updated 2/15/2005 3:39:24 PM ET 2005-02-15T20:39:24

A former senior executive at Marsh & McLennan Companies Inc. and two workers from American International Group Inc. pleaded guilty Tuesday to criminal charges in the state's probe of bid-rigging and price-fixing in the insurance industry and agreed to cooperate with authorities.

Joshua Bewlay, a former managing director at Marsh; John Mohs, identified as a vice president in a unit of AIG, and Carlos Coello, identified as an AIG underwriter, entered their pleas Tuesday in Manhattan's state Supreme Court.

New York Attorney General Eliot Spitzer said in a statement that the defendants are expected to testify in the broadening case.

Bewlay and Mohs pleaded guilty to one felony count each of scheme to defraud, punishable by up to four years in prison. Coello pleaded guilty to a misdemeanor count of scheme to defraud, punishable by up to one year in jail.

Justice James Yates accepted the pleas but deferred sentencing, saying their sentences will depend on their level of cooperation with prosecutors.

Spitzer filed suit in October against Marsh and implicated AIG and several other major insurance companies. Spitzer said brokers throughout the industry took payoffs from insurance companies to steer corporate clients their way rather than get the best prices for policies, as they are required.

In January, Marsh executives insisted the wrongdoing was by a few individuals who violated company policy. The company agreed to pay $850 million in restitution to end Spitzer's investigation into bid rigging and price fixing. The company had hoped the settlement would end similar investigations by other states, including Connecticut, and private lawsuits.

Marsh & McLennan, which is based in New York, also issued an apology and promised to adopt reforms.

The agreements _ also known as contingent commissions or placement service agreements _ are above ordinary commissions which brokers legally receive from insurance companies. The practice raised every policy holder's premiums, Spitzer said.

After the suit was filed, Marsh ousted Chairman and Chief Executive Officer Jeffrey Greenberg and named Michael G. Cherkasky, 54, as president and CEO. Cherkasky had been head of Marsh Inc., the company's insurance brokerage unit. Earlier in his career, Cherkasky spent 16 years in the criminal justice system, some of them as Spitzer's boss in the New York district attorney's office.

In late October, Marsh announced that it was permanently eliminating the practice of receiving any form of contingent compensation from insurance companies. A number of property and casualty insurance companies announced that they wouldn't pay such incentive fees anymore.

Spitzer had claimed Marsh collected $800 million in contingent commissions in 2003 alone. Spitzer also accused the company of soliciting rigged bids for insurance contracts. The practices go back to at least the 1990s, he said.

This is the latest industry settlement for Spitzer. In recent years, he uncovered widespread conflicts of interest on Wall Street and improper trading in mutual funds.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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