Insurance broker Marsh & McLennan Cos. Inc. announced Monday that it will pay $850 million to settle allegations that it worked with insurers to rig bids, but it still faces private litigation.
New York Attorney General Eliot Spitzer accused the brokerage firm in October of bid-rigging, price-fixing, and offering kickbacks. In the settlement, the company neither admitted nor denied the allegations that led to the resignations of its chief executive, Jeffrey W. Greenberg, and general counsel, William Rosoff.
The settlement is the largest Mr. Spitzer has gotten from a single company in his probes of Wall Street conflicts of interest in mutual funds and insurance.
A class action against Marsh & McLennan by investors alleges that its misconduct led to a plunge in its stock price that cost them millions of dollars.
Extolling the settlement, Mr. Spitzer told the National Press Club in Washington, "There is new leadership at the company; there is an entirely new business model that is predicated upon disclosure and transparency."
"The insurance industry has corruption that is rife throughout it," he added, "and it touches every line of insurance that is purchased. Every line, and we will keep going until we find it."
Mr. Spitzer accused Marsh of working with American International Group Inc. and other insurers to fix prices. AIG's chairman and CEO is Maurice R. Greenberg, Jeffrey Greenberg's father.
Michael Cherkasky succeeded the younger Mr. Greenberg as chief executive. He had spent 16 years in the criminal justice system including time as Mr. Spitzer's boss in the New York district attorney's office.
Mr. Cherkasky said in a conference call Monday that he hopes the settlement will end a dark period of incidents he called "unlawful" and "shameful." He said he believes that by being the first to agree to a settlement Marsh & McLennan will gain a competitive advantage.
Marsh & McLennan will contribute $850 million to a fund to compensate customers in four annual installments beginning June 1. The fund will compensate those that hired Marsh as their insurance broker from 2001 to 2004. The clients will not need to prove they were harmed in order to receive a payment.
Mr. Cherkasky said that no penalty or fine was levied against the company. Customers will be notified of the settlement by April 1, and those who choose to opt in will get a portion of the fund, which was allotted state-by-state. This is a national compensation fund, he said, but executives are in talks with other states' attorneys general and regulators.
Late last week, a U.S. District Court judge in New York named four public pension systems as lead plaintiffs in a class action against Marsh & McLennan that alleges its actions and the consequent investigation cost them millions in their Marsh stock holdings.
Mr. Cherkasky said no evidence shows harm to any customer from the bid-rigging, but the class action alleges that in the two days after the announcement of Mr. Spitzer's investigation, Marsh & McLennan lost $9 billion of market value as its stock price fell 50%. The four lead plaintiffs say they lost more than $100 million.
Marsh said it will take a $618 million pretax charge to its fourth-quarter results to account for the settlement. It had set aside $232 million in the third quarter.
