The lawyer took a crisp $50 bill in his hand and then crushed it. Yet the bill was still worth $50, he pointed out.
That was attorney Stephen Marcellino’s way of suggesting that the insurance industry, which has been by rolled by New York Attorney General Eliot Spitzer, has also retained its value.
Marcellino, a partner with Elser Moskowitz Eddelman & Dicker LLP believes that dollars, crumpled or not, provide perspective on how the insurance imbroglio stacks up against other Wall Street scandals. He moderated a seminar, “The New Ethics of Insurance,” hosted by the eastern chapter of PLUS.
The insurance scandals seem like small change. New York forced Marsh to cough up $850 million. Aon Corp. agreed to provide $190 million for restitution while Willis North America Inc. paid $50 million. Hilb Rogal & Hobbs Co. reached a $30 million agreement with Connecticut Attorney General Richard Blumenthal and is paying a $250,000 fine.
However, the 1980s savings and loan crisis cost taxpayers $124 billion, while the thrift industry paid $29 billion.
Attorney Marvin Pickholz believes the Spitzer-driven probes don’t come close to the other major financial services scandals, noting he’d be embarrassed to fine an institution “only” $150 million or even $1.5 billion, and caught any senior executives.
Stephen Sills, CEO of Darwin Professional Underwriter, noted that those charged by Spitzer have been largely middle management, not senior level.
A lawyer with the New York State Insurance Department told the executives to stay tuned because the inquiries are not over. The ongoing finite reinsurance investigations would be bigger and reach higher, suggested Audrey Samers, deputy superintendent and general counsel.
“Finite re will have a big impact; their senior management is involved,” she said. “There are failures at corporate board level.”