By Scott Cohn Correspondent
updated 3/2/2006 3:29:01 PM ET 2006-03-02T20:29:01

In business, a reputation can take a lifetime to build. But a scandal can destroy that reputation in an instant.

Marsh and McLennan, the giant financial services firm, hit three scandals, in rapid succession. Now, it’s fallen to CEO Michael Cherkasky to restore the $12 billion company’s reputation.

This sprawling financial services giant offers a wide variety of products, from mutual funds to insurance, security to consulting.  But for awhile, it seemed the company's principal business was scandal.

By October of 2004, it was strike three for Marsh and McLennan. First, a mutual fund scandal involving its Putnam Investments Unit, which was accused of giving special trading privileges to hedge funds at the expense of regular investors.

Its Mercer Human Resources Consulting unit helped craft former New York Stock Exchange CEO Richard Grasso's pay package, and agreed to return about $400,000 in fees under a settlement with New York Attorney General Eliot Spitzer.

But after Spitzer's office accused the firm in October, 2004 of taking kickbacks from insurance companies, the New York Attorney General announced he had had enough.

“The leadership of that company is not a leadership I could talk to, not a leadership I would negotiate with," said Spitzer.

Bowing to Spitzer's demands, Marsh's board pushed out CEO Jeffrey Greenberg and replaced him with Cherkasky, who was running the firm's security division. It didn't hurt that he used to be Spitzer's boss in the Manhattan District Attorney's office.

Since taking over, Cherkasky has scaled down the executive suite, changing Marsh and McLennan from the top -- which is exactly what New York Attorney General Eliot Spitzer demanded. And he’s working to overhaul the company’s culture – from top to bottom. As CEO, he could go to work every day in a limousine, but he says he'd just as soon take the train.

“There's now a culture of responsibility and accountability in this firm for integrity and ethics as well as the bottom line,” he said.

The very day Cherkasky arrived as CEO, Spitzer announced he would not press criminal charges against the company.

Cherkasky: "I don't think we got a break. I don't think we paid a penny less. I didn't think that when we started we would, because that's not who Eliot is. But I think that the trusting relationship -- he knowing that we were going to reform this company -- was very important in being able to work through this.”

CNBC: “Now, I know that you've heard the cynical view of all of this. That Elliot Spitzer didn't like the management of Marsh and Marsh & McLennan. He put in his guy.”

“I know that's not the case. Why do I think people think that? Because it's a pretty picture if you want to be a conspiracy theorist. If you want to be a conspiracy theorist then it's a pretty picture, but it's not why Elliot put me in."

Besides, Cherkasky's first year on the job has been enormously difficult.  The settlement with Spitzer’s office meant changing the entire business model.  And that meant laying off 5,000 employees.

But Cherkasky saw an opportunity.

“The opportunity (was) for me as a former prosecutor to reform a company so that it's going to do well on Wall Street,” he said. “But do it the right way; that was a great opportunity to live right and do well.You know you balance everything else in life, and yeah there are a lot of down sides. But I think there is such a substantial opportunity as an upside that you are willing to take the chance."

Today, Marsh and McLennan is back from the brink -- stable, by all accounts. And Michael Cherkasky has become an authority in crisis management.

“I think that the most important part is the strength in your gut, the ability to see it through, to be calm, to be decisive,” he said. “So I would say, it's got to be a complete commitment. You've got to have those internal fortitude aspects of it and then being decisive. If you get it wrong, fix it. But don't be afraid of making those changes that you need to make to fix it.”

Cherkasky's predecessor, Jeffrey Greenberg, was never charged with any wrongdoing.  In fact, Cherkasky said he still calls on Greenberg from time to time for advice. But Cherkasky said he doesn't second guess anything Greenberg did at the company -- even though Cherkasky himself was part of the cure.

© 2012 CNBC, Inc. All Rights Reserved


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