Cherkasky Buys Back Sleuthing Firm Kroll from Company That Fired Him

Former crimebuster Michael Cherkasky has had his ups and downs in business. The job that nearly broke him was taking the reins as CEO of Marsh & McLennan, the world's largest insurance broker, and getting unceremoniously fired after a turbulent three-year tenure. But this week he got the last laugh -- buying back his former firm Kroll from Marsh at a bargain basement price.

Cherkasky, a crackerjack prosecutor, ran Kroll, one of the world's leading security firms, from 2001 until it was bought by Marsh three years later. Kroll had such a good reputation that the U.S. government used it to track terrorists' money after the first World Trade Center bombing in 1993.

Cherkasky became Marsh's CEO only a few months after he and Kroll joined Marsh. When an investigation by New York Attorney General Eliot Spitzer into bid rigging at the insurance broker led to the former CEO's ouster, the board voted in Cherkasky.

With a background in law enforcement, Cherkasky seemed like the ideal choice. He had battled mobsters like John Gotti and supervised the Los Angeles police department after it was charged with brutality and racism. More importantly, he knew Spitzer and could make peace with the fired-up AG. The two had run a mob sting operation in New York's Chinatown while at the New York County district attorney's office.

What Cherkasky -- who had virtually no background in insurance -- couldn't do was make shareholders, employees and clients happy. To be fair, he had a lot going against him when he took over Marsh in 2004. Spitzer had just fined the giant broker $850 million for bid-rigging and the company was bleeding $800 million a year in lost commissions that it no longer got from insurers as a result of the Spitzer settlement.

But while Cherkasky was great at playing Jack Bauer of TV's 24 in real life, he lacked the "hail fellow well met" skills to deal with insurance agents and brokers. Many of them complained bitterly about the way he tried to compartmentalize them; others simply packed their bags and left. Marsh retreated to being the world's second largest insurance broker behind Aon Corp. Cherkasky's star finally fell when he fired the CEO of the brokerage unit, whom he had promoted to the job two years earlier.

He was replaced by former Ace Limited CEO Brian Duperreault. An insurance insider, Duperreault has repaired much of Marsh's brokerage business, as well as expanding the franchise. But he realized that Kroll didn't fit and wasn't thriving in the Marsh empire.

This week Kroll landed right back in Cherkasky's lap. The former Marsh CEO was now CEO of Altegrity. A privately-held 8,000-worker security firm operating in the Washington, D.C. area, Altegrity is essentially a mini-Kroll, and handles security issues for the U.S. government. It also runs employment screening and provides data for property casualty insurers. Cherkasky bought Kroll for about $1.1 billion, compared to the $1.9 billion for which it was bought by Marsh.

The moral of the story: CEOs should stick to what they do best. Cherkasky is good at running companies that focus on security and investigation. After all, he's a sleuth and spymaster. Duperreault is good at dealing with insurance brokers, which one CEO likened to "herding cats." They should both stay put in their own industries.