Spitzer Insurance Probe Builds Up Guilty Pleas
August 4, 2005
NEW YORK (Reuters) - New York Attorney General Eliot Spitzer continues to amass guilty pleas from insurance executives as his year-and-a-half-long probe into bid-rigging and price-fixing abuses builds steam.
Three executives from Marsh & McLennan Cos., the world's largest insurance brokerage, and one from Zurich American Insurance Co., pleaded guilty this week to fraud and restraint of trade charges before New York Supreme Court Judge James Yates.
In all, 14 executives have entered pleas to criminal charges since October last year.
According to complaints filed by Spitzer this week, all four executives were part of a scheme to control the excess casualty insurance market.
James Spiegel, formerly a senior underwriter in the specialties excess casualty unit of Zurich, and Regina Hatton, a former senior vice president in the excess casualty division of Marsh Global Broking, each pleaded guilty to a felony fraud charge.
Meanwhile Marsh insurance broker Nicole Michaels, pleaded guilty to "combination in restraint of trade and competition," a misdemeanor charge. From October 1997 through September last year, Michaels worked in Marsh Global Broking's excess casualty division, where she placed insurance policies with American International Group and Zurich.
On Tuesday, former Marsh Senior Vice President and Global Broking Coordinator Todd Murphy pleaded guilty to a misdemeanor fraud charge.
More guilty pleas could be forthcoming, a spokesman for Spitzer said, but he declined to comment further, citing the ongoing investigation.
Marsh collaborated with various insurers to manipulate the excess casualty insurance market. Marsh executives instructed insurers to submit inflated quotes so that an incumbent insurer could retain business up for renewal, yet still give customers the impression they were receiving competitive bids.
Marsh's scheme was fueled by contingent commissions, or kickbacks, according to Spitzer, which were required if insurers wanted to continue winning business though Marsh.
Spitzer announced a civil suit last October accusing Marsh of using its dominant position to rig bids and fix prices for insurance coverage. Of the 14 industry executives to have entered guilty pleas so far, six came from Marsh.
Marsh & McLennan agreed in January to pay $850 million to settle a civil lawsuit filed by Spitzer and enacted business reforms. Spitzer then secured a series of plea agreements from former Marsh executives Robert Stearns, Joshua Bewlay and Kathryn Winter.
Four AIG executives, one ACE Ltd executive and now three from Zurich also have entered pleas.