NEW YORK -- Michael G. Cherkasky, the longtime prosecutor now running embattled financial services giant Marsh & McLennan Cos., says he has figured out the main difference between investigating corporate wrongdoing and taking charge of a company targeted by a white-collar probe:
"I see the same issues, but now I don't sleep at night. I go home and I worry," said Cherkasky, 49. "It's so personal."
Cherkasky will have to establish a new business model at Marsh & McLennan, which has lost big clients.
(Frank Franklin -- AP)
Cherkasky became chief executive of Marsh & McLennan in October, 11 days after one of his former prosecutorial proteges, New York Attorney General Eliot L. Spitzer, accused the firm's Marsh Inc. insurance brokerage unit of bid-rigging and accepting kickbacks.
His first brief was to reassure Spitzer and Wall Street that the firm was making changes, and he did, renouncing the "contingent commissions" at issue in the probe, jettisoning two top insurance executives and the firm's general counsel, and laying off nearly 3,000 people. He has also met with more than 120 big clients to personally apologize, and responded personally to thousands of anguished e-mails from laid-off employees.
Now the pressure is on for Cherkasky, who spent 15 years in the Manhattan district attorney's office, to prove that he's more than a crisis manager chosen simply for investigative experience and his ties to Spitzer.
Even he admits he has taken a leap from his previous post as chief executive of Kroll Inc., a security and risk consulting firm with 3,200 employees that was acquired by Marsh & McLennan earlier this year. Cherkasky now heads a firm with revenue exceeding $11 billion and more than 60,000 employees. He has laid off more employees in his first weeks than he had ever previously supervised, and his promise to ditch contingent commissions opened an $845 million hole in Marsh's budget, significantly larger than Kroll's entire net sales of $485.5 million in 2003.
"It's ridiculous. I look at myself in the mirror and I cannot picture that the person who was a prosecutor 10 years ago is doing these things," Cherkasky said at a recent interview in the nondescript 44th-floor office he picked after rejecting the much plusher digs that had been used by his predecessor, Jeffrey W. Greenberg.
So far, the market is skeptical. Marsh stock, which used to trade around $45 and fell 47 percent in the days after Spitzer filed his fraud complaint, has rebounded only somewhat since Cherkasky's ascension. The stock closed at $31.95 yesterday.
Cherkasky is the most prominent example of a popular corporate tactic in this era of heightened government scrutiny: public companies recruiting former prosecutors and regulators in high-level positions.
The major investment banks, which have been under pressure from Spitzer and the Securities and Exchange Commission for several years, have adopted this strategy with gusto -- Bear Stearns and Morgan Stanley have brought former Spitzer aides on board and Credit Suisse First Boston and Citigroup Inc.'s investment banking arm have former high-level SEC lawyers in upper management.