Former ACE US exec tied to shady dealings with Willis in Spitzer document on settlement

By Lilla Zuill
Royal Gazette
May 19, 2005

A former top insurance executive in the US operations of Bermuda-based ACE Limited may have been party to an alleged scam by leading broker Willis Group to book payments before they were earned.

Susan Rivera, who was head of ACE’s US operations until her sudden departure earlier this year, allegedly approved an advance payment from ACE to Willis of $500,000 in 2003 in exchange for a promise of increased business in 2004.

The allegations were revealed in a legal document made public last month from New York Attorney General Eliot Spitzer in which Willis agreed to discontinue any illegal or questionable business practices, and settle charges by establishing a $50 million fund by July to compensate US policyholders.

Willis’ settlement was in keeping with ones already reached between Mr. Spitzer’s office and brokers Marsh & McLennan and Aon.

Willis is the world’s third largest insurance broker, while the top two spots go to Marsh and Aon respectively.

A widescale probe of broking industry abuses was launched last year by Mr. Spitzer including a high-profile lawsuit against broking giant Marsh alleging the broker favoured insurers who paid the highest commissions, as well as bid-rigging and price-fixing practices.

Mr. Spitzer and the New York Superintendant of Insurance said Willis wilfully deceived clients by steering business to “favoured” insurers and used other questionable business practices.

In the Marsh matter, a casualty risk unit of ACE was named as participating in the alleged bid-rigging practices. Several ACE staff working in units that ultimately came under Mrs. Rivera were fired in connection with the allegations.

Mrs. Rivera’s sudden January departure from ACE came after it was revealed in November that she knew an ACE unit was being pressured by Marsh to rig bids.

No contact details for Mrs. Rivera or her lawyer could be obtained. And ACE yesterday declined to comment on any of the April allegations from Mr. Spitzer’s office regarding dealings between Willis and ACE.

Mr. Spitzer’s legal document on the Willis matter alleged that James Drinkwater, managing director of Willis Global Markets North America was in charge of negotiating the company Placement Service Agreement (PSA) commission payments, a fee paid by insurers to effectively encourage brokers to sell their policies to clients.

“Willis made it clear to insurers that signing contingent fee agreements with it would mean Willis would steer business to those carriers,” the document from Mr. Spitzer said.

An email from Mr. Drinkwater to Mrs. Rivera, revealed in Mr. Spitzer’s legal document, underscored to ACE that its negotiations for business in 2004 would get off to a “good start” if the partnership was agreed.

Insurers St. Paul, Chubb, Liberty Mutual, Hartford and Crum & Foster were also named in the document as being due “special attention” because of PSA agreements inked with Willis.

In another place, insurers Hartford, AXIS, ACE and St. Paul are named as seeing a “positive effect” from having PSA agreements with Willis.

The only people named in the Willis document are Willis personnel and Mrs. Rivera, with some questionable activities by Willis revealed in details of telephone calls and email communications between Willis and Mrs. Rivera.

For example, Mr. Drinkwater is alleged to have personally fought to keep business with ACE in a telephone call to Mrs. Rivera when ACE North America retained a rival broker to place a reinsurance contract that Willis had been involved in.

“After the call, Rivera ordered ACE to move the reinsurance to Willis,” the document said.

In addition to allegations of Mrs. Rivera approving a $500,000 advance payment to Willis, Mr. Spitzer’s office also revealed that she sent emails written by Willis to justify their receipt of the early payment.

“Drinkwater personally convinced Susan Rivera to send him fraudulent emails, drafted by Drinkwater himself, to make it appear that Willis was entitled to the funds in 2003. These inaccurate emails were then given to Willis’ auditors to justify the recording of the payment,” the Spitzer document said.

Copyright © 2005 The Roral Gazette Ltd.

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