Detective, Guard, and Armored Car Services

SIC 7381

Companies in this industry

Industry report:

This category covers establishments primarily engaged in providing detective, guard, and armored car services. Establishments primarily engaged in monitoring and maintaining security systems devices, such as burglar and fire alarms, are classified in SIC 7382: Security Systems Services.

Industry Snapshot

The security and investigations industry is a $100 billion business worldwide that has been in existence for at least 125 years. In the United States in 2010, approximately 25,000 businesses made up the $27 billion investigative and security services industry. Organizations and individuals within the security industry provided products and services that included video surveillance services and equipment, security guard services, armored car services, corporate investigations, biometric identification and devices, and concertina wire. The industry benefited from the Internet but remained relatively primitive in terms of marketing its products and services, which usually were handled via word of mouth, direct mail, e-mail, print advertising, and industry conferences. Indeed, e-mail had become one of the most important advertising vehicles and the ongoing focus of many companies by the early 2010s.

The industry was highly fragmented with a few large players and thousands of small companies. Firms with fewer than 50 employees made up almost 90 percent of the industry, but accounted for just 45 percent of industry sales. According to government statistics, there were more than 1 million security guards working in the United States in the early 2010s. Of these, over one-half were considered contract guards who were employed by private companies and contracted out, and the rest were staff guards directly employed by entities as employees.

Organization and Structure

Detective agencies provide investigative services. The area of investigation can vary widely, from uncovering corporate espionage to uncovering an unsavory episode in the background of a courtroom witness for the purpose of discrediting that witness. These enterprises range in size from small independent agencies to larger corporate businesses.

Business, industry, and government agencies all use guard services. Uniformed guards are hired to protect client property against theft, trespassing, or vandalism, or to protect clients from physical harm. Some companies that provide guard services also provide security systems services (see SIC 7382: Security Systems Services). There are more than twice as many security guards in the United States as police officers.
Approximately 685 armored car services existed in the United States in the early twenty-first century, according to the U.S. Census Bureau, some of which were subsidiaries of large corporations and others that operated independently. Many of the latter belonged to the Independent Armored Car Operators Association. In addition to providing armed transport of cash between banking locations (for example, between the Federal Reserve Bank and bank branches), armored car companies also have what they call commercial accounts. These include food stores, restaurants, fast-food chains, department stores, and, potentially, any business that needs to move large sums of cash off site to a bank. Many armored car companies also have a money room, where money is stored temporarily and where services such as auditing deposits and processing orders for change are performed for client banks. In some cases, the cash may even move from a retailer to a money room, then straight to the Federal Reserve, bypassing the retailer's bank altogether.

The money courier industry is largely unregulated. There are no federal regulations covering who may transport money or how. Although the top companies use armored vehicles and try to screen out employees with criminal records, other companies may use ordinary minivans and do little to screen employees. Law enforcement officials, as well as officials within the industry, have charged that the lack of a government regulated licensing process, one which would require a thorough background check of potential employees, has bred an industry in which robberies are all too frequently "inside jobs."

Background and Development

U.S. manufacturers, in an attempt to prevent theft and counterfeiting of their patented products and ideas, turned to private investigation firms for undercover operations. In one case, a female private detective was hired to apprehend those responsible for the theft from two major U.S. companies of proprietary plans for industrial compressors. A spokesperson for the American Society for Industrial Security (ASIS) estimated that theft of proprietary information cost U.S. and Canadian firms $20 billion each year. A survey of ASIS members in the late 2000s revealed that theft of manufacturing process technology was on the rise. Another area of concern to U.S. industry was protection of pharmaceutical trade secrets.

One emerging field for private detective work was the investigation of environmental crime. This might involve tracing illegal industrial sewage discharge to the guilty party or conducting research to determine which companies had in the past disposed of toxic waste at a particular site. Another unfortunate field of opportunity for detective work was urban terrorism. This was the case in 1991 when Laidlaw Transit in Seattle, Washington, received three letters warning that school buses operated by Laidlaw would be blown up on Friday the thirteenth. Private investigators, working with the Seattle police, determined the threat to be a hoax. Other developing areas included computer and communications crime detection and forensic accounting, in which a firm's books are examined for instances of in-house fraud.

In 1997, detective, armored guard, and armored car services was a $14.5 billion industry. It remained an industry that enjoyed growth in the late twentieth century with industry sales in the early 1990s seven times what they were in 1956. In the 1970s there was concern within the industry that the use of credit cards would eliminate the need for armored car services. These fears did not become a reality, however, and by the mid-years of the first decade of the 2000s, credit card companies had themselves become major users of armored car services. Transportation of food stamps provided another growth area for the armored transport industry, as has the use of ATM machines. However, there are those who believe that all cash transactions eventually should be replaced by a federally operated electronic money system, which would eliminate many criminal activities. If such a system were to be implemented, armored car companies could expect a drastic decline in demand for their services.

The industry was thought to be approaching maturity in the late twentieth century, because as banks consolidated and closed branches, demand for armored car services was lessened. Jim L. Dunbar, chief executive of Federal Armored Express, speculated that in the future there would be increased emphasis on money-room services as a source of revenue for armored car companies. The industry also attracted new entrants who competed based on price. Some companies were able to offer price reductions by cutting back on security precautions such as well-fortified vehicles. In addition, if the courier was insured to protect the client against loss or theft, the client could sometimes be persuaded by the cost savings offered to forego optimal security.

The demand for security guards, on the other hand, enjoyed steady, rapid growth through the 1990s as the industry experienced average annual growth of 8 percent. Fueled by public perceptions of increasing crime, a growing schism between the haves and have-nots, the rise of gated communities, and an apparent willingness on the part of federal, state, and municipal authorities to leave public security to private firms, employment opportunities in the security guard industry grew in the early twenty-first century.

The climate of fear that proved so hospitable to the security guard sector was heightened by the terrorist bombing in Oklahoma City in 1995. On the day after the bombing, the stock price of Wackenhut Corporation, America's third largest provider of security guards, jumped 20 percent. Although the panic was short-lived, demand for security guards continued to grow.

Guard companies, on the other hand, struggled during this period, facing what one analyst described as unacceptably high guard contract turnover. The reason for this was the conservatism and traditionalism of guard company management. Instead of assessing and reacting to changing levels in the customers' risk profile, most companies made operational changes only in response to customer criticism. By the mid-1990s, security firms began to take tentative steps to enhance the effectiveness, scope, and productivity of security officers with information-related technology. These technologies made it possible for a guard company to upgrade its customer service by tracking client asset changes and making the corresponding changes in guard services automatically. Online central information processing allowed direct management of the guard force, while three-dimensional modeling programs and high-speed portable equipment made it possible to create customized security plans on a daily basis rather than working from specifications that changed infrequently, if at all.

Already one of the fastest growing sectors in the United States, the demand for security on all levels only continued to grow after the terrorist attacks of September 11, 2001. Spurred largely by the events of 9/11, growth came from a large number of businesses within the United States beefing up security. The trend toward outsourcing security services was seen in organizations such as commercial offices, warehouses, and correctional facilities. This contributed to all sectors within this industry showing healthy growth in 2001. Demand for private security rose 6.8 percent per year beginning in 1996, reaching $33.55 billion in 2001, with guarding services taking the biggest share within that market at 35 percent in 2001. Guarding, a $10 billion business in 1996, grew to $11.7 billion in 2001, a 3.1 percent annual growth rate. Alarm monitoring brought in almost $11.1 billion in 2001, up from $6.9 billion in 1996, reflecting a 9.9 percent annual growth. Private investigations comprised the next largest sector in the private security industry, with $2.1 billion in 2001, up from nearly $2 billion in 1996. Private correctional facilities management showed the largest annual growth rate from 1996 to 2001, up 24.2 percent to reach approximately $2 billion in 2001. Armored transport stood at $2.1 billion in 2001; systems integration at $1.5 billion; security consulting at $910 million; and pre-employment screening and other services at $2.3 billion.

Airport security was one sector that was the focus of much scrutiny and publicity in the months following 9/11. Employee screening and hiring processes became a major concern. Increased passenger screening after 9/11 increased costs to the U.S. government nearly fourfold in the form of additional screening personnel, transition costs from private screeners to a federal environment, and increased wages and benefits. The Transportation Security Administration estimated it would pay some $211 million per month in passenger screening costs in 2002, up from the $55 million per month the airlines paid for the same services in 2000. Airport security was also getting some high-tech upgrades as a result of terrorism. A number of intelligent security systems were developed for passenger screening in airports nationwide.

Another post-9/11 trend in security was the shift to better trained personnel and, accordingly, higher wages for those better qualified. Security firms replaced entry-level guards with former military or police personnel, while sometimes doubling pay in hopes of better services and improved profit margins. Despite a rise in private guard employment following 9/11, there were an estimated 124,000 private guards that left the industry between 1999 and 2003. With the ongoing recession, businesses were not in a position to invest in security and, according to the Congressional Research Report, were forced "to cut discretionary expenses, to maintain profitability," in the area of security guard deployment. Overall, the number of security guards had declined between 1999 and 2003.

Growth within this industry as a whole continued in the early years of the first decade of the 2000s. There were concerns that with such high demand, the supply of qualified personnel, who were required in some cases to carry firearms, was somewhat limited. Other problems the industry faced included the lack of uniform training requirements, standardized background checks, and government negligence. Indeed, the lack of regulations in some states currently allow convicted felons to become security guards and private detectives.

Following 9/11, the Transportation Security Administration (TSA) increased the number of airport screeners from 28,000 in September 2001 to 60,000 in November 2002. As of March 2004, there were 44,000 airport screeners in place. In spite of the decrease, the figure was still 57 percent higher than in 2001. Of the 1 million security guards, 5 percent were referred to as "critical guards."

Technology became an important part of the security industry, with new products and services developed as new technologies arose. More advanced products available to the industry in the early 2000s included audio listening devices and electronic counter surveillance devices, robot guards, "intelligent" fences, handheld guard tour scanners, explosion detection devices, and electronic key management systems.

Despite these advances, the industry had room to improve when it came to regulations, licensing, and training guidelines. In the early and mid-2000s, concerns were mounting over the competency of the private security industry in general, as well as the conflicting views that stalled federal guidelines from being put in place. Private security companies opposed government mandates, arguing they would increase their operating costs. Meanwhile, the more than 1 million security guards in 2006 were largely unlicensed, while only 34 states required criminal background checks and 10 states had no regulations at all. The National Association of Security Companies stated that of the 40 states that were regulated, the guidelines "vary significantly."

Nonetheless, demand for security services continued to grow in the 2000s. Guarding services alone were expected to reach $20.8 billion by 2015, one-third of the total revenue for private security services. Within this industry category, security consulting was predicted to grow the fastest, followed by private investigations. Guarding segments would grow with the specialty and value-added services that companies could offer to niche markets.

The role of contract security firms' involvement with the U.S. military came to the public's attention in the late 2000s when the Blackwater firm, which was hired by the U.S. Department of Defense (DOD) to undertake responsibilities related to protecting Americans in Iraq, was linked to the killing of 17 Iraqis in September 2007. In January 2009 the DOD decided to let its contract with Blackwater, which had since renamed itself Xe, expire. In addition, the Iraq government had refused to renew the company's license to operate in Iraq. As a result of the killings, fiver former Blackwater employees pleaded not guilty to charges of voluntary manslaughter and other crimes and a sixth employee former guard plead guilty to voluntary manslaughter and attempted manslaughter.

The incident brought to a head ongoing negative feelings of many Iraqis toward U.S private security forces and raised new questions regarding the qualifications and training of private security forces. Although the DOD replaced Xe with another security company, Triple Canopy, both the DOD as well as other government entities such as Congress looked into the feasibility of replacing contracted security forces with military forces. In response, the National Association of Security Companies released a white paper in April 2009 that outlined the argument for retaining, if not expanding, the role of privately hired security personnel at DOD facilities. "DoD branches have a long history of using both civilian security guards as well as contract security guards," the association argued. "The current use of 'in-house' police and security guards along with contract security guards is working for the Services in terms of both mission performance and efficiency."

Despite the bad press from the Blackwater incident, the security industry as a whole was holding its own, given an economy deep in recession in the late 2000s. Although growth was lackluster at best, long-range expectations for the industry were positive as concern for increased security continued. In addition, technological advances were driving the sector, as consumers moved to replaced out-of-date systems and procedures with more advanced and highly integrated systems.

According to Dun & Bradstreet, in the late 2000s, security guard services held 22 percent of the industry by number of firms (41 percent by revenues). Private investigators made up 26 percent by number of firms (7 percent by revenues); guard services, 16.1 by number of firms (12 percent by revenues); and detective and armored car services, 13 percent by number of firms (9 percent by revenues).

Current Conditions

According to research firm IBISWorld, this industry, like many others in the United States, was negatively affected by the economic recession of the late 2000s. A 2011 report noted that "Security providers experienced flat revenue growth during the recession as companies scaled back their security spending and bankruptcies reduced the pool of potential clients." However, the report also predicted an uptick in the industry as the economy recovered. Competition in the security guard sector was expected to come from increasingly high-tech services that negated the need for a live person. Businesses expected to survive into the 2010s included those that provided integrated services in conjunction with the new technology.

Industry Leaders

Securitas AB
The country's first detective agency was established in 1850 by Allan Pinkerton, an immigrant from Scotland. Pinkerton's had clients in the United States, Canada, Mexico, and the United Kingdom. In 1999, about 85 percent of revenues came from security guard services. Pinkerton's guards were used by hospitals, governmental units, special events promoters, and other industrial, commercial, financial, and retail customers to provide security, access control, traffic control, theft prevention, and related services. Pinkerton's also offered design and consulting services, conducting on-site analyses and making recommendations to design or improve systems. Pinkerton's enjoyed strong name recognition. Capitalizing on this, Sun Coast Merchandise Corp. licensed the Pinkerton's name in 1992 to apply to a line of emergency lighting called Pinkerton Home Security & Safety Products.

Burns International Security Services was founded as Borg Warner Corp. (BWC) in 1928 through the merger of four firms engaged in the manufacture of auto parts. In subsequent years, the Chicago-based firm diversified into other areas such as chemicals, industrial equipment, air conditioning, and, with the purchase of Baker Industries in 1978, protective services. After being bought out by Merrill Lynch Capital Partners in 1987, it divested itself of all operations except for the automotive and protective services businesses. Burns International Security Services continued to provide security guard and investigative services to industrial and institutional clients throughout North America and the United Kingdom.

By 2000, both Burns International and Pinkerton's had been purchased by Securitas AB of Sweden. In July 2003, Pinkerton's and Burns International officially became Securitas Security Services USA (now Securitas Security North America), creating one of the nation's largest security companies. In 2008, Securitas Services North America held 12 percent of U.S. contracted services and 18 percent of Canadian contracted services.

AlliedBarton Security Services.
Allied Security Holdings, which was owned by the Blackstone Group and did business as AlliedBarton Security Services in the early 2010s, was one of the largest private contract security firms in the United States. The company recruited, trained, and employed security guards for a variety of industries through 100 offices nationwide. Sales for Allied Security in 2011 were almost $1.7 billion, and the firm employed 52,000 people.

The Brink's Company
Formerly called The Pittston Company, The Brink's Company garnered approximately 85 percent of its $3.1 billion in 2008 revenues from armored car operations. The Pittston Company was created in 1930 by the Alleghany Corporation, which operated the Erie Railroad and Pennsylvania Coal Company, as a means of dodging antitrust regulations in the U.S. coal market. Pittston had leased mines from the Erie Railroad and sold the coal through its own distributors. Alleghany faced an antitrust issue when it purchased the New York Central Railroad in 1954. This time, the solution for Alleghany was to divest itself of Pittston, leaving the latter an independent company. In 1956, Pittston, which had already diversified into trucking and warehousing, diversified further with its purchase of a 22 percent interest in the Chicago-based security transportation company, Brink's, Inc.

Brink's was founded in Chicago in 1859 as a delivery company and began making payroll deliveries in 1891. By 1956, it was the world's largest company providing armored car services. In 1962, Pittston completed its purchase of Brink's, but in 1976 Alleghany's legacy of antitrust confrontation fell on Pittston: a federal grand jury indicted Brink's with antitrust violations. The charges cost the armored car company millions of dollars in settlements, the last of which was $2.7 million paid in 1980 to 12 Federal Reserve banks. In spite of this, Brink's grew during the 1980s even as Pittston's older oil and warehousing operations were sold. In 1998, the Pittston Brink's Group employed 41,800 people and had sales of approximately $1.45 billion. Pittston changed its name to The Brink's Company in 2003. By 2011 sales for Brinks totaled $3.8 billion, and the company employed 71,000 people in 100 countries. Its fleet of armored cars and other specialty vehicles numbered 12,800.

G4S Secure Solutions (USA) Inc.
Founded as the Wackenhut Corporation in 1954 by ex-FBI agent George R. Wackenhut, G4S was another leading U.S.-based security company. It provided a broad range of security services at home and abroad, including executive protection and security for embassies and international airlines. The company's primary business was in uniformed security guard services, but G4S was also involved in the business of private investigations as well as activities under other SIC classifications such as correctional facilities management, classified in SIC 8744: Facilities Support Management Services, and security systems implementation, classified in SIC 7382: Security Systems Services. In July 1993, United Kingdom-based International Maritime Services, a company that provided security systems to the maritime industry, became a part of G4S. In 2011 revenues for G4S reached $914.5 million, and the company employed 38,425.
Kroll Inc.
Another leading firm providing investigative services in the early 2010s was Kroll. J. Kroll Associates was formed in the early 1970s by Jules Kroll to offer companies a service that would audit their purchasing process to prevent devious practices by the company's employees, such as receiving kickbacks or charging payments to fictitious suppliers. Kroll's services expanded considerably since then. During the 1980s, Kroll's company provided investigative services to Wall Street financial institutions, such as tracing money through foreign banks, analyzing the credit of a principal in a takeover deal, determining the true financial value of a targeted acquisition, and detecting illegal insider trading. Kroll also provided services to U.S. and foreign governments. For example, Kroll assisted in the Federal Deposit Insurance Corporation's investigation of the savings and loan scandal and was asked in 1992 by the Republic of Russia to locate money believed to have been taken out of the country by directors of state-run enterprises who feared the advent of privatization.

In 1997, J. Kroll Associates merged with another firm to become The Kroll-O'Gara Company. The new venture expanded the company's capabilities. In addition to Kroll's range of services, the newly organized firm conducted personnel background checks and provided both security driver and security training.

Altegrity acquired Kroll in 2010, which by then operated under three divisions: Kroll Background America (employee background screening, etc.), Kroll Ontrack (investigations and disputes), and Kroll Security Group (security consulting and system design). With operations in 27 countries in 2011, Kroll had sales of almost $70 million and about 3,100 employees.

Workforce

In 2010, 792,679 people were employed by approximately 25,572 establishments in the investigation and security services industry, according to the U.S. Census Bureau. Hiring practices for the industry came under scrutiny after 9/11. The publicity about crimes committed by security guards, some of whom were convicted felons, was another reason screening employees in this sector came under fire in the 2000s. There were at least 10 states that completely lacked any regulations in the area of security guard services, with some candidates hired before a criminal background check was performed.

Anyone could hang a sign and claim to be a detective, and there appeared to be no single career route that one followed to become a private eye, although a prior career in law enforcement was common. Anthony Pellicano, who made a name for himself by providing detective services to Hollywood stars, was a high school dropout and former bill collector for Spiegel. Jules Kroll, on the other hand, had a law degree from Georgetown Law School and worked for the Manhattan District Attorney's office. Kroll operatives included a former security chief for IBM, a former CIA station chief, a former Green Beret and international crime and terrorism expert for Rand Corporation, and a former New York City police commissioner.

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