Risk Management

Eight Former Insurance Execs Indicted

The individuals are charged with attempting to "rig the market for excess casualty insurance" by arranging noncompetitive bids and conveying those ...
Stephen TaubSeptember 15, 2005

New York State Attorney General Eliot Spitzer indicted eight former executives of Marsh Inc., a subsidiary of Marsh and McLennan Cos., for their roles in a massive bid rigging scheme that defrauded clients of millions of dollars.

The indictment charges that from November 1998 to September 2004, the individuals colluded with executives at American International Group, Zurich American Insurance Co., ACE USA, Liberty International Insurance Co. and other companies “to rig the market for excess casualty insurance” by arranging noncompetitive bids and conveying those bids to Marsh clients under false pretenses.

A total of 17 individuals at five companies, including eight former Marsh employees, have pleaded guilty to criminal charges in the ongoing insurance-industry investigation.

Marsh itself faces no criminal sanctions. The company settled a civil case in January with Spitzer, agreeing to replace top management, to apologize for “unlawful” and “shameful” business practices, not to accept contingent commissions, to adopt additional reforms aimed at improving transparency and service for insurance customers, and to set up an $850 million restitution fund for policyholders.

Agreements have not yet been reached with ACE, AIG, Zurich or Liberty, according to Spitzer.

The indictment brings charges of scheme to defraud, combination in restraint of trade and competition, and various counts of grand larceny against seven former Marsh executives — William Gilman, executive marketing director and managing director; Joseph Peiser, head of Global Broking Excess Casualty and managing director; Edward J. McNenney, global placement director and managing director; Thomas T. Green Jr., senior vice president; Kathleen M. Drake, local broking coordinator team leader and managing director; William L. McBurnie, coverage and carrier specialist and senior vice president; and Edward J. Keane Jr., assistant vice president — and former ACE local broking coordinator team leader and senior vice president Greg J. Doherty.

If convicted of the top count with which they are charged, Gilman, Peiser, McNenny, Doherty, and Green face up to 25 years in state prison; the remaining defendants face up to 15 years. The Wall Street Journal has suggested that at least two defendants may fight the charges in court rather than reach a plea agreement, in contrast to the customary response to Spitzer’s indictments.

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