Jules Kroll: The market detective

After 35 years carrying out corporate investigations, Jules Kroll knows the danger signs when he sees them, as he explains to Andrew Murray-Watson
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The Independent Online

Jules Kroll has a bad cold. "I am on antibiotics," he sniffs. The bunged-up founder of Kroll, the original corporate investigations company, is in London to launch a report that looks at the challenges facing the global economy.

His firm, now part of the sprawling Marsh & McLennan professional services group, is also global, having come a long way since its founder opened an office in New York in 1972. It has a turnover of £1bn and employs 4,200 staff in 33 countries, including 700 in London.

Mr Kroll, 66, bears an appropriate passing resemblance to Telly Savalas, the actor who played the 1970s TV cop Kojak. His firm gained a reputation for being the detective of Wall Street in the 1980s – the days when greed was good and traders and investment bankers made unheard-of sums of money. As regulators struggled to keep pace with change, Kroll became a valued policeman to watch over the activities of the Gordon Gekkos of the time.

The "big bang" of the 1980s in the City of London paved the way for it to rival New York as the financial capital of the world. Twenty years on, with hedge funds and private equity running the show, greed is still good and Mr Kroll, now vice-chairman at Marsh & McLennan, is still at the forefront of the fights against fraudsters and others who seek to gain an unfair or illegal advantage in the world of big business.

Mr Kroll released his report, Boom, Bang or Bust?, last week to coincide with the firm's 20 years of business in the City. It is a review of the changes that have swept through financial markets over the past two decades and concludes that there will be no let-up in the pace of evolution.

And like the ageing cop who refuses to hand in his badge, he still enjoys casting his beady eye over the City. His firm, the best-known corporate "spooks" in the world, has never been busier. The work it undertakes for clients includes forensic accounting, due diligence in mergers, IT security and as a host of other services. The new money flooding into London from former Soviet states and other exotic locations means investment banks and would-be investors are queuing at Kroll's door.

But for the founder of the company, it is just a case of "the same crimes being committed in new ways" . With constant advances in technology and the increasing complexity of financial markets, Kroll has had to evolve to deal with the ever-changing threats to legitimate business.

The current credit crunch has provided another tranche of work for the firm. In the US, it has been employed in dealing with the collapse of at least one sub-prime mortgage company.

"There has been a wall of money thrown at consumers," says Mr Kroll, adding that ill-advised lending to companies has been just as prevalent. "There are some major excesses in the market and the sub-prime crisis was our first tip-off of that. People just don't know the value of things at the moment."

But with the FTSE riding high above 6,600, isn't he worrying unduly?

"The great masses generally only learn about problems after the event," he says. It is not a case of "whether" there is a correction ahead but "when".

Clearly Mr Kroll believes that the fallout from the credit crunch has yet to be felt to its true extent by the world's markets, and he draws comparisons between the current situation and the conditions prior to the last two financial recessions in 1987 and 1996.

"When I give my public speeches, I tell people that it feels like 1987 all over again," he says. "I had dinner at Scott's [the exclusive London seafood restaurant] recently and they said they could squeeze us in but we had to be gone by 9pm. That's when all the hedge fund guys arrive – the real money. It felt like I was back at Annabels 20 years ago."

Mr Kroll is fond of London, even though he has worked in the US for most of his adult life.

"I have met some of the most interesting characters in the world over the last 30 years. And you know what? More of them came from London than anywhere else," he says in his distinctive New York tones.

"I am not a subscriber to the view that London's markets have done better because of looser regulation here [than in the US]. It is more the case there is a mindset here – and maybe it's a legacy of Thatcher – that people accept this is a new reality, with vast quantities of liquidity coming in from the former Soviet republics and from the Gulf states. So they ask themselves, 'how do we make this work?' Compare this with the US, where the attitude is, 'how do we protect ourselves?' " He cites the example of US politicians intervening in a "xenophobic manner" to stop Dubai Ports from acquiring ports in the US.

As Mr Kroll muses about London and New York, 1987 and 2007, it is clear he has had a colourful career.

"If I am nostalgic, it is about the characters I have met," he confesses. Take Jimmy Goldsmith [pictured]. He was a unique, imaginative character. He once asked, 'Aren't you tired of investigating me?' "

Among the other characters who feature in Mr Kroll's reminiscences is the late tycoon Robert Maxwell, whom he was once asked to take on as a client. "Two weeks later he was in the drink," says Mr Kroll.

All of these colourful tales will appear in a book he is currently writing. For anyone interested in the recent history of global finance, it should make an intriguing read.