Aon CEO: No Crime, No Fine

By Mark E. Ruquet

NU Online News Service, March 7, 3:58 p.m.EST?Aon's chief executive said he believes there will beno criminal charges filed against executives after the insurancebrokerage firm settled with state prosecutors and regulators overallegations of contingent fee abuses.[@@]

On Friday, the state attorneys general from New York,Connecticut and Illinois, along with insurance regulators in NewYork and Illinois, announced a $190 million agreement withChicago-based insurance broker Aon aimed at settling allegations offraud and anti-competitive practices involving steering ofcustomers to insurers who had hidden fee arrangements or tie-inreinsurance deals with Aon.

In an investor's conference call Friday, Patrick G. Ryan,chairman and chief executive officer of Aon, said, "We deeplyregret that some of our employees violated our code of conduct bynot always putting our client's interests first. Such conduct wasimproper and I apologize for it."

Despite the agreement to pay customers who, according to the NewYork civil action against Aon, were harmed, Mr. Ryan maintainedthat investigations have shown "virtually all of our employees"follow the company's code of conduct and have acted properly intheir relationships with clients.

The settlement draws to a close all investigations in the threestates, Aon said, and it is hoped that since this is a nationalsettlement, it will eventually settle all other outstandinginvestigations in other states?as many as 20.

Aon did not admit to any wrongdoing or liability in thesettlement, Mr. Ryan said. The settlement does not involve anypenalty or fine, and like the $850 million settlement reached withMarsh & McLennan Companies over similar allegations, the monieswill go to clients who were subject to alleged questionablepractices.

Unlike the MMC settlement, the agreement does not allegeprice-fixing, bid-rigging, solicitation of fictitious quotes ortying of commercial insurance contracts.

Mr. Ryan said no Aon employee has been charged with criminalconduct, and during a question and answer period, he emphaticallystated he expected no criminal charges to be filed against any Aonemployee.

He said the company would establish new business practices aimedat eliminating conflicts of interest and a compliance committee ofthe Aon Board of Directors.

The settlement, to be made in three payments through 2007, isexpected to be tax deductible, Mr. Ryan continued, and will notresult in layoffs.

"I believe that the business reforms emerging from theseinvestigations provide a foundation for a new model that must beembraced by the whole industry," Mr. Ryan said. "We are now movingto an even higher level of transparency, also ensuring that everyclient transaction is free of even the appearance of conflict ofinterest. We are absolutely committed to this and will not restuntil every one of our clients is clear on the terms of ourrelationship."

Mr. Ryan went on to say that there remained disagreementsbetween New York Attorney General Eliot Spitzer's office and Aonover "a number" of the allegations and conclusions laid out incivil documents, but a settlement was reached in the interest ofputting "this behind us." He said he would not comment on thedifferences.

"I don't believe these allegations are indicative of common Aonpractice," said Mr. Ryan. "Forty-eight thousand employees acrossthe globe work hard every day to meet and exceed the expectationsof our clients. I would be remiss if I did not recognize theircommitment and their contribution. This has been a difficultprocess for our industry, Aon and for our employees, and we mustnow look to the future."

On the issue of tying versus the steering of insurance clients,which the company was accused of, Cameron Findlay, executive vicepresident and general counsel, explained that tying is ananti-trust violation involving market power and the purchase ofproduct. Steering, which Aon is alleged to have participated in,involves favoring one insurer over another and is not an anti-trustviolation.

In answer to another question, Mr. Ryan said Aon is notconsidering divestiture of Aon Re Global.