The president of Hilb, Rogal & Hobbs Company has resigned after the company discovered that one of its employees arranged for improper payments in exchange for insurance placements.

The Richmond, Va.-based insurance broker, in a letter to employees on Wednesday, said that Robert B. Lockhart, president and chief operating officer of the firm, resigned. A second employee was terminated and a third suspended pending the outcome of a company investigation into improper contingent fee arrangements.

The letter was from Martin L. Vaughan III, chairman and chief executive officer, and was part of an 8-K filing on the matter. It said an internal investigation found that in the beginning of 1998 an HRH employee in the Hartford, Conn., office "arranged or attempted to arrange for payments" to the firm for the placement of professional liability insurance policies for "three different organizations."

The arrangements were possibly in violation of state or federal statutes, the letter said.

At the time, Mr. Lockhart was in charge of that office. The letter does not say what, if any, role he had in the arrangements.

A third employee is on administrative leave in connection with the payments. Neither of the employees was identified.

Mr. Lockhart's duties have been distributed among current management, the letter said, but it did not indicate if he would be replaced.

HRH went on to say that restitution will be made to clients harmed by the payments, depending upon the outcome of the investigation.

A spokeswoman for HRH said she could not comment further on the 8-K filing.

The company said it has provided information about the transactions to the Connecticut U.S. Attorney's Office, the Connecticut attorney general and the state's insurance commissioner.

HRH said it intends to cooperate fully in the investigation.

Connecticut Attorney General Richard Blumenthal issued a statement acknowledging receipt of the information, the cooperation of HRH in the investigation, and said his probe of the industry in the state is continuing. His office had no additional comment.

A spokeswoman for the state's insurance department said the department has begun an investigation and could not comment further.

A request for comment from the U.S. Attorney's Office was not returned.

In its 10-K filing for 2004, HRH said it has received subpoenas from attorneys general in Florida, Massachusetts and North Carolina. HRH said it received requests for information from insurance departments in 10 states and could receive more subpoenas or requests for information from other states in the future.

It reported that 19 percent of the $42.4 million it received in contingent commissions in 2004 consisted of volume-based placement agreements. Those types of agreements were at the center of alleged abuses uncovered at Marsh and Aon. As of Jan. 1, the company converted all of its contingent commissions to standard profit-sharing agreements.

Special Reports /

HRH President Resigns, Two Others Disciplined

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