Conn. Sues MMC & Ace In Kickback Scheme

NU Online News Service, Jan. 23, 12:18 p.m. EST?Connecticut's Attorney General Richard Blumenthal said he has filed suit against Marsh & McLennan, Inc., and ACE Financial Solutions, Inc., over an alleged bribery scheme.

Mr. Blumenthal accused New York-based MMC's insurance brokerage firm Marsh of steering an $80 million workers' compensation state contract to ACE in return for an additional commission of $50,000. Mr. Blumenthal said Marsh failed to inform it's client, Connecticut's Department of Administrative Services, about the additional commission.

Mr. Blumenthal added that this is the first of a series of legal actions his office plans to bring "into insurance industry abuses."

The attorney general said, in a statement, that Marsh never told the DAS about the additional commission. DAS paid Marsh $100,000 in consulting fees. He said DAS "clearly expected" Marsh would not accept any additional fees. The broker also failed to inform DAS of ACE financial condition at the time of the contract, he added.

Mr. Blumenthal said. "This lawsuit?shows particular arrogance and avarice in victimizing the state and its taxpayers. Whatever name they are called ? bonuses, commissions, overrides ? the effect of these concealed kickbacks is to steer contracts, corrupt competitive bidding, inflate costs and deceive customers."

According to the attorney general, in April 2001, the DAS sought an insurance company to administer 678 workers' comp cases. The cases involved state workers with serious injuries, many requiring long-term care, and were therefore unusually expensive. DAS believed it would save money hiring an insurer to manage the cases for a fixed amount.

Through a competitive bidding process, two brokers, Marsh and Hagedorn & Company, responded. Marsh named its "preferred" companies, in the bid, including ACE.

The DAS eventually selected both Marsh and New York-based Hagedorn. In its contract, Marsh agreed to limit its commission to a $100,000 fee from the state.

Despite that express limit, it was alleged, Marsh demanded that ACE pay Marsh a commission on the DAS contract if it wanted to continue receiving similar contracts. On December 3, 2001, less than two weeks after the deal was finalized, a Marsh executive informed the company's New York office that ACE had agreed to pay a $50,000 commission on the DAS contract. The two companies then signed a confidentiality agreement preventing ACE from revealing the terms of the deal, it was charged.

In selecting ACE, Marsh also failed to inform the DAS of the company's financial condition resulting from claims stemming from the Sept. 11 terrorist attacks, Mr. Blumenthal added.

The DAS awarded ACE the contract in November 2001, paying the firm $80 million to take over the portfolio of cases.

The attorney general's suit accuses Marsh of violating Connecticut consumer protection laws by accepting additional commission, falsely claiming that it considered only the state's best financial interests in arranging the contract, and falsely claiming that it recommended ACE solely on ACE's qualifications.

The attorney general's action seeks actual and punitive damages, information allowing determination of how much Marsh was falsely paid, and reimbursement for legal and investigative expenses.

Hamilton, Bermuda-based ACE is conducting an internal investigation stemming from a suit filed by New York's Attorney General Eliot Spitzer against MMC. One executives at ACE has plead guilty to criminal charges in New York, and at least five have been dismissed or suspended from the company. ACE said it expects its internal investigation to be completed in February.

Neither MMC nor ACE issued statements over the weekend in response to Mr. Blumenthal's allegations.

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Conn. Sues MMC & Ace In Kickback Scheme

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