New York Attorney General Eliot Spitzer on Thursday announced that a grand jury has indicted eight former insurance executives on felonies involving bid rigging that cost corporate customers millions of dollars.
The former executives — including seven from Marsh & McLennan Companies Inc., the nation’s largest insurance broker — are accused of colluding with executives at major insurance companies to arrange noncompetitive bids. These bids then were given to Marsh & McLennan clients “under false pretenses,” according to Spitzer’s statement.
The defendants were arraigned Thursday in state Supreme Court. All entered innocent pleas and were released pending further court appearances, according to Spitzer and state Insurance Superintendent Howard Mills.
Former Marsh & McLennan employees indicted on charges of first-degree scheming to defraud, restraint of trade and competition, and grand larceny — all felonies — were: William Gilman, was executive marketing director; Joseph Peiser, head of global broking excess casualty and managing director; Edward J. McNenney, global placement director and managing director, and Thomas T. Green Jr., a senior vice president.
Greg J. Doherty, former local broking coordinator and team leader and senior vice president at the ACE USA insurance company, a division of Bermuda-based ACE Ltd., was indicted on the same charges, Spitzer’s office said.
Indicted on charges of scheming to defraud, restraint of trade and grand larceny were three former Marsh & McLennan executives: Kathleen M. Drake, who was 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.
If convicted, Gilman, Peiser, McNenney, Green and Doherty face a maximum sentence of 25 years in state prison. The other defendants face a maximum of 15 years in prison.
Marsh & McLennan spokesman Jim Fingeroth had no immediate comment.
In morning trading, shares in Marsh & McLennan were down 13 cents at $28.75 on the New York Stock Exchange.
Spitzer has alleged that bid-rigging by insurance companies — along with special commissions aimed at steering customers to insurers in exchange for bonuses — has been widespread in the industry. That can keep customers from receiving the best deal.
In January, Marsh & McLennan agreed to pay $850 million in restitution to end Spitzer’s investigation into bid rigging and price fixing. The settlement became a model for other insurance company settlements.
Marsh & McLennan as a corporation faces no criminal sanctions, Spitzer said.
The indictments handed down Thursday allege bid rigging from November 1998 to September 2004.
Spitzer said the defendants colluded with executives at American International Group, Zurich American Insurance Company, ACE USA, Liberty International Insurance Co. and other unnamed companies.
Agreements have not been reached with ACE, AIG, Zurich or Liberty, Spitzer said.