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Massachusetts sues Great American Insurance for making a fake bid that it says was at Marsh's request.
Stephen Taub and David McCann, CFO.com | US
January 7, 2008
Insurance broker Marsh & McLennan asked Great American Insurance Group to rig a bid to a potential customer, according to a lawsuit filed by Massachusetts Attorney General Martha Coakley, though Marsh is not named as a defendant.
According to the complaint, Great American, at Marsh's request, in 2004 submitted a falsely inflated quote to semiconductor maker Analog Devices in order to make another insurance company’s lower bid look competitive. In return for this favor, Marsh allegedly steered another one of Analog Devices’ insurance policies to Great American at a pre-determined price.
Coakley asserted that insurers including Great American paid Marsh "lucrative contingent commissions" based on the volume of business Marsh placed with them.
The Massachusetts Attorney General's office declined to say why Marsh was not named as a defendant. Marsh did not return a phone call seeking comment.
On Jan. 2, Travelers Cos. agreed to pay $6 million to settle a case brought by regulators in eight states and the District of Columbia, who claimed Travelers paid fees to Marsh to win commercial property/casualty accounts and failed to disclose the payments to clients, according to published reports.
The case stemmed from an investigation started in 2004 by then-New York State Attorney General Eliot Spitzer, who alleged that Marsh steered clients to insurers with which it had lucrative payoff agreements, and that the firm solicited rigged bids for insurance contracts. Marsh agreed in February 2005 to pay $850 million to settle charges of fraud and anti-competitive practices.
About the new lawsuit, Coakley said, "Bid rigging is a very serious violation of Massachusetts law. We allege that Great American was a knowing participant in a scheme to defraud Analog Devices."
Great American denied any wrongdoing. "Great American's conduct in issuing that quote was lawful," the company said in a statement. It also said that it had tried to reach an out-of-court resolution but couldn't because of the attorney general's "unreasonable" demands.
Professional Risk Brokers Inc., a subsidiary that provides coverage quotations to brokers on Great American's behalf, was also named as a defendant in the lawsuit.
The complaint seeks restitution, attorneys’ fees, civil penalties, and a court order prohibiting the company from engaging further in unfair and deceptive business practices.