Bid rigging trial of two former Marsh executives begins

Two former executives of giant insurance broker Marsh & McLennan Cos. Inc. went on trial earlier this month for what prosecutors said were their roles in a lucrative bid rigging scheme.

William Gilman, who was executive marketing director, and Edward J. McNenney, ex-global placement director, are charged in Manhattan’s state Supreme Court with scheme to defraud, first- and second-degree grand larceny and restraint of trade.

The former Marsh executives, being tried without a jury before Justice James Yates, have pleaded not guilty. If the judge convicts them, they each would face up to 25 years in prison.

Their lawyers say they did nothing criminal.

The prosecution says the defendants and others conspired with brokers and other insurance companies to arrange noncompetitive bids for Marsh’s corporate customers from November 1998 to September 2004.

“This case is about greedy and arrogant people,” said Assistant Attorney General Nina Sas. “Instead of letting market forces work, they became the market forces” by controlling how much was bid to get business and by whom it was bid. Customers of Marsh allegedly cheated by this arrangement included Vivendi, Cisco Systems, IBM, State Farm insurance and Merle Norman cosmetics.

Sas said that the former executives set a target for the predetermined winner to bid after getting deliberately losing bids from other companies to mislead customers. Sas said Gilman protected chosen carriers from competition, guaranteed them a profit and charged them a contingency fee.

Prosecutors will call as witnesses former Marsh employees who have already pleaded guilty to bid rigging. Sas said some Marsh clients will testify they would not have bought coverage if they knew the bidding was rigged.

Gilman’s lawyer, Robert Cleary, and McNenney’s lawyer, Stephen Neal, acknowledged that their clients’ customer and carrier matching was not pure “unguided competition” but said it was a method that worked well for all since some carriers will not insure specific kinds of businesses. They also said Marsh helped companies keep a client’s business because there were no gaps in coverage, and there was more stability in premiums.