Two ex-Marsh executives are accusing their former employer of making them "scapegoats," saying Marsh tried to avoid criminal prosecution by colluding with the N.Y. attorney general to have the two men indicted over allegations they engaged in an improper kickback scheme.
Former Marsh executives William Gilman and Edward J. McNenney Jr. filed an amended complaint with the U.S. District Court, Southern District of New York. The two men filed their original suit in 2010.
The suit says that the insurance brokerage firm Marsh, a subsidiary of Marsh & McLennan Cos., colluded with the attorney general to avoid criminal indictment and instead be subject only to civil penalty.
The company ultimately paid a penalty of $850 million in 2005 after allegations were made by then-New York Attorney General Eliot Spitzer that executives engaged in steering certain accounts in Marsh's global broking practice to insurers that paid lucrative contingent-commission fees. The broker was also banned from accepting contingent commissions until 2010.
The suit charges that Spitzer negotiated to have his good friend Michael Cherkasky named chief executive officer after the resignation of then-CEO Jeff Greenberg in late 2004.
The suit says Spitzer engaged in the collusion in an effort to "bolster his crime-fighting credentials," as he successfully sought the Democratic nomination for governor of New York in 2006.
Gilman and McNenney contend that the engagement in contingent commissions was perfectly legal and that they cooperated in all internal investigations without hesitation. Both were fired from their jobs without cause, the suit contends, and Gilman was "unfairly denied" his eligible retirement.
Both men were also denied the severance pay they were entitled to, the suit contends, noting that others who were released for their involvement in the alleged scheme did receive severance.
In 2005, eight executives from Marsh were indicted on fraud and larceny charges, including Gilman and McNenney. All eight pleaded not guilty at their arraignment. The 37-count indictment handed up to New York County Supreme Court Judge James A. Yates accused the former executives with scheming to defraud, restraint of trade and competition, and grand larceny.
Spitzer said at the time, "These former Marsh managers are accused of colluding with leading insurance companies to arrange non-compete bids and conveying these bids to Marsh clients under false pretences."
He added, "Not only was this wrong, but it was harmful to the economy. It skewed the system and added to the already high cost of insurance. It subverted the fundamental principal of our economy, which is full, free and fair competition."
"There is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers," he added.
In 2008, Gilman and McNenney were found guilty of a felony monopoly charge for bid-rigging, but were cleared of other charges, including grand larceny and fraud. The two were convicted of deceiving clients by arranging it so that insurance contracts went to preferred carriers in return for lucrative kickbacks in the form of contingent commissions.
Robert J. Cleary, an attorney with the law firm Proskauer Rose in New York, who represented Gilman, said at the time he would appeal the verdict. "We look at this as round one," he said after the 2008 decision.
The charges against Gilman and McNenney were eventually dropped, and their convictions were subsequently vacated in 2010 based on the withholding of evidence that the judge said could have impacted the verdict.
The attorney general's office formerly withdrew the charges in 2011.
"The New York attorney general's dismissal of the indictment against [McNenney] results in the complete and total vindication on all charges of wrongdoing against him," Cooley LLP litigation partner Scott Devereaux, who represented McNenney, said at the time.
"Following six long years my family and I are able to put this behind us and move forward with our lives," McNenney said in the same statement.
In response to the latest complaint filed by McNenney and Gilman, a spokesman for Marsh & McLennan Cos. declined to comment on the particulars of the case. But the spokesman issued a statement saying, "The decision to prosecute William Gilman and Edward McNenney was made by the former New York attorney general and a grand jury; not by Marsh."
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