategic Alliances in the New Millennium

The Burns corporate structure continued to change into the new millennium. Lackluster financial performance in its U.K. operations, slow growth expectations, and consolidation in the industry, were factors in its faltering $10 stock price. Management continued to aggressively pursue national clients, and talks of strategic alliances began. Then, in September 2000, Securitas AB, the largest security firm in Europe, announced that it had acquired Burns for $650 million and the assumption of $193 million of debt.

In March 1999, Securitas had purchased Pinkerton’s Inc., the long-time Burns competitor. After the Burns purchase, Securitas integrated the two firms under their Security Services USA business unit. According to a Mergers & Acquisitions article, “Securitas has said it believes that no other security company can match its global reach. It offers security officer services, systems integration, consulting, and investigations. As corporations expand around the world, the Swedish company is betting that its size and reach will make it the first choice for many multinational clients.”

The strategic positioning of Burns and Pinkerton left only one other major competitor in the U.S. security market—Wackenhut Corporation. Although industry analysts predicted little growth in the market for security services, particularly with U.S. crime rates realizing a slight decline, Burns’s new alignment with Pinkerton’s under the Securitas banner helped establish it as a market leader and began yet another chapter in its lively history.