Csiszar Hits Spitzer McCarthyism

NU Online News Service, May 2, 2:16 p.m. EDT--The head of an insurance trade group launched a verbal attack on New York Attorney General Eliot Spitzer at a conference here, calling Mr. Spitzer's continuing investigation of the industry "terrorism" and "McCarthyism."

Ernst Csiszar, president of the Property Casualty Insurers Association of America (PCI), based in Des Plaines, Ill., made his remarks during the American Association of Managing General Agents' annual meeting here.

"The reality is that Spitzer did find practices in the industry that are deplorable," said Mr. Csiszar, "but he has taken it further."

Mr. Spitzer's continuing investigation has led to 10 guilty pleas by commercial brokerage and insurance executives who are awaiting sentencing for activities related to improper steering of customers, bid-rigging, price-fixing and hidden payoffs to brokers in the form of incentive commissions.

Brokers have agreed to repay more than $1 billion to clients who may have been injured. A large focus of the probe has been on American International Group, which Mr. Spitzer announced last week was being audited for possibly cheating his state's Workers' Compensation Fund out of millions.

Mr. Csiszar complained that the investigation should have resulted in the prosecution of the guilty and that should have been the end of it.

According to Mr. Csiszar, the N.Y. attorney general has pushed the probe beyond criminal review and is now conducting a trial through the media. "This is corporate terrorism, using the threat of indictment," he said. "There is no due process and he is ravaging the industry."

His comments came Saturday during an ethics seminar for wholesalers. A spokesman for Mr. Spitzer said he had no comment.

Mr. Csiszar spoke during a panel discussion that included Florida's chief financial officer Tom Gallagher, whose department includes the regulation of insurance, and Gordon Breslin, senior property underwriter with Ace European Group in London.

Mr. Csiszar's attack also questioned Mr. Spitzer's motives for continuing the probe.

"He should look for his own conflict of interest," said Mr. Csiszar, noting that Mr. Spitzer is a Democratic primary candidate for governor in New York and may one day aim to run for president of the U.S.

"What punishment is there for that?" he asked. "This smacks of McCarthyism." A reference to the late U.S. Sen. Joseph McCarthy, whose activities in the 1950's exposing persons he accused of Communist activity made his name a synonym for unsubstantiated media attacks that blacken personal reputations without evidence.

For his part, Mr. Gallagher said that Florida's department of insurance and its attorney general had no choice but to react to Mr. Spitzer's probe. But he appeared to cast doubt over whether the state's probe would result in finding any wrongdoing. He said the probe has proven expensive for the industry and the state would not have begun one if it were not for New York's probe.

He said one result will be greater transparency for the industry and that measures designed to do that should pass during this year's session of the Florida legislature.

Mr. Breslin said there is no doubt that the more egregious practices that were unearthed "should be eradicated." However, any reform "is just a question of how strong the regulations need to be."

The London markets have not experienced the extreme reactions the United States has seen, said Mr. Breslin, and the regulator there--the Financial Services Association--has not shown an inclination to make the same inquiries.

On another issue, Mr. Csiszar said the Congress must pass the Terrorism Risk Insurance Act because the industry cannot absorb a tremendous loss from another terrorism attack. However, passage will depend on the industry coming up with some solution that will include the private sector.

"We need a good faith effort on the part of the industry to accomplish this," he said.