Three Marsh brokerage employees and an underwriter at Zurich American Insurance pleaded guilty last week in New York Criminal Court to felony charges related to commercial insurance bid-rigging. Court documents revealed that among the evidence compiled against them by the New York Attorney General's Office was an e-mail from a broker that openly asked an underwriter to provide a "fake" quote.
The trio who pleaded guilty are the latest people charged in New York Attorney General Eliot Spitzer's ongoing investigation of the insurance industry, and bring to six the number of executives and other staff at Marsh who have admitted to participating in bid-rigging activity.
Todd Murphy, a former senior vice president in the Excess Casualty Division of Marsh's Global Broking Unit, pleaded guilty to scheming to defraud in the first degree and admitted that he engaged in price-fixing with American International Group.
Pleading guilty to the same charge as Mr. Murphy was Regina Hatton, a broker in Mr. Murphy's division. Marsh broker Nicole Michaels pleaded guilty to attempted combination in restraint of trade and competition.
According to complaints against the three, they arranged to have cooperating insurers submit phony quotes that were priced excessively and ensured that an incumbent carrier that Marsh was representing would retain a client's business.
The quotes were sometimes referred to as "B Quotes, Protective Quotes or Bs," according to the complaints, and at other times referred to as what they were.
In a Sept 26, 2002 e-mail, according to the complaint, Ms. Michaels gave a Zurich underwriter quotes from the incumbent insurance carrier, American International Group, for two policies of excess coverage. Her e-mail, it was charged, included the direction: "[P]lease overprice…[for either] or both if you can. This is a fake quote. Both of them are fake."
The Zurich employee who pleaded to a charge of scheming to defraud was James Spiegel, a senior underwriter in his company's Excess Casualty Unit. According to the complaint against him, he provided phony quotes for Ms. Hatton.
The charge of scheming to defraud carries a possible sentence of one-to-four years, while attempted combination in restraint of trade carries up to one year. A representative for Mr. Spitzer's office said charges against the four would likely be withdrawn, "contingent on their cooperation" with the investigation agreement to testify in future cases.
A representative for Marsh & McLennan Companies, the parent company of New York-based Marsh, said there would be no comment. She acknowledged the three had been employed by Marsh but said they are no longer with the company.
According to Mr. Spitzer's office, the evidence against Mr. Murphy involves e-mails allegedly requesting insurers to submit bogus quotes in an effort to steer business toward AIG.
In order to steer business to AIG, it was alleged that he had asked four different carriers on at least two occasions–once in 2001 and once in 2002–to supply bids in excess of the AIG bid. In both cases, the client bound the policy with AIG.
Callout:
Marsh employees arranged to have cooperating insurers submit phony quotes that were priced excessively and ensured an incumbent carrier retained the account.
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