25 Oct 2007
Simon Freakley may only have done one audit during his time as a professional chartered accountant at Andersen, but as an insolvency practitioner he has seen hundreds of businesses, and turned them inside out and upside down.
‘I think Andersen thought I needed to have a bit of experience with audit,’ he laughs now. Even back then, though, Freakley knew he was more ‘interested in the business of business’.
Staring out at St Paul’s Cathedral from Kroll’s London office, Freakley admits he can barely believe three years have flashed by so quickly since he was thrust into the position of chief executive at Kroll, the corporate restructuring, investigative and forensic accounting company.
Three years ago this month, he was rushed out of a weekend away in France and told to hightail it to New York, where his then boss Michael Cherkasky asked him to take on the job of Kroll CEO.
At the time Cherkasky had been appointed chief executive of Marsh & McLennan a professional services company that had bought Kroll earlier in the year replacing Jeff Greenberg, who resigned under a cloud following US regulatory investigations into illegal payments by MMC’s brokers.
Freakley had never envisaged taking on so senior a position so soon.
Only a decade earlier, he had been managing Buchler Phillips, a boutique insolvency firm with a turnover of £15m to £20m, which he joined in 1992.
The firm, which Kroll bought in 1999, was made up of several former Andersen, KPMG and PricewaterhouseCoopers partners. They found themselves with a captive market needing insolvency services as the Big Four came under increasing fire over conflict of interest issues arising from the balance of audit and non-audit work.
Freakley is proud of having spent such a large part of his time in restructuring and insolvency.
He stumbled on his career during a summer job doing menial work at a boatyard which was going into receivership.
‘They [the accountants] would come and ask questions about the business and how it worked. I watched a bit of that and thought it quite interesting,’ he says.
After graduating from Birmingham University with a business degree, he joined
Andersen’s Manchester office and went into restructuring after a short stint in
‘It interested me to see so many different businesses, and I ended up with the ability to look into all types of different companies.’
Although Freakley respects the auditing side of the profession, he realised it was not for him.
‘As an auditor you tend to be given a programme of audit and then you follow those companies for a few years until you’re rotated. Restructuring and insolvency is so diverse that you might be working on three or four different kinds of businesses concurrently. So by the end of a period of three or four years training in restructuring and insolvency, I’d probably worked on about 30 to 40 different businesses,’ he says.
Freakley is quite certain that his CA training has stood him in good stead at Kroll, which not only works for a variety of different companies but is itself a fast-growing business.
When he became chief executive, Kroll employed 5,500 people and had an annual turnover of nearly $1bn (£560m). The company’s turnover now exceeds £1bn.
‘There are challenges,’ Freakley admits. ‘I was trained in the UK so it took me a little while to really re-orientate myself to thinking of business in a multinational environment. And then I also had to learn to deal with some of the issues that arose out of doing business in multiple jurisdictions.’
He also had to deal with cultural issues. ‘Some cultures are very collaborative, while some are hierarchical. I had to learn how to run a business which had 63 offices in 24 countries.
‘My restructuring training helped me in the sense of digesting a lot of information quickly. I had to learn to make decisions and exist in environments in which I didn’t necessarily have the complete information.
‘And of course, not being frightened by financial information helped me. Without a CA qualification, people think they can bullshit you with financial information. But they can’t if you have a grounding in it,’ he says.
He has only been able to give his undivided attention to Kroll since the end of last year after he and two other administrators finally wrapped up Federal-Mogul. The car parts maker had filed for bankruptcy in 2001 after a string of acquisitions and a sharp increase in litigation related to the asbestos liabilities of many of those acquisitions.
Freakley had to give up working on everything else so he could concentrate on Federal-Mogul, which ultimately turned into one of the biggest international restructuring operations of all time.
When Federal-Mogul went into administration, its pension scheme, which has 40,000 members, appeared fully funded, but after the regulators took a closer look, it turned out to be significantly underfunded.
During this time, Freakley had the dubious pleasure of meeting activist investor Carl Icahn, who at the time took a position on the fund.
‘I spent many, many hours negotiating with Carl Icahn. He had the largest office I’d ever seen in my whole life it was a whole quarter of the floor of the General Motors building.
‘On the way to my first negotiation, his assistant asked me if I’d like to
the office before the meeting and see Icahn’s antiques. I said that, actually, I came from Europe and we had lots of antiques there.’
The mammoth case, which began in 2001, was finally completed by the end of 2006. Creditors’ needs were met and asbestos victims were compensated.
Since then, Freakley has been getting on with growing and managing Kroll, which he wants to double in size by 2010.
The company has transcended its original investigative work and expanded into four main areas, which cover everything from consulting, forensic accounting and investigations, to security training of staff to work in politically sensitive areas like Iraq, and a risk consulting business that handles claims for insurers. There’s a technology arm, too, which carries out background searches on employees, data recovery and credit checking.
The technology side relies heavily on a recent acquisition, Kroll Ontrack, which Freakley says is about systems that can scan vast amounts of data and do very ‘clever things’ with it.
Freakley believes the company has the potential to grow even further.
Two years ago, he was reported as saying his biggest challenge would be managing that growth: ‘It’s simply essential to have a really good team behind you. Kroll has several arms of specialised business, and it’s important for me to have experts managing and handling those sides of it.
‘Business tends to grow in spurts. I think it’s about ensuring we have the right infrastructure and systems for where we are at any given time, but also to have the flexibility to cope with the next surge of new growth. It’s one of the most difficult things that management teams have to do. But I’ve got a strong team behind me.’
A flip through the forensic files
Kroll’s notable cases over past 30 years include:
Early in 2002, Kroll’s US corporate advisory subsidiary was given the monumental challenge of restructuring Enron, the collapsed energy giant with $65bn (£32bn) of assets.
With Kroll’s Steve Cooper at the helm as Enron’s interim CEO and chief restructuring officer, a Kroll team is still working with Enron’s current management and creditors committee to implement a viable plan to maximise value for the company’s stakeholders.
Unravelling Saddam Hussein’s financial network
The Kuwaiti government hired Kroll between 1990 and1991 to investigate the financial network used by Iraqi dictator Saddam Hussein to hide assets in the West. Kroll’s work linked Hussein to millions in assets held through nominees in the US and Europe, exposing his front companies and agents.
Tracking down an international kidnapper
In August 2001 Cornelia Streeter called Kroll for help in finding her ex-husband, Anwar Wissa Jr, who had kidnapped their children and fled to Egypt. A two-year chase involved
Kroll’s investigators tracking Wissa across the world – from Egypt to Spain and Panama, and finally, to Cuba. Cuban authorities detained Wissa in June 2003 and the children were at last reunited with their mother.
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