Marsh Directors Reportedly in Negotiations with N.Y. AG; CEO Greenberg Said Pressured to Resign

October 25, 2004

Outside directors of Marsh & McLennan Cos. have sought to negotiate with New York Attorney General Eliot Spitzer in the insurance bid rigging case, a source familiar with the overture said Friday.

The source spoke to The Associated Press on the condition of anonymity and would not elaborate on the discussions.

The Wall Street Journal and the Financial Times of London reported that chairman and CEO Jeffrey Greenberg was expected to resign to clear the way for settlement negotiations.

Spitzer has been highly critical of the company’s management, and said when he announced charges against the insurance brokerage last week that he would not negotiate with current management.

In announcing his case, Spitzer said his office was “misled at the very highest levels of that company.”

He also said: “The leadership of that company is not a leadership I will talk to. It is not a leadership I will negotiate with.”

Spitzer spokesman Marc Violette refused to comment on the case Friday.

A spokesman for Marsh declined to comment on the reports, calling them rumors.

Since Spitzer’s civil suit was announced Oct. 14, Marsh & McLennan’s stock value has plummeted by nearly half. On Friday, they got a lift from reports that Greenberg may go. The shares were up $1.90, or 7.7 percent, at $26.25 in afternoon trading on the New York Stock Exchange.

The reports by the Journal and FT, citing people close to the matter, said the world’s largest insurance broker may name Jules Kroll as its interim CEO.

Spitzer accuses insurance brokers of steering their business to insurance companies who pay brokers the highest fees — in addition to their commissions — instead of representing only the interests of clients. The fees have apparently been common for years and Spitzer’s property casualty insurance probe now includes transactions in health, life and disability insurance policies.

Connecticut, Massachusetts and California attorneys general are pursuing similar cases.

In New Jersey, Banking and Insurance Department Commissioner Holly C. Bakke said Friday that while there are no pending allegations in the state, she has established a task force to examine recent charges of bid-rigging and other sales abuses.

New Jersey law requires brokers to disclose “any potential conflicts in their fee agreements to the consumers that hired them,” said Donald Bryan, state director of insurance.

Spitzer’s lawsuit also named New York-based American International Group Inc., ACE Insurance Co. of North America in Philadelphia, The Hartford and Munich American Risk Partners. He said other insurance companies are being investigated.

Also Friday, the New York state Insurance Department issued citations alleging fraudulent, coercive and dishonest practices against Marsh & McLennan and its Marsh Global Broking as well as more than 10 other Marsh-related companies.

“Our joint investigation with the attorney general’s office has raised serious questions about the way they have conducted business,” said state Insurance Superintendent Gregory Serio. Marsh officials must answer the citations Nov. 23.

The department could suspend or revoke Marsh’s licenses.

Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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