New York Attorney General Eliot Spitzer said Tuesday that two employees from a third insurance company- Zurich American Insurance Company (Zurich) – have pleaded guilty to criminal charges in connection with a bid rigging scheme. The employees both were senior underwriters at Zurich.
According to an Associated Press report, the two men were identified as John Keenan and Edward Coughlin. They each reportedly are looking at a penalty of up to a year in jail and a fine of up to $1,000.
The action is part of the ongoing investigation of fraud and anti-competitive practices in the insurance industry. Five executives at three major insurance companies have now pleaded guilty to criminal charges in the probe. Last month, two executives at AIG and one at ACE pleaded guilty to similar charges.
“The investigation is proceeding carefully and methodically,” Spitzer said. “Our goal is to determine the full extent of wrongdoing in the industry and its effect on consumers, to punish those involved in misconduct, and to implement appropriate corrective measures.”
In their guilty pleas, the underwriters admitted to following and executing the directions from a supposedly neutral broker to submit bids designed to lose, thus awarding the business to the designated “winner.”
According to the complaints, from August 2002 through September 2004, both defendants worked in a section of the Specialties Excess Casualty Unit at Zurich, and dealt exclusively with executives at Marsh Global Broking, a subsidiary of Marsh & McLennan Companies (Marsh).
Each defendant pled guilty to a misdemeanor under New York State’s Donnelly Act, which prohibits agreements in unreasonable restraint of trade and competition. Both individuals face a maximum sentence of one year in state prison.
Spitzer thanked the New York State Insurance Department for its cooperation in the joint investigation, which is continuing.
The two Zurich underwriters, as well as the three other insurance company employees who previously entered criminal pleas, are expected to testify in future cases.
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