Louis Freeh, private eye

July 25, 2013, 11:26 AM UTC
Freeh found that he craved the nitty-gritty of casework.
Photo: Jonathan Becker

If there is such a thing as the Platonic ideal of a G-man, it would have to resemble Louis Freeh.

Even today, 12 years after retiring as director of the Federal Bureau of Investigation, Freeh favors what look like government-issue gray suits with an American flag pin on the lapel. His factual, flat speaking style conjures an FBI agent on the witness stand. Five-foot-nine and trim at age 63, he still looks as if he could sprint down the street after a perp if he had to.

Needless to say, it’s been decades since Freeh chased those sorts of perps. These days most of his targets tend to wear white collars, and Freeh has assumed a new mantle: corporate America’s most prominent private investigator. In July he was assigned to probe alleged irregularities in the BP oil-spill claims process. That comes on the heels of investigations or oversight roles for Daimler, MF Global, Wynn Resorts, and FIFA, the organization that governs world soccer. Freeh’s most headline-grabbing report excoriated Penn State University officials for failing to oversee Jerry Sandusky, the former assistant football coach now in prison for sexually abusing boys.

Business is booming for Freeh Group International Solutions, the consultancy he founded in 2007 and sold last year to law firm Pepper Hamilton. Freeh’s team has 22 professionals, but clearly he’s the draw. There simply aren’t many former FBI directors out there, much less ones who’ve also been an agent, a prosecutor, and a judge — and who’ve personally investigated everyone from Sicilian mobsters to the Unabomber to international terrorists.

That’s appealing to corporate clients, who often hire investigators to uncover wrongdoing or to untangle a disaster that is bringing unwanted attention. As Chevron general counsel Hew Pate puts it, “If you’re in a situation that is being commented on or played out in public, you want to have someone who is seen as credible … and has pretty high values.”

If there’s one thing that exceeds Freeh’s sterling investigative pedigree, it’s his reputation for probity. “I think his personal life is without flaw,” says Tom Sheer, who spent 25 years in the FBI. “There’s no incidents, no women, no sex, no problems, no nothing.” According to Ali Soufan, a former FBI agent who worked on terrorism cases, including the attack on the U.S.S. Cole, Freeh placed particular emphasis on the bureau’s “bright line” ethical policy. “Under Louis,” he says, “it was made more bright than usual.”

Many have found his Manichaean moralism off-putting. And having private clients presents challenges Freeh didn’t face in government, including the conflict of interest that could arise if a current or prospective Pepper Hamilton client hires Freeh’s investigative outfit. Would he shade findings to improve the law firm’s chances of getting or keeping business? Unthinkable, say people who know him.

Still, Freeh’s work has kicked up a lot of dust lately. His conclusions in the Penn State and Wynn reports prompted people criticized by Freeh to hire their own distinguished former federal officials, who then prepared counter reports that lacerated Freeh’s work as incomplete. Similar doubts were raised about Freeh’s conclusions in the FIFA case.

Speaking in rare and exclusive interviews with Fortune, Freeh says that fear of making a mistake keeps him up at night — but he staunchly denies any errors in these cases. Criticism, he says, is “an occupational hazard of what we do. So if you decide, ‘Well, I won’t take any controversial cases, and that way if I make a mistake, it’s going to be confidential’ — well, we assume nothing is confidential. My kids always used to say, ‘Dad, you know all the secrets!’ And I would say, ‘There aren’t any secrets!’ ”

Freeh ought to know. These days he can be found, yellow legal pad in hand, grilling witnesses at the scene of a corporate or institutional disaster. He’ll deliver a report and it will reach strong conclusions. Still, that might not be the end. Freeh may be the ultimate boy scout, but where he operates, turbulence tends to follow.

In many ways, Freeh — his name is pronounced “Louie Free” — seems like a figure from a different era. He’s serious and formal, though there’s warmth and kindness in his droopy expressive eyes. He’s disciplined, almost ascetic, in his habits. He often skips lunch. His worst vice is excessive drinking … of coffee.

Freeh’s upbringing was modest. His father, of German and Irish heritage, was at various times a truck dispatcher and union organizer; his mother’s parents were Italian immigrants. Freeh shared a bedroom in the family’s North Bergen, N.J., home with his two brothers. The family took in boarders to make ends meet.

His biography reads like something J. Edgar Hoover’s PR operation might have crafted. Young Louis was an altar boy, worked a paper route, and read to children at a school for the blind. There was even a telling hint of things to come: Freeh headed the student disciplinary board at his Catholic high school. “I was the presiding judge,” he once noted, “whenever the Christian Brothers would recommend some miscreant to us.”

The 1960s reached their full flower during Freeh’s teenage years. But while others protested the Vietnam War, he nurtured dreams of attending West Point. Freeh didn’t have the grades, so he had to settle for New Jersey’s state university, Rutgers, where he stayed for law school.

From there, Freeh sought out the FBI, which he saw as a noble bastion of authority. As an agent in Manhattan, he spent long hours listening to wiretaps and sitting in parked cars on stakeouts. “The FBI job is a great job if you’re a 25-year-old agent in New York City working organized crime,” he says.

Still, Freeh was ambitious. He made an unusual leap, becoming a prosecutor in the office of Rudy Giuliani, the U.S. attorney who was striking terror in the hearts of Mafiosi and inside traders alike.

Freeh led the “Pizza Connection” prosecution, a landmark case that would launch his career. The 1985 trial concerned a cocaine and heroin operation run by the Sicilian mob out of pizza parlors; 22 defendants, more than 40 defense lawyers, and 24 jurors were stuffed into the courtroom for 17 months. “Louis worked nonstop,” says Giuliani. “He worked so nonstop that several of his children were brought up in the U.S. attorney’s office.”

Freeh secured convictions for all but one of the defendants and even earned admiration from his opponents. “Louis was the breath of fresh air on the government side,” says Larry Schoenbach, a defense lawyer in the case. “He was pleasant, he was honest, and he didn’t pull any punches. Everybody respected him.”

In 1991, President George H.W. Bush tapped Freeh to be a federal judge. Two years later Bill Clinton persuaded him to become FBI director. Relations between the two would quickly sour. Freeh found himself investigating Clinton, first over the Whitewater scandal, then over alleged contributions from China to the 1996 Clinton-Gore campaign.

The two would later snipe at each other in dueling memoirs. Clinton accused him of adopting “an adversarial position” in order to “please the Republicans.” Countered Freeh: “If Bill Clinton’s memoir is an accurate reflection of his inner life, he came to believe that I was trying to undo his presidency. That’s bunk.”

Critics detected a strain of self-righteousness. Freeh was so concerned with appearing apolitical and pure that he rebuffed an invitation to a White House movie screening with the Clintons and Tom Hanks.

Yet Freeh wasn’t always so rigid. He discarded an FBI policy barring anybody who had ever smoked marijuana from becoming an agent — not because Freeh was an aficionado (he certainly wasn’t), but because he hated the idea that the FBI was encouraging new agents, many of whom had presumably tried pot at some point and would have to deny it, to begin their bureau careers with a lie.

Freeh even showed a personal touch. He was known for the handwritten notes he sent to agents upon, say, a death in the family. He met every new class of agents at Quantico and ran a few miles with them.

His directorship would prove controversial. For every big success — Freeh played a key role in catching the Unabomber — there seemed to be some fiasco or accusation of hasty judgment. In 1996 the FBI suspected security guard Richard Jewell of the fatal bombing at Atlanta’s Olympic Games. Jewell’s name leaked to the press, and his reputation was trashed — but he turned out to be innocent. In 1999 the feds charged atomic scientist Wen Ho Lee with 59 counts of violating the Espionage Act and other laws, only to see the case collapse. Lee later pleaded guilty to one count of mishandling classified data, but received an apology from the federal judge in the case, who told him the executive branch had “embarrassed our entire nation.” Does Freeh see mistakes in those pursuits? “Not in those two cases,” he says. “I felt the criticism, but I didn’t feel like it was good criticism. I mean, Wen Ho Lee was convicted of a felony.”

The worst disaster for the FBI — 9/11 — occurred two months after Freeh retired as director. He had paid significant attention to terrorism and done so in typical hands-on fashion: Freeh traveled to Saudi Arabia four times to personally investigate the 1996 terrorist bombing at the Khobar Towers, which killed 19 U.S. servicemen. He would later tell the national commission investigating 9/11 that he “share[d] in the responsibility” for not protecting the nation while also arguing that “the FBI was intensely focused on its CT [counterterrorism] needs” but lacked sufficient funding.

After leaving the FBI, Freeh took the type of lucrative corporate position you’d expect for a person who had spent years on a government salary: He became general counsel and “ethics officer” for the credit card issuer MBNA, joining a small colony of former FBI agents who had landed there.

Freeh stayed until MBNA was sold to Bank of America in 2006 and then made plans to join a law firm in New York. But his sons, whom he had moved from New Jersey to New York to Virginia to Delaware, begged not to be displaced again. He yielded. Friends say he is unusually devoted to his wife, Marilyn, and six sons, all but two of whom are now grown up. Family is the only off-hours activity Freeh will admit to. “I don’t play golf. I don’t hang out with friends,” he says. Every year his former prosecutor buddies meet up in Las Vegas; Freeh stays home. (He does, however, make an annual pilgrimage to Palermo to honor a Sicilian prosecutor on the Pizza Connection case who was later murdered.)

The former FBI director began his latest chapter almost by happenstance. He hadn’t figured out his next move when a Wilmington contact, then DuPont CEO Chad Holliday, asked Freeh if he was available to do some consulting for the company. Freeh took the project on and was reminded of his love for the nitty-gritty of casework.

In 2007, Freeh created two sibling firms: his investigative group and a six-attorney law firm. Former Saudi ambassador Prince Bandar (a contact in the Khobar Towers case) became one of Freeh’s first controversial clients. Corruption had been alleged in the sale of billions in arms by the U.K.’s BAE Systems to the Saudi government. Bandar was suspected of receiving $2 billion in allegedly inappropriate payments, but Freeh proclaimed his client’s innocence, and the Saudi was never charged with any crimes.

Freeh began a string of prominent assignments. In 2010 he was named the monitor of Daimler in Germany. The company had consented to a deferred-prosecution agreement with the Justice Department in which it admitted that executives had paid bribes. It was the corporate equivalent of probation, and Freeh was effectively Daimler’s probation officer, delivering periodic assessments on its compliance with the agreement. He believes his firm’s work helped transform Daimler: “Paying bribes to sell buses and trucks was [its] M.O. and the model for business. It’s clearly and irrefutably not the model anymore.”

He took on a handful of sports-related cases. In addition to FIFA and Penn State, last year the New Orleans Saints hired him to look into allegations that general manager Mickey Loomis had wiretapped rival coaches a decade ago. (Loomis denied doing so.) Freeh won’t discuss the matter but says he delivered his report to the team last summer. Around the same time, state police announced they’d found no evidence of wrongdoing.

He was also named one of two trustees in the bankruptcy of commodities-trading firm MF Global. Freeh prepared a report, which blasted management for “negligent conduct,” and worked to help MF’s creditors recover as much as possible. (The other trustee gathered assets for former customers.) Freeh’s plan should recover a third of the assets for bondholders, and 76% for holders of bank debt.

Last august, Freeh sold his businesses to Philadelphia law firm Pepper Hamilton. Freeh acknowledges that it’s highly uncommon for an investigative unit to be owned by a law firm — “We don’t know of any other organization that operates that way” — but the result is that Freeh can tap Pepper attorneys for investigations. In theory, that should allow his group to compete with much larger competitors, such as Kroll, and giant audit firms, such as PwC and KPMG.

Of course, the risk is that law firms — the entities that often hire investigators — will avoid Freeh because they don’t want to give business to a rival law firm. So far, he says, that hasn’t been an issue. Meanwhile, in February, Pepper Hamilton named him its chairman. He calls it his “Pepper hat” and sees no conflict in being chairman of both the law firm and its “independent” squad of private eyes.

When it comes to investigations, Freeh says his process is more targeted than those of his rivals. A classic investigation begins slowly with months of gathering emails and data, after which interviews are mapped out like a decision tree. By contrast, Freeh’s method is a form of triage. Michael Marquardt, who worked for him for five years, compares a new assignment to a football field covered with filing cabinets. “If you’re a large law firm or audit firm,” he says, “you look at it and say, ‘We’re going to take 10 partners and 80 associates and they’re going to sift through, and if it takes a year, it takes a year.’ Louis and the people at Freeh Group look at it more like a chess player would … realizing that three-quarters of those filing cabinets can be put off to the side for now.”

Freeh embraces the speedy, on-the-ground approach of an FBI agent. “We like to go out early and interview people right away, even before we have all the data,” he says. “In most of our cases … we show up on day three and tell someone, ‘Okay, you’ve retained us, and now we’d like to interview you.’ And they say, ‘Already?’ ”

That’s what happened with Penn State: One day after taking the assignment from the university’s board, Freeh was on the scene with his yellow legal pad. “We haven’t seen all the emails [or] data, but sitting down, eyeball to eyeball, asking questions — it’s amazing the information that you get,” he says.

Speed is a key selling point. It’s also the aspect of Freeh’s work that critics tend to pounce on. His team wrapped up the Penn State report in eight months and was searing in portraying a profound failure by the administration and the late football coach Joe Paterno to take adequate action in Sandusky’s case. Paterno’s family hired its own team, including former U.S. attorney general and Pennsylvania governor Dick Thornburgh, which then blasted Freeh’s work as a “rush to injustice” with “inaccurate and unfounded” parts.

Responds Freeh: “Could we have done another 50 interviews? Of course. Could we have done another six months of work? Yes. But we felt we had all the necessary facts that the board needed to make their decisions.” Most important, Freeh adds, the Paterno family has not accused him of making a single factual error. (In July former Penn State president Graham Spanier, who was lambasted in Freeh’s report, filed notice of a defamation suit against Freeh.) For all the continuing charges and countercharges, his assessment has proven consistent with those of prosecutors and the press. (For more of Freeh’s comments regarding the Penn State investigation specifically, see: Louis Freeh on Penn State.)

Freeh’s report for Wynn Resorts also drew a strong response. In late 2011, Wynn’s board hired Freeh to investigate Kazuo Okada, a director and owner of 20% of the company, relating to a planned casino in the Philippines. Freeh concluded that Okada had used front companies, contrary to Filipino law, and paid bribes to officials — one of whom checked into an opulent suite at Wynn Macau as “Mr. Incognito” on the company’s dime. Freeh’s report led to Okada’s ouster from the Wynn board and the forced repurchase of his shares. Okada protested his innocence and hired Michael Chertoff, former secretary of homeland security, who delivered a paper concluding that Freeh’s work was “not credible.” (In July, Filipino authorities recommended charging Okada for using front companies to hide his ownership but also stated, “The facts and evidence gathered thus far are insufficient to justify the filing of bribery charges.”)

In 2011, Freeh was hired to investigate whether bribery had occurred at FIFA, and concluded it had. As a result, the organization banned an executive, Mohamed bin Hammam, for life. The Court of Arbitration for Sport overturned the ban — it claimed Freeh’s findings were inconclusive — but FIFA later banned him again on new grounds after further investigation by Freeh and others.

Despite the heat, Freeh’s work has emerged unscathed. He hasn’t been forced to concede an error in any report. (Most, it should be noted, reached predictable conclusions.) It all adds up to a paradox: A noted straight arrow — whose work is regularly challenged. Perhaps it’s just a reflection of the contentious, high-profile cases and subjects he has taken on. You have to expect to draw some return fire, and certainly he has taken plenty, both at the FBI and today. But for all the hue and cry — or perhaps because of it — Freeh is still getting plenty of new assignments.

This story is from the August 12, 2013 issue of Fortune.