ACE executive latest to plead guilty in commissions probe

An executive of insurer ACE has pled guilty to criminal misdemeanor charges related to the investigation of broker commissions being conducted by New York Attorney General Eliot Spitzer. The news came Friday, a day after Sptizer filed civil charges against international brokerage Marsh for alleged “bid rigging” and other fraudulent acts related to the placement of commercial insurance contracts with insurers the Attorney General says the broker had the most lucrative placement arrangements with. At the same time, two executives from AIG’s American Home Assurance also pled guilty to criminal charges related to the investigation, with Spitzer saying these executives are expected to testify against Marsh.
The complaint against Marsh named AIG, ACE, The Hartford and Munich-American Risk Partners, although only the three executives mentioned above have been charged and the insurers are not named as defendants in the civil case.
Responding to the news this past weekend, ACE CEO Evan Greenberg wrote in a letter to employees that the executive involved has been suspended and placed on paid leave. He added that the company would immediately stop using placement service agreements (PSAs) with brokers, and that an internal investigation has been underway since Spitzer announced his probe earlier this year. “That investigation will continue, and it will examine every relevant area of the organization to determine whether there has been or remains any improper behavior,” he writes.
Marsh parent Marsh & McLennan Cos. says it has also immediately suspended use of PSAs. And MMC has removed Ray J. Groves as chair and CEO of its brokerage unit, replacing him with Michael G. Cherkasky, former head of risk consulting operation Marsh Kroll. He is also a former prosecutor with the New York County District Attorney’s Office. Groves will remain with Marsh as a “senior advisor”.
In its response to being listed in the Marsh complaint, insurer The Hartford stressed that it was not a defendant in the case and added that it is also conducting it own internal investigation. “In addition to cooperating with this [Spitzer] investigation, we are thoroughly reviewing, together with outside counsel, whether any Hartford employee engaged in bid-rigging or otherwise violated any law or breached any of our corporate ethics standards Improper or illegal activity will result in swift corrective and disciplinary action.”