Ohio AG Sues Marsh, Insurers

Ohio's attorney general is suing the brokerage operation of Marsh & McLennan Companies along with four insurers for allegedly conspiring to violate the state's antitrust laws.

An MMC representative called the lawsuit a rehash of charges brought originally by New York authorities in 2004 and concluding with a settlement in 2005.

Ohio Attorney General Marc Dann filed a 44-page complaint on Aug. 27 in the Court of Common Pleas in Cuyahoga County, accusing the New York-based Marsh brokerage of conspiring with insurers to fix prices and steer business in return for volume-based contingency bonuses.

The suit seeks cessation of such practices and monetary awards–including forfeiture to the state of $500 per day during the time the defendants engaged in their allegedly unlawful conspiracy.

The complaint also names American International Group Inc., ACE Ltd, The Chubb Corp. and the Hartford Financial Services Group Inc. as co-defendants.

Mr. Dunn said a fifth carrier–Zurich American Insurance Company–settled such charges for $7 million in 2006.

“Our investigation has produced evidence of blatant violations of the antitrust laws that have cost Ohio businesses millions of dollars,” said Mr. Dunn in a statement. “That is why I am determined to use every resource at my disposal to both hold the conspirators accountable and send a strong message that this type of illegal and unethical activity will not be tolerated in Ohio.”

According to the complaint, Marsh conspired with the insurers to produce false bids to protect incumbent business with certain carriers, in return for lucrative volume-based contingent commissions–also known as Placement Service Agreements–between 2001 and 2004.

The complaint highlights testimony by insurance executives when they pled guilty in New York courts to criminal charges related to that state's investigation of MMC's practices. The state also argues that in several instances Ohio companies and public entities were adversely affected by the alleged activity, without naming the entities involved.

New York's attorney general at the time (now governor), Eliot Spitzer settled with MMC early in 2005, setting up an $850 million fund to compensate clients for the broker's alleged practice of bid-rigging and price-fixing. As part of the agreement, the company also ceased taking contingent commissions alleged to have led to the illegal practices. (The agreement was recently amended to allow certain service fees.)

A representative for MMC, Mike Kachel, said the current suit was “a rehash of old allegations” already settled in New York. He said the company has paid $35 million to Ohio clients, and that 99 out of 100 of the state's largest clients accepted the New York settlement.

He added that 75 percent of the state's public entities also accepted the settlement and agreed not to pursue any additional litigation. Mr. Kachel noted that the attorney general's chief of the antitrust section accepted the funds from the New York agreement and distributed them.

“We intend to defend these claims vigorously,” Mr. Kachel said.

When asked about MMC's comments, Jennifer Brindisi, a representative for Mr. Dann's office, said by e-mail that the Ohio attorney general is fulfilling his obligations as the state's chief law enforcement officer.

“Our request for disgorgement and civil forfeiture is based upon the simple proposition that the antitrust laws of the State of Ohio have been broken,” she said. “It is the attorney general's job to enforce those laws and to make violators answer for their misdeeds.”

In an e-mail statement, The Hartford said it “denies the allegations and is disappointed” the attorney general did not discuss them.

Chubb, also in an e-mail statement, said New York's review found no employees in the company actively engaged in MMC's practices, despite inadvertently benefiting from it. Chubb said it contributed $15 million to a settlement fund in New York, Connecticut and Illinois because it did benefit from the activities, and paid an additional $2 million toward the costs for the investigation.

Both insurers and MMC said they have cooperated with Mr. Dunn's investigation. Chubb and Hartford said they, too, would “vigorously” contest the Ohio suit.

Representatives for both AIG and ACE declined to comment.