Spitzer Subpoena Process Routine, Says Aon

By Michael Ha

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

"Subpoenas almost always start out being very broad, and the parties are then given a chance to discuss with the attorney general?to find out what he really wants to achieve, what he wants to know," Aon spokesman Gary Sullivan told National Underwriter.

Mr. Sullivan's comments came in the wake of a report suggesting that the inquiry into possible conflict of interest by Aon and other brokers who accept the contingency fees from insurers they do business with is wider than first thought. Critics suggest that the fees may dissuade brokers from finding the best deal for customers.

In a story based on the contents of an internal Aon memo, which was sent to its employees, The Wall Street Journal suggested Attorney General Spitzer is seeking a broader range of information than first expected.

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

The Journal said the memo from Aon's general counsel office asked employees to save all relevant documents in 18 categories and described the subpoena as "comprehensive in scope" and "not limited to 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 a long-standing and aboveboard process, follow a letter in February from 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 to investigate the fees, which WLF said "infringe on businesses' right to compete in a free marketplace."

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

Contingency fees were the subject of criticism in the late 1990s. The payment arrangements with insurance companies are in addition to commissions that brokers receive. The fees are based upon the amount of business or the quality of business that a broker places with an individual company.

In 1998, the activity was the subject of a letter from the New York Insurance Department warning brokers that undisclosed contingency fees might be illegal. After pressure from commercial buyers via the Risk and Insurance Management Society, Chicago-based Aon, New York-based Marsh and London-based Willis all agreed to disclose fees. A California public interest lawsuit in 2000 that was filed against the three brokers over the fees was quietly settled out of court.

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

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

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Spitzer Subpoena Process Routine, Says Aon

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