J. Greenberg Out?, Marsh Hearing Set

By Daniel Hays and Arthur Postal

NU Online News Service, Oct. 22, 4 :56 p.m. EDT?As reports multiplied that Marsh & McLennan Company Chief Executive Jeffrey Greenberg would quit over the firm's brokerage price-fixing scandal, New York's insurance superintendent said he has summoned MMC management for a hearing on charges they engaged in fraud and other legal violations.[@@]

New York Insurance Superintendent Gregory V. Serio, in a highly unusual move, said that last night he had sent citations to MMC, their Marsh Inc. brokerage subsidiary and 11 other corporate entities to appear at a hearing next month to respond to charges they "used fraudulent, coercive and/or dishonest practices and have demonstrated untrustworthiness."

As Mr. Serio's announcement was made, various newspaper and wire service outlets were reporting that Mr. Greenberg would quit so that MMC could settle civil charges of broker price-fixing brought by New York Attorney General Eliot Spitzer. MMC and its directors had not responded to calls seeking comment on the report as this story was posted.

The reports also indicated that Jules Kroll, executive chairman of Kroll Inc. and vice chairman of Marsh Inc., would take over as interim chief executive of MMC if Mr. Greenberg resigned. However, Mr. Kroll issued a press release today saying that such reports are "erroneous."

Mr. Spitzer last week had suggested the directors consider a change in management. One day later, Roger E. Egan was replaced as Marsh chairman and chief executive officer by Michael G. Cherkasky, a former prosecutor who was with MMC's risk consulting subsidiary.

At the New York Insurance Department hearing, MMC will be asked to give their defense to the accusations made in Mr. Spitzer's civil suit, according to a department spokesman, Mike Barry.

Mr. Spitzer, in a joint investigation with the New York department, said in his civil complaint that MMC's Marsh brokerage unit had conspired with major insurers to rig bids and fix prices at inflated levels. In exchange, it was charged that insurers made payoffs disguised as contingency fees to have unwitting customers steered their way.

The department's investigation with Mr. Spitzer "raised serious questions about the way they [MMC] have conducted business in New York State," said Mr. Serio.

His announcement of the hearing--set for Nov. 23--noted that he has the authority to "suspend or revoke licenses, seek restitution on behalf of aggrieved parties, and levy monetary penalties against its license."

The citation said actions could include requiring restitution of all commissions and fees improperly received from insurers and/or insureds. MMC said that in 2003, Marsh recorded revenue from fee arrangements--called market service agreements?of $845 million.

Meanwhile, a spokesman for Georgia Insurance Commissioner John Oxendine said his office will launch a market conduct exam of Marsh Inc. California and Connecticut already have inquiries underway.

Elsewhere, Maryland Insurance Commissioner Alfred W. Redmer Jr.--speaking in Washington, D.C. at the annual meeting of the American Bankers Insurance Association--said insurance commissioners will make both independent and group decisions in determining how they will follow up on Mr. Spitzer's investigation. He said it is his "personal hope" this "will not lead to a witch hunt, and that there is not an overreaction based on the activities disclosed so far."

He made it clear he was not speaking on behalf of the National Association of Insurance Commissioners, but then added: "My perception is that this is nothing necessarily special. Regulators all day, every day, spend time looking for fraudulent and inappropriate activity."

He added: "This is like anything else. We will gather additional information, and we will make a collective decision, as well as individual decisions, on what the response will be. The emphasis is that whatever investigation or additional work that takes place, will be coordinated among the different states."

Special Reports /

J. Greenberg Out?, Marsh Hearing Set

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