US- Mercer parent company Marsh & McLennan (MMC) has agreed to pay compensation of US$850m to settle allegations of fraud and anticompetitive practices.
New York State Attorney General Eliot Spitzer had filed civil charges against MMC in October accusing subsidiary Marsh Inc. of placing clients with insurers with which it had compensation agreements and soliciting rigged bids from insurance contracts to make these placements more attractive. The attorney general had stated that MMC had earned US$800m from this so-called “contingency compensation.”
“To its credit, Marsh is not disputing the problems identified in our original complaint, Spitzer said. Instead, the company has embraced restitution and reform as a way of making a clean break from the practices that misled and harmed its clients in the past.
The US$850m will be used to compensate US policyholder clients who retained Marsh to place insurance with inception dates between 1 Jan 2001 and 31 Dec 31, 2004, according to MMC. MMC originally took a US$232m provision in its third quarter 2004 earnings. The remaining US$618m will come as a pre-tax charge on its fourth quarter 2004 earnings.
“We deeply regret that certain of our people failed to live up to our history of dedicated client service,” said Michael Cherkasky (pictured), MMC’s president and CEO. “The acts of these employees were inconsistent with the integrity and ethics on which this company was founded and which guide our tens of thousands of other employees every day.”
MMC has additionally agreed to enact written standards of conduct for insurance placements and will cooperate fully with Spitzer’s ongoing investigation into the insurance industry.
Recently, Mercer shut its Transition and Recapture Services over a desire to avoid conflicts of interest between retirement consulting and broker/dealer services.
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