NEW YORK–The defense put on its first witness today in the trial of two former Marsh executives accused of defrauding insurance clients through their alleged steering of insurance contracts in return for kickbacks.

New York Supreme Court Judge James A. Yates, who is presiding over the nonjury proceeding, heard from the defense's first witness in the trial of William Gilman, former executive marketing director and managing director at Marsh, and Edward McNenney, former global placement excess casualty director and managing director at Marsh.

Testifying as an expert witness, Jeffrey G. McKinley, president of Risk Management Strategies of Stinson Beach, Calif., described challenges brokers face in the procurement of excess casualty insurance compared to the more common personal lines market.

Defense attorney Robert J. Cleary said Mr. McKinley's testimony would be used not only to paint a picture of the excess casualty market but also address how contingent commissions are contracted and distributed in the insurance industry.

Prosecutors attempted to have Mr. McKinley dismissed as an expert witness, saying despite his years in the industry and three occasions where he testified in plaintiff cases, including the World Trade Center claims dispute trial, he lacked any current knowledge that could be considered evidence and his testimony should only amount to opinion.

Judge Yates said prosecutors would have the opportunity to cross examine Mr. McKinley and it would be up to the judge to weigh the significance Mr. McKinley's testimony. The trial is now in its 10th month.

Lawyers for Mr. McNenney moved to rest the case without calling any witnesses. Mr. McNenney did not take the stand. The defense indicated Monday that it planned to present only two witnesses, Mr. McKinley and Mr. Gilman.

During his testimony early today, Mr. McKinley outlined the differences between personal lines and excess insurance lines, noting that the market is very limited and carriers are usually very cautious about their exposure in this market.

He also revealed during questioning by the prosecution that his services as an expert witnesses are being paid for by Marsh and not the defendants, presumably under the firm's directors and officers policy.

On Wednesday, Judge Yates ruled on a defense motion to dismiss all charges. He dismissed larceny counts concerning placement of insurance for Cisco System and E&J Gallo Wineries and either denied a motion to dismiss or reserved dismissal on the remaining counts. Court officials said the dismissals have the effect of reducing the degree of the counts of larceny against the defendants.

Mr. Gilman and Mr. McNenney are being tried on charges of scheming to defraud, restraint of trade and competition, and grand larceny. The charges stem from their alleged involvement in a scheme to steer insurance contracts to certain carriers in exchange for lucrative contingent commissions.

The practice of brokers securing sham “B” quotes from insurers that were higher than those of the carrier the broker wanted to place the business with was uncovered by New York Attorney General Eliot Spitzer in 2004. The discovery of the practice led Marsh and three other global brokers to agree to stop taking volume-based contingent commissions.

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Defense Begins In Trial Of Two Marsh Execs

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