BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
NEW YORK--New York Attorney General Eliot Spitzer is leveling fraud and antitrust charges against Marsh & McLennan Cos. Inc., accusing the world's largest broker of illegally steering clients to insurers paying it the highest commissions and conspiring with insurers to rig quotes on client programs.
After months of investigating brokers' contingent commission practices, Mr. Spitzer also announced Thursday that two executives of an American International Group Inc. unit have pleaded guilty to felony criminal charges related to the alleged schemes. The officials--who are with an excess insurance unit of AIG's American Home Assurance Co.--are cooperating with investigators, he said.
The investigation--in which the attorney general has subpoenaed several large brokers and insurers since the beginning of the year--uncovered improper transactions in virtually all lines of coverage for all sizes of clients, Mr. Spitzer said at a news conference.
"Once again, it reveals the craven disregard for the law and ethics in some of our major corporations," he said.
While naming only MMC and brokerage unit Marsh Inc. as defendants, Mr. Spitzer's suit accuses several insurers of illegal dealings with the broker, including AIG, units of ACE Ltd. and Hartford Financial Services Group Inc. and Munich-American RiskPartners, a division of American Re-Insurance Co.
According to the complaint, filed in New York State Supreme Court in Manhattan, Marsh:
Explaining the rating system to colleagues in 2002, a Marsh managing director said, "I will give you clear direction on who (we) are steering business to and who we are steering business from," according to the complaint.
In November 2003, a Marsh executive reported telling the president of an ACE subsidiary that ACE would have to raise its commission payments to win more business from the broker, the suit says. "I made it clear that if ACE wants us to meet significant premium growth targets, then ACE will have to pay 'above market' for such (a) stretch," the executive wrote in an e-mail cited in the lawsuit.
Another insurer executive noted that Marsh threatened to "kill" the company if it did not "get to (the) right number" on its contingent commission agreement, the suit charges.
AIG also provided false "high" quotes on business that Marsh wanted to place with other insurers, and a Marsh official warned AIG that it would lose its entire book of Marsh business if it did not provide such quotes, the suit alleges.
According to the complaint, MMC collected $800 million in contingent commissions last year, about 8.5% of its $9.38 billion in brokerage revenues and more than half of its $1.5 billion in net income.
The suit seeks to bar the broker from collecting contingent commissions and to force it to disgorge illegal commissions already collected.
In a statement, MMC said it takes the charges "very seriously" and is cooperating with Mr. Spitzer. "We are committed to getting all the facts, determining any incidence of improper behavior, and dealing appropriately with any wrongdoing," the company said.
A Hartford spokeswoman said the company is also cooperating and "does not condone bid-rigging or any other illegal activity."
American Re issued a statement Thursday noting that its Munich American RiskPartners unit is not a defendant in the suit and said it is cooperating in the investigation.
AIG said in a statement that the company is "saddened" by the two American Home employees' guilty pleas "because we hold ourselves to the highest ethical standards." The company said it is cooperating with the investigation and had asked the New York Insurance Department twice since 2002 for advice on placement service agreements.
ACE did not respond immediately to requests for comment.