J. Greenberg Out?, Marsh Hearing Set

By Daniel Hays and Arthur Postal

NU Online News Service, Oct. 22, 4 :56p.m. EDT?As reports multiplied that Marsh & McLennanCompany Chief Executive Jeffrey Greenberg would quit over thefirm's brokerage price-fixing scandal, New York's insurancesuperintendent said he has summoned MMC management for a hearing oncharges they engaged in fraud and other legal violations.[@@]

New York Insurance Superintendent Gregory V. Serio, in a highlyunusual move, said that last night he had sent citations to MMC,their Marsh Inc. brokerage subsidiary and 11 other corporateentities to appear at a hearing next month to respond to chargesthey "used fraudulent, coercive and/or dishonest practices and havedemonstrated untrustworthiness."

As Mr. Serio's announcement was made, various newspaper and wireservice outlets were reporting that Mr. Greenberg would quit sothat MMC could settle civil charges of broker price-fixing broughtby New York Attorney General Eliot Spitzer. MMC and its directorshad not responded to calls seeking comment on the report as thisstory was posted.

The reports also indicated that Jules Kroll, executive chairmanof Kroll Inc. and vice chairman of Marsh Inc., would take over asinterim chief executive of MMC if Mr. Greenberg resigned. However,Mr. Kroll issued a press release today saying that such reports are"erroneous."

Mr. Spitzer last week had suggested the directors consider achange in management. One day later, Roger E. Egan was replaced asMarsh chairman and chief executive officer by Michael G. Cherkasky,a former prosecutor who was with MMC's risk consultingsubsidiary.

At the New York Insurance Department hearing, MMC will be askedto give their defense to the accusations made in Mr. Spitzer'scivil suit, according to a department spokesman, Mike Barry.

Mr. Spitzer, in a joint investigation with the New Yorkdepartment, said in his civil complaint that MMC's Marsh brokerageunit had conspired with major insurers to rig bids and fix pricesat inflated levels. In exchange, it was charged that insurers madepayoffs disguised as contingency fees to have unwitting customerssteered their way.

The department's investigation with Mr. Spitzer "raised seriousquestions about the way they [MMC] have conducted business in NewYork State," said Mr. Serio.

His announcement of the hearing--set for Nov. 23--noted that hehas the authority to "suspend or revoke licenses, seek restitutionon behalf of aggrieved parties, and levy monetary penalties againstits license."

The citation said actions could include requiring restitution ofall commissions and fees improperly received from insurers and/orinsureds. MMC said that in 2003, Marsh recorded revenue from feearrangements--called market service agreements?of $845 million.

Meanwhile, a spokesman for Georgia Insurance Commissioner JohnOxendine said his office will launch a market conduct exam of MarshInc. California and Connecticut already have inquiriesunderway.

Elsewhere, Maryland Insurance Commissioner Alfred W. RedmerJr.--speaking in Washington, D.C. at the annual meeting of theAmerican Bankers Insurance Association--said insurancecommissioners will make both independent and group decisions indetermining how they will follow up on Mr. Spitzer's investigation.He said it is his "personal hope" this "will not lead to a witchhunt, and that there is not an overreaction based on the activitiesdisclosed so far."

He made it clear he was not speaking on behalf of the NationalAssociation of Insurance Commissioners, but then added: "Myperception is that this is nothing necessarily special. Regulatorsall day, every day, spend time looking for fraudulent andinappropriate activity."

He added: "This is like anything else. We will gather additionalinformation, and we will make a collective decision, as well asindividual decisions, on what the response will be. The emphasis isthat whatever investigation or additional work that takes place,will be coordinated among the different states."