Spitzer Subpoena Process Routine, Says Aon

By Michael Ha

NU Online News Service, May 7, 4:14 p.m. EDT?Asubpoena from the New York attorney general's office that asks Aonbrokerage for a wide variety of data concerning controversialcontingency fees does not signify any expanded investigation of thecompany, an Aon representative said.[@@]

"Subpoenas almost always start out being very broad, and theparties are then given a chance to discuss with the attorneygeneral?to find out what he really wants to achieve, what he wantsto know," Aon spokesman Gary Sullivan told NationalUnderwriter.

Mr. Sullivan's comments came in the wake of a report suggestingthat the inquiry into possible conflict of interest by Aon andother brokers who accept the contingency fees from insurers they dobusiness with is wider than first thought. Critics suggest that thefees may dissuade brokers from finding the best deal forcustomers.

In a story based on the contents of an internal Aon memo, whichwas sent to its employees, The Wall Street Journal suggestedAttorney General Spitzer is seeking a broader range of informationthan first expected.

Aon is one of four large brokers who disclosed last month theyhad been subpoenaed. The others are Marsh & McLennan, WillisGroup and Kaye Insurance.

The Journal said the memo from Aon's general counsel officeasked employees to save all relevant documents in 18 categories anddescribed the subpoena as "comprehensive in scope" and "not limitedto any particular Aon unit."

Aon told NU that such e-mails are part of "a routine,standard process" companies undertake when facing subpoenas.

The focus on the contingency fees, which brokers call along-standing and aboveboard process, follow a letter in Februaryfrom a public interest group, The Washington Legal Foundation,asking Mr. Spitzer's office, the California state attorney general,and the New York and California insurance departments toinvestigate the fees, which WLF said "infringe on businesses' rightto compete in a free marketplace."

So far, the only agency to publicly state it is investigating isthe California Insurance Department.

Contingency fees were the subject of criticism in the late1990s. The payment arrangements with insurance companies are inaddition to commissions that brokers receive. The fees are basedupon the amount of business or the quality of business that abroker places with an individual company.

In 1998, the activity was the subject of a letter from the NewYork Insurance Department warning brokers that undisclosedcontingency fees might be illegal. After pressure from commercialbuyers via the Risk and Insurance Management Society, Chicago-basedAon, New York-based Marsh and London-based Willis all agreed todisclose fees. A California public interest lawsuit in 2000 thatwas filed against the three brokers over the fees was quietlysettled out of court.

On Tuesday, Patrick G. Ryan, Aon chairman and chief executive,said of the fees, "We provide valuable services to underwritersthat we need to be compensated for, and the underwriters obviouslyagree," and he added, "We feel these agreements are entirelyappropriate."

"It's important for everyone to understand," Mr. Sullivan said,"that we are determined to fully cooperate with the inquiry becausewe hope it clears the fact that compensations for our services tounderwriters are entirely appropriate."