Who Is Mr. Big?
New York Attorney General Eliot Spitzer continues to line up plea bargains with relatively small players in his crusade to expose wrongdoing by insurers and their brokers.
Since Mr. Spitzer went public with his probes, 16 people have pleaded guilty to various charges involving market manipulation–seven from Marsh, four at AIG, three at Zurich, and one each at ACE and Liberty Mutual. The offenses carry prison time, but the caveat is always that charges could be reduced and/or sentences eased in exchange for cooperation and testimony.
The question is: Who is Mr. Spitzer really after? The natural assumption is that the crusading attorney general is targeting an individual or group of conspirators much higher up on the food chain–big-name players he can nail with the "cooperation and testimony" of those smaller fish he's caught in the act thus far.
Of course, pressure from Mr. Spitzer and friends has already landed some big game for his trophy room.
First, he made it clear he would not do business with the head of Marsh & McLennan, Jeff Greenberg. He held out the possibility of criminal charges and offered little hope of reaching any settlement with the firm if board members did not play along by forcing out their powerful CEO.
Then, the industry's highest-profile figure–AIG's top dog, Maurice "Hank" Greenberg, Jeff's dad–was toppled in the wake of bid-rigging scandals and unrelated allegations involving accounting irregularities.
In each case, the threat to the stock value and reputation of Marsh and AIG as the companies were "tried" in the press drove the boards of both to cut their losses and dump their respective leaders.
But at some point, somebody has to go to jail, right? Otherwise, why strike all of these deals with the various characters paraded into court by Mr. Spitzer?
One thing I know for sure is that Mr. Spitzer has met his match in Hank Greenberg. Remember, although resignation was his best option after challenges by Mr. Spitzer and federal authorities, he has not been indicted, and it is far from certain he ever will be. He has been questioned–and reportedly declined to answer certain queries–but that proves nothing.
Hank Greenberg has virtually unlimited time, money and legal talent at his disposal, while Mr. Spitzer does not. Plus, this fight has become personal. Hank is not about to be thrown out of the business with a black mark on his record after a lifetime atop the insurance world. He will devote his life and considerable resources to clearing his name and restoring his reputation.
Indeed, he has already launched his counterattack. In a 50-page white paper, his lawyers charged that AIG's $4 billion earnings restatement was "exaggerated and unnecessary," created not only to mollify investment analysts but to justify his ouster. You can bet Hank is not going to concede anything to Mr. Spitzer.
Does Mr. Spitzer have the evidence to land a "Mr. Big"–whether Hank Greenberg or some other industry king pin? Or is he merely building leverage to force more big-dollar settlements?
We'll find out soon, because time is not on Mr. Spitzer's side. He is running for governor and before long will have to campaign full time. Headlines about more insurance giants forking over cash and agreeing to clean up their act would boost his credentials. But if this drags out and nothing more significant develops, people might be tempted to ask what all the fuss was about.
Sam Friedman
Editor-In-Chief
"Big headlines about more insurance giants forking over cash and agreeing to clean up their act would boost Mr. Spitzer's credentials. But if nothing more significant develops, people might be tempted to wonder what all the fuss was about."
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