| JWissmille 2004-10-24, 2:08 am |
| Spitzer: Insurance scheme rigged bids for payoffs to brokers
By MICHAEL GORMLEY
Associated Press Writer
October 14, 2004, 11:32 AM EDT
ALBANY, N.Y. -- Insurance brokers required to provide competing bids to
customers seeking the best deal have been taking payoffs from insurance
companies
to rig the system in widespread corruption in the industry, New York Attorney
General Eliot Spitzer charged Thursday.
Two insurance company executives were expected to plead guilty to
participating in the illegal conduct and are expected to testify in future
cases, Spitzer
said in announcing the broader investigation into whether brokers and
companies violated fraud and antitrust laws and regulations. He did not give
details
on their identity or employer.
The victims were mostly large corporations who were deceived into buying
property and casualty coverage that may have cost more, but also included small
and mid-size businesses, municipal governments, school districts and
individuals, Spitzer said.
Spitzer announced the civil suit against Marsh & McLennan Companies of New
York City, the nation's leading insurance brokerage firm, accusing it of
steering clients to insurers for lucrative payoffs under long-standing
agreement. The
firm collected $800 million in so-called contingent commissions in 2003
alone, investigators said. Spitzer also accuses the company of soliciting
rigged
bids for insurance contracts.
Some of the nation's largest insurance companies including New York-based
American International Group Inc., ACE Insurance Co. of North America based in
Philadelphia, The Hartford and Munich American Risk Partners are accused in
Spitzer's suit of steering contracts and bid rigging. He said other insurance
companies are being investigated.
Spitzer bases part of his insurance industry probe on internal e-mails and
memos, in which he said insurance executives openly discussed actions that were
aimed at maximizing Marsh's revenue and insurance companies' revenues, without
regard to clients' interests.
One executive said the amount of contingent commissions would determine "who
[we ] are steering business to and who we are steering business from,"
according to Spitzer.
A spokesmen for Marsh declined comment. The insurance companies named in
Spitzer's suit had no immediate comment.
"If the practices identified in our suit are as widespread as they appear to
be, then the industry's fundamental business model needs major corrective
action and reform," said Spitzer, who has forced Wall Street to adopt measures
against conflicts of interest among stock analysts. "There is simply no
responsible argument for a system that rigs bids, stifles competition and
cheats
customers."
Copyright © 2004, The Associated Press
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