Labor Department Subpoenas Marsh & McLennan Over Benefit Services; Sale of MMC Capital Progresses

By | March 10, 2005

In its annual report filed with the Securities and Exchange Commission, Marsh & McLennan reported that the U.S. Department of Labor last month served the firm with a subpoena seeking documents related to the company’s employee benefit plans services as well as the bidding procedures and compensation for those services.

MMC said the DOL is “seeking documents pertaining to services provided by MMC subsidiaries to employee benefit plans, including but not limited to documents relating to how such subsidiaries have been compensated for such services. The request also seeks information concerning market service agreements and the solicitation of bids from insurance companies in connection with such services.

Marsh & McLennan said it is fully cooperating with the labor department.

That was one of several requests for information that Marsh & McLennan reported receiving recently.

The firm also reported progress on its plan to spin-off its private equity firm, MMC Capital, to a group of senior employees.

On Jan. 6, 2005, MMC said it received a request from the Pension Benefit Guaranty Corp. for documents regarding the funding status of the company’s own retirement plan and financial and business developments since last October’s complaint against it filed by New York Attorney General Eliot Spitzer over compensation and account placement practices.

Marsh & McLennan said in its SEC filing that it is fully cooperating with the PBGC request.

In the filing, MMC also revealed it is cooperating with a request of its Mercer Investment Consulting unit on Feb. 10 by the West Virginia Securities Commission for documents relating to services provided to that state’s public retirement system.

Also, the SEC report says that on March 25, 2004, and Jan. 6, 2005, Mercer received requests for documents and testimony from the U.S. Department of Justice in connection with an industry-wide investigation of potential anti-competitive agreements or understandings among providers of actuarial consulting services relating to limitations of liability and other contractual terms or conditions of engagement. Mercer is cooperating fully with this investigation.

In other news from MMC, the firm reported that it expects its plan to spin-off its private equity firm, MMC Capital, to a group of senior employees will close by the end of the second quarter.

On Feb. 28, 2005, MMC signed a letter of intent providing for the
transfer of MMC Capital’s business, including the management of the Trident Funds, to a company to be formed by MMC Capital’s senior management, including its chairman and chief executive officer. MMC said it would maintain a strategic alliance with the acquisition company and continue certain of its investments in the Trident funds. In addition, MMC may maintain its investments in certain insurance and reinsurance companies.

MMC Capital is a private equity firm that manages investments and committed capital of more than $2 billion. During the past 10 years, MMC Capital has targeted investments in the insurance and financial services industries as the investment manager of the Trident Funds, which consist of The Trident Partnership formed in 1994, Trident II formed in 1999 and Trident III formed in 2003. Investors in these funds include MMC Capital’s corporate parent and other investors.

MMC Capital’s investment activities date back to the mid-1980s when MMC was instrumental in sponsoring several Bermuda-based insurance and reinsurance companies, including ACE Limited, XL Capital Ltd., Centre Reinsurance Holdings Limited and Mid Ocean Limited.

More recently, MMC Capital helped to develop an additional source of insurance and reinsurance capacity after the Sept. 11, 2001 terrorist attacks through the formation of AXIS Capital Holdings Limited.

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