Former NAIC president slams N.Y. AG for 'terrorism' againstindustry

By Mark E. Ruquet

Orlando, Fla.

The head of a major insurer group attacked New York AttorneyGeneral Eliot Spitzer at an agent conference here, describing Mr.Spitzer's conduct during continuing investigations of the industryas “corporate terrorism,” and adding that his tactics arereminiscent of “McCarthyism.”

Ernst Csiszar, president of the Property Casualty InsurersAssociation of America in Des Plaines, Ill., went after Mr. Spitzerhere during remarks to the American Association of Managing GeneralAgents' annual meeting.

“The reality is that [Mr.] Spitzer did find practices in theindustry that are deplorable, but he has taken it further,” saidMr. Csiszar, who left his post last year as South Carolina'sinsurance regulator and resigned as president of the NationalAssociation of Insurance Commissioners to take over PCI.

Mr. Spitzer's continuing investigation has led to 10 guiltypleas by commercial brokerage and insurance executives who areawaiting sentencing for activities related to improper steering ofcustomers, bid-rigging, price-fixing and hidden payoffs to brokersin the form of contingency commissions.

The nation's three largest brokers–Marsh, Aon and Willis–haveagreed to repay more than $1 billion to clients who may have beeninjured by the misdeeds.

A large focus of the probe of late has been on AmericanInternational Group and finite reinsurance deals that may have beenmisused to bolster its balance sheet. AIG is also being audited forpossibly shortchanging New York's Workers' Compensation Fund bymillions of dollars by mischaracterizing premium payments.

Mr. Csiszar complained that Mr. Spitzer's investigations shouldresult in the prosecution of the guilty, and that should be the endof it. However, according to Mr. Csiszar, the New York attorneygeneral has pushed the probe beyond criminal review and is nowconducting a sham trial through the media.

“This is corporate terrorism–using the threat of indictment,” hesaid. “There is no due process and he is ravaging theindustry.”

Mr. Csiszar's attack also raised questions about Mr. Spitzer'smotives for continuing the probe into insurance industrypractices.

“He should look for his own conflict of interest,” said Mr.Csiszar, noting that Mr. Spitzer is a Democratic candidate forgovernor in New York and suggesting that he might one day aim torun for president of the United States.

“What punishment is there for that?” he said, noting that Mr.Spitzer has stated on television that targets of his probe areguilty before presenting all of the evidence against them andsecuring an indictment, let alone holding a trial where they coulddefend themselves.

“This smacks of McCarthyism,” he suggested, referring to thelate U.S. Senator Joseph McCarthy, whose activities in the 1950sexposing people he accused of Communist activity made his name asynonym for unsubstantiated media attacks that blackened personalreputations without evidence or trial.

His comments came during an ethics seminar for wholesalers. Arepresentative for Mr. Spitzer said he had no comment about Mr.Csiszar's remarks.

Mr. Csiszar spoke during a panel discussion that includedFlorida's chief financial officer, Tom Gallagher, whose departmentincludes the regulation of insurance, and Gordon Breslin, seniorproperty underwriter with ACE European Group in London.

For his part, Mr. Gallagher said that Florida's department ofinsurance and its attorney general had no choice but to react toMr. Spitzer's probe. However, he appeared to cast doubt overwhether the state's investigation would result in finding anywrongdoing.

He said his probe has proven expensive for the industry, addingthat his state would not have begun an investigation of its own ifit were not for New York's action.

He said one result will be greater transparency for theindustry, noting that measures designed to assure full disclosureshould pass during this year's session of the Floridalegislature.

Mr. Breslin said there is no doubt that the more egregiouspractices that were unearthed by Mr. Spitzer “should beeradicated.” However, he added, any reform “is just a question ofhow strong the regulations need to be.”

The London markets have not experienced the extreme reactionsthe United States has seen, noted Mr. Breslin. He pointed out thatthe United Kingdom's regulatory agency–the Financial ServicesAssociation–has not shown an inclination to make the sameinquiries.

On another issue, Mr. Csiszar said Congress must pass anextension of the Terrorism Risk Insurance Act because the insuranceindustry cannot absorb a tremendous loss from another terrorismattack. However, passage will depend on the industry coming up withsome longer-term solution that will include the private sector, headded.

“We need a good-faith effort on the part of the industry toaccomplish this,” he said.

Quotebox for Csiszar mug:

“This is corporate terrorism–using the threat of indictment.There is no due process and he is ravaging the industry.”

Ernst Csiszar, President, PCI

Caption over mug of Spitzer:

PCI's president said Eliot Spitzer's penchant for declaringpeople guilty before trial, or even an indictment, “smacks ofMcCarthyism.” Mr. Spitzer had no comment about Mr. Csiszar'sremarks.

Caption over McCarthy pix:

Mr. Spitzer's behavior, says Mr. Csiszar, reminds him of Sen.Joseph McCarthy, who in the 1950s communist witch hunts accusedpeople of crimes without evidence or trial.