Friday, January 7, 2005

Former Marsh & McLennan Broker Pleads Guilty

New York Attorney General Eliot Spitzer's investigation of bid-rigging in the insurance industry has resulted in a guilty plea by Robert Stearns, a former Marsh & McLennan Corp. broker. According to a press release issued by Spitzer's office (Jan. 6), "In his guilty plea, the Marsh executive admitted that during a period from 2002 to 2004, he instructed insurance companies to submit noncompetitive bids for insurance business, and conveyed these bids to Marsh clients under false and fraudulent pretenses. These noncompetitive bids allowed Marsh to control the market, to protect incumbent insurance carriers when their business was up for renewal, and to maximize Marsh's profits."  The criminal complaint alleges that Stearns engaged in a scheme to defraud, which is different from the civil antitrust allegations leveled against the company in October 2004, although they arise out of the same practices.  This is the first guilty plea by a Marsh Mac insider, and we can expect the usual approach of building a case from the bottom--or perhaps the middle--up as high as the facts can take the investigation.  This is probably the first of a series of criminal charges against individuals. (ph)

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