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NEW YORK—A judge's decision to dismiss criminal charges against a group of former insurance executives accused in New York state's investigation of bid rigging and broker compensation practices was unusual but not entirely surprising given the outcome of other trials in the case, legal experts say.
At a hearing last week in New York County Supreme Court, Judge James Yates granted the prosecution's request to dismiss outright the misdemeanor convictions of six individuals who pleaded guilty in 2004 and 2005 to helping New York-based broker Marsh Inc. rig bids on client insurance placements.
In addition, Judge Yates reduced three other individuals' felony guilty pleas to misdemeanors. The remaining charges will be dropped in six months, via a legal mechanism known as adjournment in contemplation of dismissal.
Then-New York Attorney General Eliot Spitzer brought the charges in 2004 and secured 21 guilty pleas and the individuals' cooperation in his investigation of contingent commission practices in the insurance industry (see box).
Eight other executives were indicted in 2005. While some were convicted, others were acquitted (see related story).
Prosecutors from New York Attorney General Andrew Cuomo's office, which inherited the case, asked the judge last week to grant the dismissal motion “in the interest of justice.” A hearing for the remaining people who cooperated in the case is scheduled for Friday, when Judge Yates is expected to make similar dismissals.
While the move is rare for a criminal trial, “at this stage I'm not surprised given the history of this case,” said James Carbin, a partner with Duane Morris L.L.P. in New York. “It really raises some questions of whether or not the entire investigation was warranted in the first place.”
In November, Judge Yates acquitted three former Marsh executives of all charges in the case after a nearly 11-month trial. After that, the judge dismissed criminal charges against three remaining defendants before their trial began.
In making their request to dismiss the last wave of defendants, prosecutors cited the high cost of another trial and the likely outcome given the recent acquittals.
Given the recent acquittals, dismissing charges against the cooperators “is the prosecution doing the right thing,” said Jacob Frenkel, a partner with Shulman Rogers Gandal Pordy & Ecker P.C. in Potomac, Md., and a former federal prosecutor.
Michael Cornacchia, a New York criminal defense attorney and a former assistant U.S. attorney, said dismissing charges in the interest of justice is the “judicial equivalent of a pardon, rather than a finding of innocence.”
Given the circumstances, “it's the best possible outcome (that the cooperating individuals) could have hoped for,” Mr. Cornacchia said. “The individuals did admit under oath they committed a crime, and this does not erase that criminal taint,” he said.
In making a general statement to the court, Assistant Attorney General Felice Sontupe said the factors of the case are “specifically unique.” Ms. Sontupe declined to elaborate after the hearing.
The action may also reflect a shift in priorities by the state attorney general's office, some observers said.
“It's possible the office feels they have accomplished what they set out to do,” said James M. Burns, a partner and chair of the antitrust group of Williams Mullen in Washington. “The industry has already reacted to Mr. Spitzer's investigation,” For example, industry changes have been made regarding contingent commission practices and there is an increased sensitivity to antitrust laws, he said.
From the attorney general's view, “these changes (in industry reaction) are likely more valuable than anything they could achieve by pursuing further criminal penalties against these individuals,” Mr. Burns said.
Still, the attorney general and staff have to walk a fine line. “They can't be seen criticizing the investigation” begun by a previous attorney general, Mr. Cornacchia said.
For the individuals, observers said there likely are mixed feelings.
“On one hand, they're elated that the case ended without a conviction on their record. However, there is certainly some anger involved at having been dragged through this for five years,” Mr. Frenkel said.
In addition, those once accused may face challenges in the future.
“Their testimony at trial is a matter of public record, and that is not going away,” Mr. Frenkel said.
The association with the case may give future employers pause or raise regulatory issues with respect to obtaining industry licenses, observers said.
In February 2008, former Marsh Managing Directors William Gilman and Edward J. McNenney were found guilty of an antitrust charge but acquitted of other charges. Their sentences of 16 weekends and jail and fines have been stayed pending appeals.
Marsh never faced any criminal charges in the case, but paid $850 million in January 2005 to end the bid-rigging and fraud investigations.