Three Insurer Execs Plead Guilty In Fee Probe

Both were released on bail after an appearance before State Supreme Court Judge Michael Ambrecht in Manhattan and are due back in court for sentencing on Dec. 16. However, that date will likely be postponed because the two are reportedly cooperating with Mr. Spitzers investigation.

"They pleaded to a felony charge, which I believe will be reduced to a misdemeanor," said American International Group Chairman Maurice Greenberg during a conference call with stock analysts. "The two have been put on leave and are the only ones at this point who have been put on leave," he said later.

Ms. Radke, according to the AGs Office, has been with American Home since 2001, while Mr. Tateossian joined the firm in the middle of last year.

The AGs civil suit charges that Marsh solicited and obtained fictitious high quotes from insurers to deceive its clients into believing that true competition had taken place. Insurers that took part in the arrangementwhich included paying substantial contingent commission feeswere rewarded by having business steered to them, the suit alleges.

In 2003, a contingent commission agreement with AIG Risk Management Inc. provided Marsh with a 1 percent bonus on all renewal premiums if its clients renewed with AIG at a rate of 85 percent or higher, 2 percent for a 90 percent renewal rate, and 3 percent for 95 percent or higher, according to the lawsuit.

Mr. Greenberg said that after the attorney generals office subpoenaed the firm for information about brokerage contingent commissions, AIG began an investigation that "finally focused on the excess casualty department of American Home. There we uncovered two employees who acknowledged that they had participated in bids they were not certain they would ever get an order for We advised the attorney generals office promptly about that."

A third executive named in the probePatricia Abrams, a desk underwriter with Bermuda-based ACE Ltd.pled guilty to a misdemeanor in Manhattan Criminal Court.

In a message to employees, ACE CEO Evan Greenbergthe son of AIGs Maurice Greenberg, and brother of Marsh & McLennan Companies Chairman Jeffrey Greenbergsaid Ms. Abrams has been suspended on paid leave. He announced that the brokerage fee deals, which ACE calls placement service agreements, were immediately discontinued throughout ACE.

He also said that ACE has been cooperating with the New York attorney generals office, and that Mary Jo Whitethe former Manhattan U.S. Attorney, now with the Debevoise & Plimpton law firmwas heading a team conducting a "thorough" independent internal investigation. "Where the investigation shows that there have been lapses, they will be fixedquickly and permanently," he said.

The price-fixing scandal will have no long-term impact on AIG, according to its chairman. "Our business will continue to go as it has in the past," Maurice Greenberg told analysts the day after two AIG executives pled guilty to felony fraud charges. "No one in senior management knew anything about this."

Asked what he saw as the investigations impact on AIG at the end of the day, Mr. Greenberg responded: "Nothing. Our business will continue to go as it has in the past. We are cooperating with the attorney general."

He said AIG had approached the New York Insurance Department with a copy of Marshs placement service agreements and had asked for guidance because "we wanted to make sure it wasnt a conflict," but added that the department had so far not responded.

The issue of placement service agreements, he said, is "something that has troubled us. Obviously it has led to some improper practices." In the future, he added, AIG will "likely pay a straight commission" and will not participate in PSAs.

Reproduced from National Underwriter Edition, October 21, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.