Kroll Inc.

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Kroll Inc.

900 Third Avenue
New York, New York 10022
U.S.A.
Telephone: (212) 593-1000
Toll Free: (888) 209-9526
Fax: (212) 750-5628
Web site: http://www.kroHworldwide.com

Public Company
Founded: 1972 as Kroll Associates
Employees: 2,300
Sales: $289.2 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: KROL
NAIC: 561611 Investigation Services; 514190 Other Information Services; 541219 Other Accounting Services; 541330 Engineering Services; 541614 Process, Physical Distribution, and Logistics Consulting Services; 541618 Other Management Consulting Services; 541620 Environmental Consulting Services; 541690 Other Scientific and Technical Consulting Services

Long considered one of the business world’s best kept secrets, Kroll Inc. has been hired by multinational corporations and governments alike to investigate fraud, embezzlement, environmental compliance, even murder. Kroll’s successes are world famous; they include finding millions that former president Ferdinand Marcos stole from the Philippines; tracking billions skimmed from Iraqi oil profits by Saddam Hussein; and breaking the Gambino crime family’s stranglehold on the Long Island trucking industry. With former agents, police officers, prosecutors, and licensed detectives making up its ranks, Kroll has the manpower and the resources to take on even the most complicated cases.

From Lawyering to Investigating: 1970s

Jules B. Kroll was born in 1941 in Brooklyn, New York. His father owned a printing company and his mother was a homemaker. Young Jules did well in school, attended Cornell University where he earned a bachelor’s degree in 1963, then went on to Georgetown University Law School. He received his law degree from Georgetown in 1966, took the New York bar exam, and worked as an assistant district attorney in Manhattan. Kroll’s experiences in the D.A.’s office included prosecuting a wide range of crimes and working with up and coming politicians including Robert F. Kennedy. After a few years, however, Jules branched out on his own and founded Kroll Associates in 1972.

Kroll started off small but ended up consulting for some of New York City’s largest and most powerful corporate entities. Kroll’s first customer was Curtis Publishing Company, which was renamed Cadence Industries after a merger. Because of his knowledge of printing and publishing (from his father’s company), Jules Kroll was hired to assist the company’s purchasing department, reviewing costs and cutting waste. By 1974 Kroll took on his first white collar investigation, which had become an increasing problem in the inflationary and Watergate-tinged 1970s.

By the dawn of the 1980s Kroll Associates had proven itself adept at investigation and there was no shortage of clients as merger mania swept Wall Street and the investment world. The Kroll name became a trusted ally to many of the era’s biggest newsmakers by ferreting out financial irregularities and doing so quickly and discreetly. As the firm’s reputation grew, Kroll assembled an extensive network of former agents from the FBI, CIA, Mossad, and MI-5; police officers; attorneys and prosecutors; auditors and accountants; licensed private detectives; and computer experts.

High Profile Cases: 1985–94

Kroll was definitely on a roll when the firm was hired by the Foreign Affairs Committee of the U.S. House of Representatives in 1985 to confirm reports Philippines President Ferdinand Marcos and his shoe-crazed wife Imelda had embezzled upwards of $200 million. A similar request came the following year, in 1986, from the Haitian government after dictator Jean-Claude “Baby Doc” Duvalier fled the country with millions taken from the poverty-stricken country’s treasury. In both cases, Kroll found the goods; the Márcoses owned pricey real estate in New York and elsewhere while Duvalier and his wife Michele had sizeable bank accounts in New York, London, Paris, Geneva, and elsewhere.

Kroll’s ability to sniff out caches and cash led to international renown and further high profile clients. In the late 1980s the firm was on the opposite side of the fence, hired by the Reichmann family, who were under attack for allegedly collaborating with the Nazis during World War II. Instead of finding proof of wrongdoing, Kroll was able to exonerate the Reichmanns, who had not helped, but rather hindered, the Nazis in their zealous pursuit of Jews. Around the time the Reichmann case was resolved, Kroll opened another controversial investigation: New York City’s Covenant House, rocked by accusations of sexual misconduct and financial irregularities. Coming under Kroll’s scrutiny in 1990, charges were corroborated against Covenant’s founder Father Bruce Ritter, who had been removed from his duties.

Iraqi strongman Saddam Hussein was Kroll’s next target, as the firm was hired to unearth some $10 billion in missing oil profits. Believing the dictator had funneled his ill-gotten gains into Western investments, the Kuwaiti government asked Kroll to find them. Throughout 1990 and 1991, Kroll investigated and found a number of corporations and individuals fronting for Hussein, who had hidden funds in both the United States and Europe. Kroll then played Agatha Christie to prove Italian banker Roberto Calvi, nicknamed “God’s banker” for his ties to the Vatican, had not committed suicide back in 1982. Kroll’s inquiry, which began in 1991 and ended in 1994, uncovered proof that Calvi’s failed Banco Ambrosiano had been laundering money for several shadowy clients. It turned out the banker had been murdered by Sicilian mobsters for mishandling some $175 million of their funds and threatening to name names in an ongoing investigation.

Kroll also went up against organized crime in the United States, investigating New York’s garment and trucking industry. By this time the firm had an army of over 200 full-time sleuths and more than 500 consultants digging up dirt for clients. Hired to oversee the dismantling of the Gambino family’s trucking monopoly in 1992, the case lasted five years and brought acclaim from clothiers and even the New York Times. Another home-based client was the Port Authority of New York and New Jersey, which hired Kroll after the 1993 bombing of the World Trade Center. Kroll was credited with the Port Authority’s ability to evacuate the majority of the towers’ workers after the first plane hit on September 11, 2001, and before the buildings collapsed.

Change and Rampant Growth: 1995–99

There seemed to be no end to corporate or international intrigue, as Kroll Associates was the world’s largest investigative agency by 1995, with offices in Australia, France, Hong Kong, Japan, Mexico, Russia, and the United Kingdom, with others slated to open in India, China, and Germany in 1996. Yet with Kroll’s immense success came scores of competitors and the loss of executives who either defected or quit to form their own investigative agencies. While Kroll’s internal turmoil never rivaled that of its clients, Jules Kroll entertained the idea ofmerging with a like-minded company. It was not the first time either—he had had similar thoughts back in 1991 about a merger with Nashville’s Business Risk International, then changed his mind.

Kroll’s next suitor was accounting firm Coopers & Lybrand in 1996, which instead lured away several of Kroll’s top officials; then came Insurance Services Group (ISG), part of the Atlanta-based Equifax, in early 1997. Again, the takeover fell through and more of Kroll’s management departed. The $70 million company then hooked up with O’Gara-Hess & Eisenhardt, an Ohio-based armored car manufacturer. The new firm, Kroll-O’Gara Company, traded on the NASDAQ under the ticker symbol KROG.

Unfortunately, problems seemed to crop up almost immediately for the merged companies, from two corporate headquarters to the management styles of its officers—Jules Kroll, as chairman and CEO, and the O’Gara brothers (Bill and Thomas), who were co-vice chairmen. While the O’Garas and Kroll had worked together over the years, running their companies together was something entirely different. The merger was supposed to make Kroll-O’Gara the world’s premier investigative and security outfit, offering its clients a complete array of personal and corporate services—but what the executives failed to address was how different the two companies actually were. Kroll was all about esoteric, behind the scenes maneuvering; O’Gara was the world’s leading manufacturer of specially outfitted Hummers, limousines, and other vehicles.

While most believed Kroll and O’Gara would be able to integrate their businesses into a working if not cohesive whole, personality clashes also kept Jules Kroll and the O’Gara brothers from seeing eye to eye. Nevertheless, Kroll-O’Gara embarked on a series of acquisitions beginning in 1998 with Lindquist Avey Macdonald Baskerville, Inc., a forensic accounting firm based in Toronto; Chicago’s InPhoto Surveillance; Fact Finders Ltd., based in Hong Kong; Louisiana’s Laboratory Specialists of America, Inc.; and Schiff & Associates, Inc., based in Texas.

Company Perspectives

Kroll Inc., the world’s leading independent risk consulting company, provides a broad range of investigative, intelligence, financial, security and technology services to help clients reduce risks, solve problems, and capitalize on opportunities. Headquartered in New York with more than 60 offices on six continents, Kroll serves a global clientele of corporations, law firms, government agencies, nonprofit institutions and individuals. Kroll’s Security Services Group provides security consulting and engineering; travel risk management; protective services and training; and crisis management programs.

In 1999 came two more purchases, the United Kingdom’s Buchler Phillips Group in April and the Nashville-based Background America, Inc. in June. Throughout Kroll-O’Gara’s spending spree the firm’s problems became more pronounced and the Blackstone Group expressed an interest in acquiring the company. Although the takeover was welcomed by many, the deal fell apart by late 1999. Revenues, however, had risen to $305.2 million for 1999, up nearly $45 million from the previous year.

Kroll in the New Millennium: 2000s

Business continued as usual despite the pervading tension in 2000. Kroll-O’Gara acquired several more companies, including Minnesota-based OnTrack Data International, the country’s largest information recovery firm, and Crucible, a Virginia-based protective services firm. Year-end sales figures for 2000 rose slightly to $310.6 million for the merged companies, but soon the inevitable came to pass. In August 2001 Kroll-O’Gara solved its problems with a permanent separation. The O’Gara armored car and security division was sold to Armor Holdings for around $52 million and the O’Garas went with it. The new Kroll Inc. was worth an estimated $200 million, had a network of more than 50 offices dotting the globe, and an evolving array of services including forensic accounting, background screening, travel security for high risk locations, building reinforcements, environmental compliance, and measures to combat cyber piracy and electronic infiltration.

Once the dust settled, New York-based Zolfo Cooper LLC, which specialized in corporate restructuring, joined Kroll. Founder Steve Cooper came with the deal and his expertise landed him the highly publicized role of acting CEO at Enron after its financial meltdown. But first came a shock: the terrorist attacks of September 11, 2001. In the tragedy’s aftermath Kroll received an unexpected boost in revenue, hired not only by security-conscious corporations but municipalities scrambling to protect their citizens and implement antiterrorist measures. Chicago officials and owners of the famed Sears Tower updated the skyscraper’s security system through Kroll, while thousands of New Jersey Transit Corporation employees were trained by Kroll in emergency response tactics and terrorist-fighting measures after so many of their brethren had perished.

Kroll in 2003 operated with five distinct yet complementary units: Background Screening Group (BSG); Consulting Services Group (CSG); Corporate Advisory & Restructuring Group (CARG); Security Services Group (SSG); and the Technology Services Group (TSG). During the year Kroll signed on for several high profile assignments including its appointment by the U.S. Dept. of Justice and the city of Detroit to monitor the allegedly corrupt Detroit Police Department, and with the Securities and Exchange Commission (SEC) to provide security consulting services for a year.

Kroll’s ongoing operations could be narrowed down to upholding one basic tenet of human behavior: “Do unto others as you would have them do unto you.” Back in 1994 Jules Kroll had used this Biblical adage to explain the difference between a person with ethics and one without (Management Review, May 1994), “You shouldn’t do unto others what you would find hateful done to you. In every society the rules are a little bit different, but basically, treat the other person the way you would like to be treated.” If everyone followed this simple rule, there would be no need for Kroll Inc. and its thousands of full-and part-time sleuths.

Principal Subsidiaries

InPhoto Surveillance Ine; Kroll Associates Inc.; Kroll Background America Inc.; Kroll Brazil; Kroll Fact Finders Ltd.; Kroll Information Services Inc.; Kroll International Inc.; Kroll Japan; Kroll Laboratory Specialists Inc.; Kroll Lindquist Avey Company; Kroll Ltd.; Kroll Ontrack Inc.; Kroll Schiff & Associates, Inc.; Kroll Zolfo Cooper Inc.

Principal Operating Units

Background Screening Group (BSG); Consulting Services Group (CSG); Corporate Advisory & Restructuring Group (CARG); Security Services Group (SSG); Technology Services Group (TSG).

Principal Competitors

AlixPartners; Applied Discovery; ChoicePoint Inc.; Guards-mark; Securitas AB; TransNational Security.

Key Dates

1972:: Company is founded as Kroll Associates by Jules Kroll
1972:: Kroll takes on its first case of white collar crime.
1985:: Ferdinand and Imelda Marcos of the Philippines are investigated by Kroll.
1986:: Kroll tracks down millions stolen by Haiti’s Jean-Claude “Baby Doc” Duvalier.
1990:: Kroll is hired to track down oil profits skimmed by Saddam Hussein.
1996:: Kroll considers takeover offers from Coopers & Lybrand, then Insurance Group Services of Equifax, both of which fall through.
1997:: Kroll and the Ohio-based ‘Gara Company merge to become Kroll-O’Gara.
1998:: Kroll-O’Gara goes on a buying spree; acquisitions include Lindquist Avey, Corplex, and Laboratory Specialists of America.
1999:: Background America joins the Kroll-O’Gara family of companies, as the Blackstone Group expresses interest in a takeover.
2000:: The Blackstone deal falls apart as acrimony builds between Kroll and O’Gara.
2001:: Kroll and ‘Gara separate company; ‘Gara operations are sold and the new firm becomes Kroll Inc.
2002:: Kroll Inc. acquires OnTrack Data International and Zolfo Cooper LLC.
2003:: Kroll is hired by the SEC for security services and the U.S. Dept. of Justice to monitor the Detroit Police Department.