Marsh Mac Cancels J. Greenberg Audio
By Daniel Hays & Caroline McDonald
NU Online News Service, Oct. 18, 3 :05 p.m. EDT?A planned conference call where Marsh & McLennan Companies Chairman Jeffrey W. Greenberg was to discuss the price fixing charges against MMC's insurance brokerage unit was abruptly cancelled yesterday.
Meanwhile, ACE Ltd, one of the companies embroiled in the scandal said it would hold a conference call Oct. 27 and has hired a former federal prosecutor to look into the allegations against it.
Marsh announced Friday that it was replacing Marsh Chairman and Chief Executive Ray J. Groves with Michael G. Cherkasky, a former prosecutor and that Mr. Greenberg would discuss "the charges made" by Attorney General Eliot Spitzer in a civil action unveiled at a Thursday press conference.
Late yesterday the company said it was postponing the investment community conference call and would file information in an 8-K report with the Securities and Exchange Commission.
The latest announcement said that the planned discussion would deal only with the financial effects of market service agreements. Those controversial fees according to the attorney general were part of a Marsh-run scheme in which the broker, rather than shopping client risks to get the best deal, channeled business to insurers in exchange for payoffs.
Friday Marsh said it would suspend taking the commissions known as market service agreements from insurance carriers. Last year, according to Mr. Spitzer's office $800 million of Marsh's earnings were attributable to such contingent commission payments.
The civil complaint against Marsh, in a suit seeking punitive damages for violations of state business fraud and anti-trust statutes, states that the brokerage "never disclosed to its shareholders how contingent commissions constitute the lifeblood of its business.''
Mr. Cherkasky, who was formerly a chief of the investigation division in the office of Manhattan District Attorney Robert Morgenthau, was moved into his new post from as spot as CEO of Marsh Kroll, MMC's risk consulting subsidiary.
During the period that Mr. Spitzer was with Mr. Morgenthau's office, Mr. Cherkasky was Mr. Spitzer's boss. On Friday Marsh President Roger Egan said Mr. Cherkasky would lead an internal investigation with help from Davis Polk & Wardwell law firm partner Robert B. Fiske Jr., a former Manhattan U.S. Attorney.
In addition to the civil action, Mr. Spitzer's probe has resulted in three guilty pleas from individuals working with insurers accused as part of the scheme.
On Thursday Karen Radke, a senior vice president and Jean-Baptist Tateossian both with American International Group subsidiary American Home Insurance Company pled guilty to felony fraud charges in New York State Supreme Court. Both remain on the payroll while their sentence is pending. The charges are due to be reduced to a misdemeanor in exchange for their cooperation.
Friday, Patricia Abrams, a desk underwriter with ACE Ltd. pled guilty to a misdemeanor in Manhattan Criminal Court.
ACE CEO Evan Greenberg, in a message to employees released to employees yesterday said she has been suspended on paid leave. He announced that the broker fee arrangements, which ACE calls placement service agreements, were immediately discontinued throughout ACE.
He also said that the firm has been cooperating with the New York Attorney General's Office and that Mary Jo White the former Manhattan U.S. Attorney now with the Debevoise & Plimpton law firm was heading a team conducting a "thorough" independent internal investigation and, "Where the investigation shows that there have been lapses, they will be fixed-- quickly and permanently."
The company is ethical and its conduct code reinforces good behavior, he wrote.
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