Three Insurance Employees Plead Guilty in Bid-Rigging Probe

By Ian McDonald
The Wall Street Journal
February 15, 2005

NEW YORK -- Three more insurance-industry executives pleaded guilty to criminal charges stemming from New York Attorney General Eliot Spitzer's sprawling probe of bid-rigging at the giant insurance brokerage of Marsh & McLennan Cos. (MMC).

Joshua Bewlay, a Marsh executive, pleaded guilty to a felony count of scheme to defraud. The crime is punishable by up to four years in prison. He was head of Marsh's global-broking unit that focused on excess-casualty insurance, which is high-level liability insurance typically sold to large companies. Mr. Bewlay had worked at Marsh since 1991.

In New York state court in lower Manhattan, he said there was "an official protocol designed to deceive" Marsh clients about the size and scope of the commissions they took from insurers.

Mr. Bewlay's attorney, Nelson Boxer, said, "It is a sad day for Josh. He worked tirelessly throughout his career at Marsh and in many respects followed the path set out for him. Today he takes full responsibility for his actions and apologizes to his colleagues."

John Mohs was a manager in an excess-casualty-insurance underwriting unit at American International Group Inc. (AIG) dedicated to working with Marsh. He pleaded guilty to scheme-to-defraud in the first degree, punishable by up to four years in jail. He will cooperate and testify in future cases, authorities said.

Carlos Coello, a former AIG underwriter, pleaded guilty to a misdemeanor charge of scheme to defraud, which carries a sentence of up to one year in jail. He was an underwriter at AIG from September 2002 to September 2004. Mr. Coello admitted to submitting fake bids at the direction of Marsh and AIG employees. He also will cooperate with the investigation and will be available to testify in future cases.

An AIG spokesman said Messrs. Mohs and Coello worked in the same unit of American Home Assurance Co. under the direction of two AIG managers who previously entered guilty pleas.

Before Tuesday's pleas, six people had been charged in Mr. Spitzer's broad investigation of insurance-broker practices -- including two AIG managers, one former Marsh broker and three employees at other insurers.

Marsh settled civil charges of wrongdoing on Jan. 31, without admitting or denying wrongdoing, but agreeing to pay $850 million in restitution to clients.

The widening insurance-industry probe was kicked off by Mr. Spitzer's Oct. 14 civil suit against Marsh. In it, he alleged Marsh cheated clients by rigging bids for corporate-insurance contracts and steering business to insurers who paid the firm sizable so-called contingent commissions. Mr. Spitzer likened the commissions to kickbacks. The payments, which were common throughout the industry, are typically paid by insurers to brokers who hit profit or volume targets.

Under the protocol described by Mr. Bewlay, Marsh brokers told clients that the contingent commissions added up to 1% to 2% of their premium, when in fact they sometimes ran as high as 20%.

Dozens of state insurance regulators and attorneys general are conducting their own industry inquiries, and Mr. Spitzer has said his investigators are continuing to comb through other corners of the business. Last week, AIG's general counsel told investors on its quarterly earnings conference call that it had completed its internal investigation of the matter without finding problems beyond a "single product, single broker, single unit" of the company, the excess-casualty-insurance one dealing with Marsh.

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