December 08, 2004
Kroll Telecom Espionage in Brazil
The company was originally reported to have been hired by the Brazilian investment firm Opportunity to investigate Telecom Italia. Opportunity has been battling with Telecom Italia to gain control of Brasil Telecom, one of the nation's largest telephone companies. Minister of Communications Luiz Gushiken - one of the subjects of Kroll's investigation - called the alleged spying "flagrant disrespect for (Brazil's) constitution." Kroll reportedly obtained copies of emails written by Gushiken in connection with the Telecom Italia efforts to take over Brasil Telecom. Authorities also raided the Rio de Janeiro offices of Opportunity, which controls Brasil Telecom.
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Marsh & McLennan Cos.' Kroll Inc. took out ads in Brazil's largest newspapers Thursday to defend five employees arrested amid allegations the international security consultant illegally spied in its probe of a bitter corporate dispute.
Kroll, whose offices were raided by police a day earlier, insisted it broke no Brazilian laws and expressed confidence the arrested employees, including two who head the company's Brazil operations, would soon be cleared.
"The company never used practices that break Brazilian laws, such as telephone bugging or hacking," the company announced in an ad on the front page of Folha de S. Paulo that was placed prominently in the Estado de S. Paulo newspaper.
Police investigating Kroll seized computers, documents and "sophisticated electronic eavesdropping equipment" in five cities in an operation dubbed "Operation Jackal."
The searches included Kroll's Sao Paulo offices, firms that do business with Kroll and a major Brazilian Kroll client.
Five Brazilian Kroll workers were arrested on conspiracy charges. Kroll is owned by Marsh & McLennan, the largest U.S. insurance brokerage company, which is engulfed in a a bid rigging and price fixing scandal. Earlier this week, Marsh & McLennan named former Kroll chief executive Michael Cherkasky as its new chief executive, replacing Jeffrey W. Greenberg, who was forced out by the company's board.
In trading Thursday morning, Marsh & McLennan shares were up 28 cents, or 1 percent, at $28.97 on the New York Stock Exchange. The shares are off more than 35 percent since the scandal broke earlier this month.
The Brazilian investigation into Kroll started in February, when police looking into the Brazilian operations of Parmalat SpA learned that Kroll was also probing the disgraced Italian dairy giant, said Romero Menezes, a high-ranking federal police official.
But the police probe shifted to Kroll's work on a corporate telecommunications dispute in July after Folha, Brazil's biggest newspaper, reported the company had obtained copies of e-mails from a top adviser to President Luiz Inacio Lula da Silva before the adviser was appointed.
Kroll was conducting an investigation for Brasil Telecom Participacoes SA, the third largest fixed line operator in Latin America's largest country.
Police also searched the Rio de Janeiro headquarters of Brazil's Opportunity Bank and the offices of Brasil Telecom. Opportunity controls Brasil Telecom.
And they searched the homes of Brasil Telecom chief executive Carla Cico and Opportunity founder Daniel Dantas. The two were not arrested or charged, said Romero Menezes, a high-ranking federal police official.
"We are still sorting through the wealth of documents obtained in the searches," Menezes said. "More arrests could follow."
Kroll is cooperating with authorities, said spokeswoman Jodie Rosenbloom. The arrested employees are being given legal help, and Kroll insisted there was no eavesdropping equipment in its offices, though the company said police may have found devices used to detect eavesdropping equipment.
Communications Minister Luiz Gushiken, a close Silva confident, said in July that he was spied upon before he was appointed. He called the surveillance "illegal" and said it was being investigated by Brazil's Justice Ministry.
Kroll obtained several e-mails written by Gushiken during the firm's investigation of Telecom Italia SpA for Brasil Telecom.
The e-mails were written while Gushiken was working in the private sector, before Silva took office last year. But the minister has long been an important player in Silva's Workers Party.
Kroll also obtained e-mails written by Cassio Casseb, who was also working in the private sector at the time but now heads the government-controlled Banco do Brasil, Brazil's largest bank.
Menezes said authorities found no evidence suggesting Kroll or contractors eavesdropped on any current government officials.
Kroll was hired by Brasil Telecom to come up with proof that it forced by Telecom Italia to pay too much money for the purchase of Brazilian fixed line Companhia Riograndense de Telecomunicacoes, SA, or CRT, in 2000. Telecom Italia has been fighting for years for control of Brasil Telecom.
"The allegations and the police investigation stem from an acrimonious corporate dispute between our client and another corporation," Kroll said.
So, what do you think - do corporate ethics standards run in the family? MMC's new CEO better hope you don't.
- Arik
Posted by Arik Johnson at December 8, 2004 04:59 PM | TrackBack
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