It’s taken more than three years for the other shoe to drop, but boy what a shoe this is.

A bit of background: in June 2009, Bryan Burroughs raised questions in Vanity Fair about the role that Kroll played in protecting Ponzi schemester Allen Stanford:

Behind the scenes, Stanford was even more aggressive. As the company grew, he became renowned within law-enforcement circles for aggressive counter-intelligence… His greatest asset may have been a top security firm, Kroll associates, whose Miami office worked with Stanford for years. “Stanford was spending millions of dollars a year trying to figure out who was looking at him, and aggressively combating whoever it was,” recalls the former FBI agent. “Kroll was essentially running a propaganda campaign in defense of Stanford’s good name. Kroll’s role in defending Stanford’s reputation, in both law-enforcement circles and the wider banking community, was an example of a controversial practice known within the private-security world as “reputational self-due diligence,” that is, vouching for a client’s good name… “It is, by all accounts, an exceedingly lucrative business… It is controversial, even inside the firm.”

The idea here was that if Stanford hired Kroll to protect and burnish the Stanford reputation, then he could continue to raise money for his Ponzi much more easily. But what exactly was Kroll doing for Stanford? Murray Waas has now found out, and it’s not pretty. Essentially, rather than simply sing the praises of Stanford, Kroll would make extremely aggressive ad hominem attacks against anybody who dared raise questions about the firm, including a former senior State Department official named Jonathan Winer.

Stanford asked Kroll’s Tom Cash for “an in depth profile, credit history, marriage, kids, work personal quirks”, and instructed Cash to “go after him as hard on as many fronts as possible”. Cash was happy to oblige, telling Stanford that “our info is wife by whom he had two children divorced him and ran off with another woman. Wife also was a lesbian”. (Incidentally, for anybody who thinks that Kroll is particularly good at finding out these things, none of that information was true — not only was the wife not a lesbian, the couple actually had three kids, not two.)

This kind of thing seems to have been quite common:

During the same period in which it targeted Winer, Kroll also tried its tactics on two former Stanford employees who sued him and threatened to talk to the Securities and Exchange Commission, the emails showed. “I think we might be able to assist in this investigation which could get very significant unless we can discredit the accusers,” Cash wrote Stanford. Earlier, after the newspaper Caribbean Week published an article critical of Stanford in 1996, Stanford directed Cash to “go for … the jugular” in investigating the story’s author. Cash assured Stanford that Kroll had “three people working full time in developing information in the United States.” The newspaper soon published a retraction of the article.

Kroll even sent “undercover agents” to “infiltrate” meetings of Antiguan dissidents, since the dissidents were unhappy with Stanford’s influence on the island.

No wonder this kind of business is controversial: I have difficulty imagining that any clean executive would serially unleash dogs like these on their critics. What’s more, Kroll isn’t even disowning its activities:

Kroll, which has been referred to as Wall Street’s “private eye,” says its employees had no clue they were helping to conceal the second-biggest Ponzi scheme in U.S. history.

This makes it sound as though the attacks and spying would have been perfectly OK, if it weren’t for the fact that they were being done on behalf of a Ponzi artist. So a couple of questions for Kroll: are these techniques normal? How often do you use them? And where do you draw the line? Because it seems to me that what Cash did went way too far.