Simon Freakley: 'Blimey, he's a limey': the Brit running the gumshoes and troubleshooters at Kroll

The chief of the US security and consulting giant tells Jason Nissé how an insolvency expert got to lead one of the world's star brands
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The Independent Online

It was almost exactly a year ago that Simon Freakley received the phone call which changed his life. Sitting in his office on a Friday, he was instructed to get on a plane to New York. His boss, Michael Cherkasky, had just been appointed chief executive officer of Marsh & McLennan (MMC), the insurance and consulting giant, replacing Jeff Greenberg who had resigned amid a US regulatory investigation into allegations of illegal payments by the group's insurance brokers.

The next day, Freakley was appointed to replace Cherkasky. He was to become head of Kroll - the corporate investigations, restructuring and forensic accounting giant, and one of the best- known brands in the business world.

"The timing was a bit of a surprise," the 44-year-old insolvency expert from the Potteries recalls. "But for succession-planning reasons, I'm sure there was a piece of paper in a safe somewhere saying that if anything happened to Michael, I'd become chief executive."

It was, though, an amazing turn of events: Freakley had been the 24th person to join the small insolvency firm of Buchler Phillips in 1992, bought by Kroll seven years later, and now he was heading a firm with 5,500 people and an annual turnover of nearly $1bn (£560m).

Freakley's rise echoed that of his firm. Buchler Phillips had been set up by two former partners at the insolvency arm of Andersen, the then-mighty accountancy firm that collapsed as a result of its role in the Enron scandal in 2001. Freakley had also worked at Andersen, having joined straight from Birmingham University. Three years after joining Buchler Phillips, he took over as managing partner, presiding over exponential growth as the firm took advantage of the increasing conflicts of interest suffered by insolvency departments at the large accountancy firms.

Two years later, in 1997, he received a phone call from Jules Kroll, the legendary founder of the detective agency which had built a niche in corporate investigations, expanding into fast-growth areas such as pre-employment screening and data recovery. Jules Kroll saw forensic accounting and corporate restructuring as a logical add-on, and Freakley saw opportunities in transatlantic work, dealing with the British subsidiaries of US firms in Chapter 11 bankruptcy.

The deal took a while to consummate, but after it, Kroll Buchler Phillips continued to expand, buying the US firm Zolfo Cooper which took a big role in the restructuring of Enron, among other deals. Freakley became the first non-American to join the board of Kroll.

And then, last year, everything changed. Kroll was approached by MMC, which saw the business fitting in well with its risk-consulting operations. Jules Kroll hadn't been looking to sell but $1.9bn ("in cash", Freakley notes, with a smile) changed his mind. The deal was struck in July. The regulatory probe into MMC was announced in September. Within a few weeks, Freakley was running Kroll.

The Americans were more surprised than he was. One paper ran the headline: "Blimey, he's a limey". Freakley now has to spend three weeks out of every four in New York, so he has bought a flat in Greenwich Village and a Mini Cooper to trumpet his Englishness. "I have to drive around the potholes in the road because it might fall into them," he laughs.

The group he inherited was over 10 times larger than the restructuring business he had built up, which now boasts 500 professionals. There are four other arms to Kroll:

Consulting, which includes forensic accounting, investigations (the original Kroll business) and intelligence. Among its more unusual assignments have been jobs for the US government monitoring the performance of the Los Angeles and Detroit police forces.

Security, where Kroll trains people who are going to work in dangerous places, such as Iraq, and advises companies on how to protect their workforces, often hiring sub-contractors to guard staff and installations. It also works with architects on how to make buildings resistant to terrorist attack.

Risk consulting, which is a business inherited from MMC and mainly concerned with claims handling for insurers.

Technology, which includes doing background searches on employees, data recovery, credit checking and an operation called Kroll Ontrack, which can scan vast amounts of data extremely quickly. Ontrack has been much in demand for legal discovery and regulatory filings.

Freakley admits it has been a "steep learning curve", particularly with Kroll's technology side, which is the largest and fastest-growing part of the group. "My restructuring background helped me, because you are frequently dropped into a company and have to learn quickly on the job," he says. "This is a little different because the company is doing so well. Rather than saving the business, the issue here is how to manage growth."

The ructions at MMC have had little effect on Kroll, except in the knock to the group's share price. The fallout has been limited to the insurance broking business, Marsh, which represents around half of MMC's turnover, and despite all its problems, is still the world's number one broker. Having Cherkasky at the helm of MMC also helps. "He understands the business back to front," says Freakley, adding that as Cherkasky is dealing with the problems at Marsh, he has been allowed a fairly free hand. "I think he has enough on his plate. His words to me when I took over were: 'I trust you to get on with it.' "

And get on with it he has. The IT business, which is now half of Kroll, has been growing at over 30 per cent a year, due to worries about identity theft and the Sarbanes-Oxley reforms to US corporate regulation post-Enron. Freakley reckons that, in three years, Kroll will be double the size it is now.

Half of this growth will be organic and half will come from acquisitions, with the MMC board supporting his proposals to make further purchases, particularly on the technology side. "Kroll is a company where the brand is bigger than the business," Freakley argues.

All this expansion has meant that he had had to stop almost all his restructuring work, though he is still the administrator of the UK businesses of Federal Mogul, the US engineering giant which collapsed three years ago beset by asbestosis claims. Its main UK operation is car parts maker Turner & Newall, where the pension fund has a £1.6bn black hole. Two weeks ago, a deal was struck with the Government's Pension Protection Fund, the fund's trustees and the largest bondholder in Federal Mogul, US corporate raider Carl Icahn, which should sort out these liabilities. Freakley expresses relief, as Federal Mogul has been taking up to two hours of his time every day. "Hopefully we've broken the back of it."

With the black holes behind him, Freakley can now go back to navigating the potholes.

BIOGRAPHY

Born: 28 August 1961.

Education: Birmingham University.

Career (1983-1992): Arthur Andersen.

1992-99: joined Buchler Phillips as a partner, becoming managing partner in 1996. The firm was bought by Kroll in 1999.

2002: became global head of Kroll's corporate advisory and restructuring group in 2002 after the purchase of Zolfo Cooper in the US.

October 2004 to now: chairman and chief executive of Kroll.

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