NU Online News Service, May 12, 5:30 p.m. EDT--Marsh & McLennan Companies said it amended its settlement agreement with New York State over price-fixing and brokerage fee misconduct to limit its application to the company's U.S. operations.

In its 10-Q filing of May 6, New York-based MMC said the office of the New York Attorney General and the Superintendent of Insurance for the State of New York agreed April 28 to alter the language in the agreement by inserting "U.S." into sections of it. The change limits the scope of business reforms that were agreed to, to exempt overseas operations, MMC said.

In January, MMC agreed to pay $850 million into a settlement fund that will be paid to insurance clients whose contract placements were affected by contingent fees the broker collected from insurers who were part of a scheme to rig bids and fix prices.

New York Attorney General Eliot Spitzer's office alleged in a civil suit that executives at MMC's insurance brokerage firm, Marsh, engaged in fraud and illegal kickbacks in return for profitable volume based on the contingent fee arrangements. MMC agreed to the settlement without admitting guilt but apologized for the actions of some executives.

To date, three Marsh executives have pleaded guilty to criminal charges stemming from the probe, along with seven executives from insurance companies.

In addition to clients of Marsh, the agreement also affects clients of Mercer Consulting, an MMC subsidiary. Mercer received contingent fee commissions while consulting on the placement of insurance, according to MMC.

In the 10-Q, MMC said that as of April 29, it has received requests for information or subpoenas from the offices of 20 attorneys general outside of New York. The company said it also has received subpoenas, requests for information or letters of inquiry from 31 state insurance departments or other state agencies outside of New York.

In January, Connecticut's Attorney General filed suit against Marsh for violation of the state's Unfair Trade Practices Act. The broker allegedly failed to disclose a $50,000 payment it received in the placement of worker's compensation for the State's Department of Administrative Services.

On the civil litigation front, MMC is embroiled in 19 class action suits that are in the process of being consolidated in New Jersey U.S. District Court in Newark.

Six similar actions have been filed in state courts and two in Canada. There are four class action securities fraud suits that are being consolidated into one action at U.S. District Court in Manhattan.

Twelve suits have been filed against directors and officers of the company in Delaware Court of Chancery, U.S. District Court, Manhattan, and New York County Supreme Court, for breach of fiduciary responsibility.

In Manhattan's U.S. District Court, MMC said it has 20 "purported" class actions alleging violation of the Employee Retirement Income Security Act (ERISA) on behalf of participants in MMC or Putnam sponsored employee benefit plans (Putnam is the investment subsidiary of MMC).

According to MMC, the plaintiffs allege that the defendants violated their responsibilities under ERISA for not properly monitoring and providing accurate information to investors. The plans assets stood at $1.2 billion prior to the filing of the lawsuit by Mr. Spitzer in October 2004. The actions were consolidated into one class action in February.

Unlike Aon, which said it will be able to take a total tax deduction on a $190 million settlement, MMC said it could not do so on its $850 million settlement.

In its 10-K filing for the year 2004, MMC said it received a "lower tax benefit" on the settlement because of "partial attribution of foreign operations." The company was also unable to take any tax deduction on its $224 million regulatory settlement for its Putnam division. For 2004, its effective tax rate was slightly less than 58 percent, compared to a tax rate of 33 percent in 2003.

Special Reports /

MMC Amends Settlement With New York

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