Another Marsh Exec Pleads Guilty to Bid Rigging in Spitzer Probe

February 24, 2005

New York Attorney General Eliot Spitzer said today that a former senior executive of Marsh, Inc. has pleaded guilty to criminal charges in connection with an ongoing investigation of fraud and bid rigging in the insurance industry.

The complaint identifies the defendant as Kathryn Winter, a former managing director at Marsh & McLennan Companies Inc.

In her guilty plea, Winter admitted that during a period from 2001 to 2004, she instructed insurance carriers to submit noncompetitive bids for insurance business, and that such bids were conveyed to Marsh clients under false and fraudulent pretenses. These noncompetitive bids allowed Marsh to control the market, protect incumbent insurance carriers when their business was up for renewal, and maximize profits, according to Spitzer.

The defendant, who is a former managing director at the company, pleaded guilty before Justice James Yates in New York County Supreme Court to the crime of scheme to defraud in the first degree, a class E felony, which carries a maximum sentence of 1 1/3 to 4 years incarceration in state prison.

The felony complaint lodged against Winter refers to email records to confirm the scheme in which the defendant and other Marsh personnel “routinely arranged for and instructed insurance company personnel to submit specific quotes for insurance coverage that the Marsh and insurance company personnel knew were less favorable than those of the incumbent carriers.”

The complaint cites a March 18, 2002 email exchange between Winter and Marsh employee Thomas Green, who requested a “supportive” quote from Zurich and AIG on an account for which the premium went up from $325,000 to $475,000. The next day, the complaint alleges, Winter replied, “Roseann will get you a ‘B’ quote on this.” The next day, Roseann Zakovic, who is described as a broker in Marsh’s Zurich-dedicated team, allegedly received a quote from a Zurich underwriter for $585,000, which she forwarded to Green. The complaint notes that the client ultimately bound coverage with the incumbent insurer for $475,000.

On November 25, 2002, the defendant is alleged to have again asked Zakovic to obtain a “B” quote for $1.4 million on another account. “AIG is quoting $1 mil for 25 mil xs 2/4/4 and 2 mil auto. Can you have ZGE come up with a ‘B’ quote- 1.4 mil??” the complaint quotes the email exchange. The next day, Zakovic allegedly received a quote from a Zurich underwriter for $1.4 million but the client renewed with AIG.

Ten employees at four companies in the insurance industry have now pleaded guilty to criminal charges in the probe. The former Marsh executive is cooperating with the investigation and is expected to testify in future cases, as are the nine other insurance industry employees who previously entered guilty pleas.

Spitzer thanked the New York State Insurance Department for its cooperation in the joint investigation, which is continuing.

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