Insurance Broker Marsh & McLennan Fined $850 Million for Rigging PricesBy Joseph B. Treaster
The New York Times -- NEW YORK
Marsh & McLennan Cos., the largest insurance broker in the world, agreed Monday to pay $850 million to settle a lawsuit accusing it of cheating customers by rigging prices and steering business to insurers in exchange for incentive payments.
Although the company did not formally acknowledge any wrongdoing, Michael G. Cherkasky, the chief executive of Marsh, apologized for what he called the “shameful” and “unlawful” behavior of “a few people” at the company. But he said, “We don’t believe that our corporate entity has ever been involved in a pattern of covering up or a pattern of criminal behavior.”
The $850 million, which Marsh will pay over a four-year period, will be used to compensate about 100,000 corporations and smaller businesses whose commercial insurance was arranged by Marsh from 2001 and 2004.
In the days after the charges were filed in October, Marsh stopped taking incentive payments from insurers and its chief executive, Jeffrey W. Greenberg, was forced to resign. The company agreed Monday to fundamental changes in the way it does business.
The lawsuit, brought by Eliot Spitzer, the New York attorney general, maintained that Marsh received kickbacks from insurance companies that increased the cost of coverage for its customers and did not serve as an unbiased broker. He has also been investigating other brokers and insurance companies around the country for similar activities, and attorneys general and insurance regulators in many states have joined in with their own inquiries.
Spitzer said in an interview Monday that the settlement “captures our best effort to bring principles of integrity to this industry.” He said he hoped that the settlement would serve as a template for bringing his other investigations to a close “in the next several weeks to months.” None of the other attorneys general or insurance regulators participated in the settlement with Marsh.
Spitzer said the $850 million was largest settlement with a single company since he began investigating corporate wrongdoing three years ago. He has negotiated billions of dollars in penalties and restitution from banks and mutual funds for cheating customers. But the largest single payment until now has been the $300 million paid by Citigroup, whose analysts were accused of providing misleading advice on stocks.
In the settlement Monday, Marsh agreed to return about half of the $1.7 billion in incentive payments that it had received over four years from insurance companies. Cherkasky did not acknowledge that the incentive payments increased the cost of insurance but he said Marsh agreed to the settlement to “put this behind us.”