Marsh & McLennan:



Sightings from The Catbird Seat

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September 29, 2006

9/11 and the Greenberg Familia

By Jerry Mazza, Online Journal

Democratic Underground Demopedia reports in Who Killed John ONeill that at the time of 9/11, AIG, the world’s largest insurance company, and subsidiaries Marsh McLennan, ACE and Kroll, were run by the Greenberg family. With Council on Foreign Relations (CFR) member Maurice “Hank” Greenberg as the AIG godfather, the Familia’s tentacles curled around the heart of the tragedy.

Hank’s son Jeffrey, a CFR member as well, was chairman of Marsh & McLennan, situated on floors throughout the North Tower of the World Trade Center as well as the top floors of the South Tower. Marsh also had ties to the CIA. Son Evan Greenberg, a CFR member, was CEO of ACE Limited, situated in Tower 7, which also contained AIG subsidiary Kroll, closely related to the CIA, also with an office in Tower 7.

Tower 7 also contained offices of the FBI, Department of Defense, IRS (which contained prodigious amounts of corporate tax fraud, including Enron’s), US Secret Service, Securities & Exchange Commission (with more stock fraud records), and Citibank’s Salomon Smith Barney, the Mayor’s Office of Emergency Management and many other financial institutions.

Greenberg’s cousin, Alan “Ace” Greenberg, was former CEO of Bear Sterns, where the Bush family, Cheney family George Schultz, James Baker, et al, did business. It is the leading brokerage firm of the great and all-powerful Bush Familia.

Also reported by Democratic Underground, AIG’s Kroll “provided protection services,” among other things, to high level Americans at home and abroad. Kroll had military teams in their company and merged with Armor Holdings on August 23, 2001, adding Defence Systems Limited, another private military corporation, to their operation, and an ex-KGB team called Alpha Firm earlier acquired by Defense Systems Limited. These four teams could have been used on 9/11, part of a “corporatizing” of black ops in tandem with military teams.

According to whistleblower Richard Grove, who worked as a senior manager for SilverStream Software on Marsh and AIG accounts, Kroll also managed the Enron fraud once Kenneth Lay stepped down.

Marsh, immediately after 9/11, established a specialized terrorism team called Marsh Crisis Consultancy (led by L. Paul Bremer III), adding the teams Control Risks Group, a British ex-SAS team and Versar, bio-terrorism and homeland defense team. These players could have known each other from 9/11, bringing in new assignments and profits.

Democratic Underground also reports, AIG allegedly was laundering drug money, and was involved in the Afghanistan oil and gas pipelines. Greenberg and the Adnan Khasshogi family allegedly benefited from the Afghanistan narcotics trade and interests in the oil and gas pipelines, as well.

Greenberg’s Law Firm Connections to Bush

According to, the Greenbergs were and are connected to the Bush Familia via their Miami-based law firm Greenberg Traurig, LLP, a 1,350-lawyer, full-service international firm. Here are a few connects . . .

1) G-T represented George W. Bush in the Bush-Gore 2000 Florida election vote recount.

2) They personally represent Florida Governor Jeb Bush.

3) They hired son of Supreme Court Justice Antonin Scalia on Election Day 2000 — after which Justice Scalia cast one of the 5 to 4 deciding votes that placed Bush in the White House.

4) They partially funded/sponsored a delegation to Israel by House-Senate Armed Services Committee members and government contractors to witness and be briefed on interrogations resistance procedures and torture techniques.

5) The firm has prominent administrative positions in Massachusetts 9/11 Fund, which also involves Bush family banking house Brown Brothers Harriman (the same BBH involved with Prescott Bush’s bankrolling the Nazis in World War II).

6) Traurig Greenberg works with 9-11 victims on planning their US government “hushmail/bribery estates.” That is, to receive the money, the victim’s family must sign an agreement never to sue the government for any reason. Victim-wife Ellen Mariani is currently being legally harassed for not signing and for holding the Bush government’s feet to the fire.

7) Bush still owes the Greenberg Traurig firm nearly $1 million for work done by dozens of lawyers and paralegals, leaving questions why a Republican candidate would hire a Democratic lawyer from a Democratic firm. See Greenberg Traurig link above for more scandals.

Greenberg’s Relationship to Larry Silverstein

On July 24, 2001, six weeks before 9/11, Larry Silverstein took control of the lease of all the WTC buildings. This followed the Port Authority decision on April 26.

According to, the three companies who originally insured the WTC were AIG, Marsh and ACE, all run as mentioned by the Greenbergs at the time. They then sold stakes of the original contract to their competition, a technique called reinsuring.

Once the Towers came down, the reinsurers got caught holding the bag. This would inextricably tie the Greenbergs to Silverstein and the larger conspiracy of 9/11. If they had no foreknowledge of events to occur, why would the Greenbergs have unloaded so many stakes in their contract?

According to Michel Chossudovsky in Financial Bonanza behind the 9/11 Tragedy, “On October 17, 2000, eleven months before 9/11, Blackstone Real Estate Advisors, of The Blackstone Group, L.P, purchased, from Teachers Insurance and Annuity Association, the participating mortgage secured by World Trade Center, Building 7.1.” [Blackstone in 2000 also purchased a 50 percent stake in Universal Studios, producers of the myth-perpetuating Flight 93.]

“April 26, 2001 the Port Authority leased the WTC for 99 years to Silverstein Properties and Westfield America Inc.

“The transaction was authorised by Port Authority Chairman Lewis M. Eisenberg. This transfer from the New York and New Jersey Port Authority was tantamount to the privatisation of the WTC Complex. The official press release described it as ‘the richest real estate prize in New York City history.’ The retail space underneath the complex was leased to Westfield America Inc.

“On 24 July 2001, 6 weeks prior to 9/11 Silverstein took control of the lease of the WTC following the Port Authority decision on April 26.

Silverstein and Frank Lowy, CEO of Westefield Inc. took control of the 10.6 million-square-foot WTC complex.

“Lowy leased the shopping concourse called the Mall at the WTC, which comprised about 427,000 square feet of retail space.”

“Explicitly included in the agreement was that Silverstein and Westfield ‘were given the right to rebuild the structures if they were destroyed.’’

“In this transaction, Silverstein signed a rental contract for the WTC over 99 years amounting to 3.2 billion dollars in installments to be made to the Port Authority: 800 million covered fees including a down payment of the order of 100 million dollars. Of this amount, Silverstein put in 14 million dollars of his own money. The annual payment on the lease was of the order of 115 million dollars.

“In the wake of the WTC attacks, Silverstein is suing for some $7.1 billion in insurance money, double the amount of the value of the 99 year lease.” In fact, some $5 billion was actually returned, given the multiple court-case protests of the insurers.

“The mortgaging of the WTC was handled by The Blackstone Group, headed by Peter J. Peterson, current head of the Council on Foreign Relations (CFR). The Blackstone Group also bought a piece of Kroll in 1993 at the very same time AIG took over majority control. Henry Kissinger sits on the board of the Blackstone Group.”

By his own admission Silverstein had Tower 7 pulled by controlled internal demolition eight hours after the first two hits. No plane hit Tower 7. There were two small fires in it that were under control. In fact, it takes weeks, months to set up a building to be pulled. So his order to “pull it” catches him in a huge lie.

Tower 7 may have been the nexus of the operations. That may have been the real reason to pull it. In fact, it may have been set up weeks in advance with Towers 1 and 2 for demolition. Ironically, Tower 7 is the only tower that has been rebuilt, and more opulently than its predecessor, although tenancy is about 18 percent.

Towers Taken Down for Profit and to Blame Muslims

Given the involvement of the Greenbergs and Silverstein, and other commercial entities that stood to profit hugely, it is difficult to believe 9/11 occurred at the hands of 19 rag-tag Muslims with box-cutters and the help of their leader, Osama bin Laden, sitting in a cave somewhere in Afghanistan with his laptop and dialysis equipment.

The real reasons behind 9/11 were financial greed and the willingness to demonize Muslims for the “Pearl Harbor-type” act that would instigate America to wage a war on terror, pursuing PNAC’s (Project for a New American Century) goal of World Hegemony.

The latest documentary on the WTC, The 911 Mysteries from, provides highly convincing proof that the buildings were taken down in six fatal steps. They involved the use of high-powered explosives, including thermite and/or thermate, with techniques more advanced than those of traditional controlled-demolition companies, most likely the military’s, given their bunker buster technology. The six steps are . . .

1.       Pre-collapse sub-basement explosions

2.       Pre-collapse interior blasts

3.       Pre-collapse ground level explosions

4.       Top level collapse initiation

5.       Mid Collapse Squibs (explosions)

6.       Final time-delayed rolls (explosions)

Without all these steps, the Towers could never have free-fallen in 10 seconds, the speed of gravity. Any obstacles or pancaking had to be eliminated otherwise the number of seconds of fall would increase dramatically. The documentary also reminds us that on February 13, 1975 there was a major fire on the 11th floor of the North Tower that did not topple it, though the loss was estimated at over $2 million, no mean event. Check it out.

It is possible that in 1996, when Securacom took over WTC security and installed a new $8.3 million security system, that the explosives and charges were also put in place. Sitting on the board of Securacom was the director Marvin Bush, George Bush’s younger brother.

In any case, this is patently the confluence of the military/industrial complex with a healthy dose of Wall Street, earning millions if not billions in put and call options on companies involved with the catastrophe, including airlines on the down (put) side and military suppliers on the up (call) side. In addition, there is the missing gold from the basement of Tower 4, $200 million of which was retrieved, and an untold amount stolen.

The real bottom line was that the Towers were two financial white elephants. And both Silverstein and Greenberg had to know that. The tenancy was dropping. They were out of date. And most dangerously, they were asbestos bombs, loaded with the dangerous building material when they were completed in 1972-73.

By law the buildings could not be taken down by internal demolition. And since it would cost a billion dollars or more to take the towers down beam by beam, it would be at great loss to the Port of Authority or its leaseholder. Thus the reasons are obvious to take WTC down in act of terror also a false-flag operation.

Remember, the concept for the WTC Towers originated with the Nelson and David Rockefeller, members of the Council on Foreign Relations and among the world’s elites. A “New Pearl Harbor” would serve those interests well.

Additional Connections to Greenberg

John ONeill, mentioned in the first paragraph, was the FBI anti-terror chief who spent years trying to track down bin Laden and “al Qaeda” members. At every point, he was stopped or frustrated by his superiors. Finally, O’Neill parted company with the FBI. Jerome Hauer, who formerly worked for Kroll, got him the job as chief of security at the WTC. On 9/11, O’Neill lost his life in the North Tower.

Mr. Hauer’s job as Kroll chief was also held by Michael Cherkasky, who came out of the New York County District Attorney’s Office, which also brought us Rudy Giuliani, Elliot Spitzer and Patrick Fitzgerald. Mr. Cherkasky also brought Mr. Spitzer into the NYC County DA’s office. Today Cherkasky is a substantial contributor to Spitzer’s campaign for New York State Governor. Cherkasky was bumped up to head Marsh McLennan in 2004.

As an aside, there were about 200 electrical engineers working in the World Trade Center around the time. Additionally, AMEC and Tully Construction played a major role in the clean up of Ground Zero and both have specialized controlled demolition companies.

Lastly, can you believe that one of the Council on Foreign Relations members who engaged President Mahmoud Ahmadinejad of Iran in a debate about the holocaust at CFR’s reception last week was none other than Hank Greenberg, who said he witnessed the Dachau camp as Germany fell? Could it all possibly be payback and then some?

For more, GO TO > > > Axis of Evil


June 23, 2006

Message from a 9-11 Whistle-blower

From 8th Estate Public Media & Research:

My name is Richard Grove

In the summer of 2001, I was terminated from my job for raising questions about “anomalous” fiscal transactions.

On August 21st, 2001, I was bribed by my ex-employer to “keep quiet”.

On September 7th, 2001, I contacted ex-coworkers and was urged to present my evidence in a staff meeting the following Tuesday morning.

The staff meeting, which I was to join during a break, was interrupted; and I never made it there. I was in traffic in Lower Manhattan on the morning of September 11th, 2001; and the meeting I was to attend was on the 96th floor of WTC 1 (the North Tower) at Marsh & McLennan, the company for whom my ex-employer had been staffing a software project.

There I sat in traffic, watching black smoke pour out of the hole in the side of the building- directly where my ex-coworkers and I were to confront a certain Marsh Executive involved with the anomalous financial activity that triggered my untimely termination.

As I’ve learned more, and more about what happened that day, I’ve focused less on the controversial “How” (i.e. HOW the real terrorists perpetrated a multi-dimensional plan through which they would simultaneously undermine the Constitution, steal hundreds of billions of dollars, profitably solve an “unsolvable” real-estate crises, and launch a never-ending crusade throughout the globe in the name of the terrorist attacks that they themselves created).

Instead I’ve focused on the “Who” and “Why”, as the financial records left in the wake of their exodus following their crimes is much easier to prove in Court- specifically Marsh’s involvement in betting against American Airlines pre-9-11… a clear indicator of foreknowledge, as the insider trading of the airline stocks was clearly a pre-meditative strategy, determined to profit from the mass murder…

To summarize, what I’ve discovered … based on my own personal experiences and research, not based on what the mass media and traditional newspapers have programmed me to repeat:

1. The events of September 11th, 2001(as extensive research and factual documentation depict) do not resemble in any way, shape, or form, what has been faithfully recited ad nauseam by the mainstream media and press within the United States.

2. The aforementioned mainstream media and press are very much aware at the helms of all organizations, and are provably complicit to the state sponsored terrorism that affects each and every one of us…

3. The evidence reflects that people who we trust and revere as “leaders”, specifically: Rudolph Guiliani (ex-New York Mayor, 2008 Presidential hopeful), George Pataki (current Governor of New York), Eliot Spitzer (New York State Attorney General, running for New York State Governor), and of course, the 1970’s White House “Team B” (now known as neo-cons – or “new-cons”, Cheney, Rumsfeld, and Wolfowitz) right up through George H.W. Bush, and the current President George W. Bush… are in fact working on the Terrorists behalf, if they are not the Terrorists themselves (and at the very least, are all professional gangsters).

4. In order for 9-11 to be perpetrated, the Terrorists needed control of elements of the highest echelons of the Intelligence Community and the Defense Department

5. In order for 9-11 to be “successful” in the eyes of the Terrorists, total control of the U.S. Media Markets was necessary….

6. Critical Elements of the Intelligence Community of the United States, as well as the U.S. Military, in association with NATO, have been strictly controlling and manipulating Black Markets, Arms Markets, and, specifically in reference to 9-11, the Global Illicit Drug Market.

7. American International Group, a.k.a. AIG (is the world’s largest insurance company). Until recently AIG’s CEO (as you will soon learn elsewhere throughout was Maurice “Hammerin’ Hank” Greenberg; ex-Chairman of the Federal Reserve Bank of New York, and ex-Chairman of the Council on Foreign Relations (CFR). AIG’s foundation grew out of Cornelius V. Starr’s “insurance work” between China and the U.S. in 1919. AIG since the 1950’s has been a front created by U.S. Intelligence interests for the purpose of laundering drug money, under the ruse of Insurance, and noting that C.V. Starr’s career in Intelligence and AIG’s ties to the “Air America” Military Drug Caravan were not coincidental.

8. The “Terrorists” are those who participate in and profit from the Global Illegal Drug Market, and the people who are in the front lines of controlling this market are Politicians, Media Moguls, Military Officers, Intelligence Directors, Insurance Companies, and the Counter Terrorist “Experts” themselves….

The hundreds of billions of dollars in illegal drug money that is annually laundered via this scheme is then “processed” through the U.S. Stock Market, and aggregated by companies like AIG and Marsh & McLennan (the world’s largest Insurance Broker, which until Eliot Spitzer’s pseudo-investigation had Jeff Greenberg, Hank’s son, as it’s CEO) with the help of companies like Kroll Associates (Private Intelligence Firm responsible for World Trade Center Security from 1993 to 2001, coincidentally owned by AIG and sold to Marsh in 2004… Kroll CEO Michael Cherkasky became Marsh CEO in response to Spitzer’s “investigation” into AIG and Marsh).

Who is Michael Cherkasky? Great question. He brought Eliot Spitzer into the NY City District Attorney’s Office way back when, and is a contributor to Spitzer’s campaign to become New York Governor….

We’re ALL affected by 9-11 in ways that most people never take time to fathom… but there are SOLUTIONS, and yes, even a panacea.

It’s called Communication

The 8th Estate is the state of being where one thinks for themselves, and enjoys the state of infinite possibility and hope…

Looking forward,

Richard Andrew Grove

For more, GO TO > > > Axis of Evil


Richard Andrew Grove has extensively documented massive fraud and conspiracy which compromises the very foundation of American’s financial institutions. He names names and spotlights 2.3 trillion of taxpayers money, a trillion in gold bullion and hundreds of billions in pre-911 stock market trades which records were conveniently covered-up in the collapse of the WTC. This is the whistleblower that will collapse the 911 fraud! – and the largest single theft and continuous theft in known history. FOLLOW THE MONEY!

~ ~ ~

Get your FREE DOWNLOAD of his book
911 Insider




March 30, 2006

Marsh Boosts CEO Pay to $10.7M in 2005

Forbes, Associated Press

Marsh & McLennan Cos. Inc. disclosed Thursday that it had more than doubled the salary of its chief executive, Michael G. Cherkasky, who took over amid a scandal in 2004.

In a filing with the Securities and Exchange Commission, Marsh & McLennan said that Cherkasky received $10.7 million in total pay in 2005, up from about $4 million in 2004. The package included a $1 million salary, a $2.5 million bonus and some $7 million in restricted stock awards and stock options.

Cherkasky became CEO in October 2004 after the company ousted Jeffrey W. Greenberg from the posts of chairman and chief executive amid a government probe into bid rigging and price fixing. The investigation has since been settled.

Before becoming CEO, Cherkasky had been the head of Marsh Inc., the company’s risk and insurance services unit.

The report to the SEC said Charles E. Haldeman, chief executive of Marsh’s Putnam Investments unit, received $14.5 million in total pay last year. His salary was $900,000, and his bonus was $12.6 million, the report showed.

Brian Storms, chairman and chief executive of Marsh Inc., received $7.1 million in compensation in 2005, including a $1 million salary and $3 million bonus, the report to the SEC said….

< < < FLASHBACK < < <

October 25, 2001

Statement of John T. Sinnott, Chairman and CEO, Marsh, Inc. Before the House Financial Services Committee “Protecting Policyholders from Terrorism: Private Sector Solutions”

Mr. Chairman and members of the Subcommittee, I am John T. Sinnott, Chairman and CEO of Marsh, Inc, headquartered in New York City.

Marsh is the world’s largest risk management and insurance brokerage firm. We have 35,000 employees and serve clients in over 100 countries around the world. We also serve virtually all of the major insurance firms with reinsurance broking and related services through our Guy Carpenter unit. My testimony is on behalf of my firm as well as the member firms of the Council of Insurance Agents and Brokers.

I’d like to thank you, Mr. Chairman, for giving me this opportunity to testify today on the topic of private sector solutions to the burgeoning terror insurance availability crisis in the wake of the September 11 attacks….

The events of that day were singularly devastating on one industry – the financial services industry – not only in business terms, but also in human terms.

The World Trade Center housed several companies from the banking, securities and insurance industries that must now deal not only with the new business challenges facing them as a result of the attacks but also with the loss of colleagues and employees.

Within the insurance industry, the brokerage community was hit particularly hard. Marsh maintained offices in both of the World Trade Center towers and the space that we occupied in the north tower comprised the floors directly struck by the first aircraft. No one in those offices at the time escaped.

In fact, of the 1900 members of the Marsh & McLennan Companies working in both towers (or who were visiting that day) 294 were lost. Another colleague was a passenger aboard one of the aircraft….

The events of September 11 have changed the landscape of commercial insurance in a way that I have not seen in my 36 years in the business. To be sure, there have been trying times in the past – the liability crisis in the mid-1980s, the property catastrophe coverage problems in the early 1990s following Hurricane Andrew, to name a couple….

In response to the mid-1980s liability crisis, Marsh played a leading role in the creation of the insurance and reinsurance companies ACE Limited in 1985 and XL Capital in 1986.

These companies were formed to provide excess liability and directors’ and officers’ liability coverages at a time when the market could not provide the necessary capacity. These companies were very successful in providing much-needed market capacity and eventually were spun off from Marsh. They exist as major insurers today.

Similarly, Marsh played a role in the creation of Mid Ocean Limited during the property catastrophe reinsurance crisis following Hurricane Andrew in 1992. This company has also done very well in meeting the needs voiced by our clients.

It was in this same spirit of responding to customer needs that MMC Capital, our sister company, recently announced the formation of AXIS Specialty Limited, a new insurance and reinsurance company formed to provide capacity needed in the wake of the September 11 attacks. AXIS has an initial capitalization in excess of $1 billion, and will begin underwriting later on this quarter….

But I must tell you in all candor that what your committee heard has been hearing over the past three weeks is true – there is an immediate crisis that demands your attention. In the current unique, and hopefully short-term, environment of uncertainty, the private sector alone will not be able to provide the insurance capacity America’s businesses need to conduct their operations.

Government involvement is needed until the environment becomes secure and returns to a state of more normalcy.

May I close by saying that my firm has been severely affected by the events of September 11.

The first aircraft directly struck our offices in the World Trade Center and we lost 295 members of our corporate family. That was the real tragedy and is still with us in our offices and hallways. We also incurred huge losses of property and equipment.

So I speak here today from painful personal experience – and perhaps with a deeper understanding of what our clients face as they look to an uncertain future. Mr. Chairman, let me restate that we are on the brink of an availability/affordability crisis insurance caused by the terrorist events….

I commend you for holding this hearing, for your efforts to create a solution that restores and strengthens the private marketplace, and I urge you to work with your colleagues in Congress and the Administration and within our industry to find workable answers….

See also: John Sinnott

For later news on the 9-11 tragedy and coverup, GO TO > > > Axis of Evil; The Eagle Hooded


December 6, 2004

Spitzer probes American Fin’l, Hartford

NY’s top cop investigating legal malpractice insurance

By Alistair Barr, CBS MarketWatch

SAN FRANCISCO (CBS.MW) — American Financial Group and Hartford Financial said Monday that New York Attorney General Eliot Spitzer is probing how the companies write legal malpractice insurance.

Great American Insurance, the property and casualty unit of American Financial (AFG), is the target of Spitzer’s latest line of inquiry, the company said in a statement.

The Hartford Financial Services Group (HIG) disclosed in a statement after the bell Monday that it is also being investigated.

Arch Capital Group (ACGL), a Bermuda-based insurance and reinsurance firm, said Friday that it got a similar request from Spitzer…

Spitzer sued Marsh & McLennan (MMC), the world’s largest broker on Oct. 14 for allegedly rigging bids and accepting disputed commissions in return for steering business to favored insurers.

While much of the complaint focused on Marsh’s excess casualty division, Spitzer’s inquires have since broadened to include employment benefits, “finite” insurance and now legal malpractice insurance.

Great American said it began an internal investigation after getting inquiries from state insurance regulators following Spitzer’s suit against Marsh. That investigation is ongoing, the company added….

Legal associations sometimes endorse insurers, helping them to sell policies to their members. In return they get a fee for the endorsement, said Andy Barile, an insurance consultant with 40 years of experience in the industry.

Spitzer may be investigating whether these fees raised the cost of insurance for lawyers and if the payments were properly disclosed, Barile said….


September 10, 2004

9/11 Impact on Marsh & McLennan Cos.
Nothing Short of Devastation

By Dave Thomas, Insurance Journal

Marsh & McLennan Companies Chairman and CEO Jeff Greenberg remembers all too well those images of Sept. 11, 2001.

Greenberg knew something had gone terribly wrong in New York City that Tuesday morning. He recently chatted in an e-mail interview with Insurance Journal about that day, how Marsh families were impacted, and how the company has rebounded despite the terrible losses, as the third anniversary of the attacks approached.

Insurance Journal: Where were you on 9/11 and what were your first reactions when you heard the news?

Jeff Greenberg: On 9/11 I was at MMC’s midtown headquarters, which has an unobstructed view of lower Manhattan. I saw the smoke rising from One World Trade Center and the fireball erupt from the second tower. My initial reactions were shock, horror, and what the meaning of the attacks would be for MMC. Were people getting out of the buildings? Had we lost people? Which clients were affected? These questions and many others were on my mind at a time when our communications were down and news from the outside world was confused and contradictory.

IJ: How many Marsh employees were lost and was everyone accounted for?

Greenberg: Two hundred ninety-five MMC colleagues were lost in the attacks of Sept. 11. On that day, 1,908 MMC colleagues worked in or were visiting our offices in the twin towers of the World Trade Center. We had one employee who was a passenger on one of the hijacked planes….

IJ: As great as the human loss was for Marsh, what kind of financial impact did 9/11 have on the company?

Greenberg: The sudden death of 295 friends and co-workers was the worst loss in our 133-year history. But because we are a very large company, we had 58,000 people around the world in 2001, the purely business impact of Sept. 11 was largely confined to our offices in downtown Manhattan and did not have a large effect on our global operations. As we reported in our 2001 annual report, MMC recorded a pre-tax charge of $126 million for costs related directly to Sept. 11, which were not covered by MMC’s insurance program.

IJ: How has Marsh rebuilt since 9/11 and what has the company done for survivors of those who were killed?

Greenberg: Rebuilding the company was really not our challenge. Although disaster recovery plans and our dedicated technology staff helped us restore data, critical applications, and telecommunications, we did make operational changes, e.g., not placing critical facilities on the same power grid. We have also made substantial investments in security programs to protect our colleagues….

IJ: Overall, how do you think the insurance industry came out of 9/11, and, God forbid, could it survive another event of such proportions?

Greenberg: The insurance industry came through 9/11 very well. The period of disruption was relatively short, and capacity returned to most markets fairly quickly. In order to analyze the impact of 9/11, you must distinguish between changes in the last three years that were directly related to 9/11 versus the other factors (prolonged soft market, tough loss environment leading up to 9/11, asbestos and environmental issues, corporate governance scandals, poor investment climate, etc.). In that context, 9/11 might be seen as the capstone to what was already a market in trouble and that in many lines was already in transition….

IJ: Where do you see Marsh in the coming years as far as its position in the industry?

Greenberg: In the coming years, we expect MMC to strengthen its leadership position in risk services. The mission of that business is to help clients reduce the total cost of risk to their enterprises. Helping clients to affect risk transfer remains fundamental to managing risk, and it underlies much of Marsh’s work for clients. But our strategy has evolved to encompass a much broader set of services around risk management. We see attractive growth opportunities in all client segments and geographies.


March 31, 2005

Marsh’s Former Chief Executive
Forfeited $25.1 Million


Marsh & McLennan Cos., the world’s largest insurance brokerage, said former Chief Executive Jeffrey Greenberg forfeited $25.1 million in restricted stock after being fired amid an investigation into bid rigging.

A portion of the stock could be reinstated, as the “characterization” of Greenberg’s October termination hasn’t been determined, New York-based Marsh said today to a regulatory filing with the Securities and Exchange Commission. Greenberg, 53, also forfeited options on 220,000 shares of stock.

Marsh paid Greenberg a $1 million salary last year and other compensation totaling $91,519. He lost his job after New York Attorney General Eliot Spitzer accused the company of soliciting phony insurance bids and steering clients to insurers that paid hidden fees.

Michael Cherkasky, who replaced Greenberg as CEO, received $3 million in restricted stock, a $373,965 salary and a $600,000 bonus last year. Cherkasky, 55, joined Marsh in July when it acquired Kroll Inc., a risk consulting company….

Marsh agreed in January to pay $850 million to settle Spitzer’s charges. The company didn’t admit or deny any wrongdoing.

Shares of Marsh fell 28 cents to $30.42 in New York Stock Exchange composite trading today. The shares have fallen 34 percent since Spitzer sued the company on Oct. 14.


September 12, 2003

New York City: Relatives of 9/11 victims
march in opposition to US war policies

By a World Socialist Web Site reporting team

Several dozen family members of people killed in the Sept. 11, 2001 terrorist attacks led about 2,000 supporters Wednesday evening in a candlelight procession down lower Broadway from Union Square to the site where the World Trade Center once stood. There they formed a vast ring around the site that they described as a “Circle of Hope,” and held an hour-long silent vigil.

The march and vigil were organized by the group September 11 Families for Peaceful Tomorrows as an alternative to Thursday’s official commemorations, which were dominated by Republican politicians.

President Bush stayed away from the Thursday ceremony, according to some reports out of White House concerns that his presence could provoke protests. While Vice President Richard Cheney was tapped as a stand-in, he also withdrew from the main event at Ground Zero, ostensibly because the massive security operation that is conducted wherever he goes would have interfered with family members filing down into the World Trade Center site.

Wednesday’s vigil was called both to remember those who died in the attacks and to oppose US military action. While political banners and signs were discouraged, it was clear that the participants came because they opposed US war policies in general, and the occupation of Iraq in particular.

The demonstration—organized by those who lost husbands or wives, sons or daughters, brothers or sisters in the September 11 attacks—represented a repudiation of the lies of the Bush administration that invading first Afghanistan and then Iraq was justified by the September 11 attacks.

The dozens of family members who marched on Wednesday represent the tip of the iceberg in relation to the anger that has been building up among thousands of relatives who see all too clearly that their grief is being manipulated for political and financial gain, while the Bush administration systematically stonewalls any attempt to uncover information about the attacks and who was responsible for allowing them to take place….

The World Socialist Web Site spoke with some of the family members and others who marched to the World Trade Center Wednesday.

John Leinung, 49, works as a trainer for the Metro North commuter railroad. He lost his step-son in the World Trade Center attacks. Paul Battaglia, only 22 at the time, was a safety consultant for Marsh & McLennan, working on the 100th floor of the North Tower when it was hit.

John told the WSWS: “I am concerned that the administration has rolled over Afghanistan and then abandoned it. I never saw the case for war against Iraq either. They never demonstrated any connection between the Iraqi government and Al Qaeda.”

Asked about the investigations into the events of 9/11, John said, “I’m suspicious because the government feels it necessary to keep so much secret. The Saudis have been playing both ends against the middle—militant extremists and the oil companies. The large corporate interests and oil companies don’t want us to see the connections they have in Saudi Arabia. They are making a lot of money with these people.”…

Jack Hallock, age 44, lost his cousin Ryan Kohart, then age 26, who worked for bond broker Cantor Fitzgerald. Asked how things have changed in the two years since the World Trade Center attacks, he said: “It’s a disaster. Foreign policy is a disaster. The domestic platform is a disaster. The government is using 9/11 to perpetuate war abroad and economic war at home.

“There’s no evidence connecting Iraq to 9/11. There’s about as much evidence of that as there is that Iraq was developing nuclear arms, or that they had thousands of tons of weapons of mass destruction. Where do you hide thousands of tons?

“The investigation into the Saudi Arabian connection has been thwarted by the Bush administration. Considering that 15 of the 19 hijackers were Saudis, it’s a little strange.”…

For more, GO TO > > > Axis of Evil


September 16, 2005

Reilly threatens to hit
Marsh & McLennan with suit

17 state firms may have been bid-rig victims, AG says

By Andrew Caffrey, Boston Globe

Massachusetts Attorney General Thomas F. Reilly said Marsh & McLennan Cos. may have cheated more than a dozen Bay State business customers in a bid-rigging scam and is threatening to sue the embattled insurance brokerage.

The list of 17 local Marsh & McLennan clients who may have been wronged includes some of Massachusetts’ largest companies and institutions, including the University of Massachusetts, the New England Medical Center, State Street Corp. and Gillette Co.

In a Sept. 8 letter to company chief executive Michael G. Cherkasky, the attorney general’s office said it had ”reason to believe” that Marsh & McLennan ”engaged in unfair and deceptive practices” because it may not have provided ”customers with the services it promised and deceived them about the role of compensation payments and compensation arrangements it had with insurers.”

A spokesman for Marsh & McLennan, James Fingeroth, said ”the company is continuing to have discussions and is cooperating with the Massachusetts attorney general.”

Also yesterday, eight former executives of the company’s Marsh Inc. brokerage unit were indicted in New York state court on 37 felony counts for their roles in a scheme to allegedly fix prices and steer contracts of business customers to those insurers who paid the company secret commissions.

These are the latest charges in the case brought by New York Attorney General Eliot Spitzer, who last October rocked the insurance world when he disclosed the secret bid-rigging scheme and sued Marsh & McLennan. Spitzer has said the secret arrangements defrauded Marsh customers of millions of dollars and undermined competition throughout the industry.

The disclosures resulted in Marsh & McLennan losing around 40 percent of its stock market value, cost its former chief executive, Jeffrey Greenberg, his job and led to a major house cleaning throughout the corporation.

Marsh & McLennan, based in New York, is also the parent company of Boston’s Putnam Investments.

Under Cherkasky, Marsh & McLennan in January agreed to a settlement with Spitzer in which it agreed to pay up to $850 million to US-based customers –including those in Massachusetts–who had placed policies through Marsh between 2001 and 2004, for which the insurance broker received these secret commissions.

Those eligible customers would receive a pro-rated portion of the $850 million fund based on the size of their policy and the commission that Marsh received from it.

In agreeing to receive restitution from the Spitzer settlement, Marsh customers would also agree to waive other legal actions against the company. Customers have until Tuesday to sign onto the settlement. The company also apologized for its behavior and said it would no longer receive such commissions from insurance companies.

In the Massachusetts situation, Reilly’s office accused Marsh & McLennan of some of the same transgressions that it had settled with Spitzer.

”Marsh also steered clients to certain insurers, rigged bids, solicited false quotes from insurers, discouraged or withheld quotes, and encouraged insurers to increase the prices of their bids,” the Massachusetts prosecutor wrote….

The eight former Marsh executives indicted yesterday pleaded not guilty to charges of defrauding customers, grand larceny and restraint of trade. Spitzer said the eight colluded with executives of at least four major insurance providers, including American International Group, ”to rig the market for excess casualty insurance.”

Spitzer had previously obtained guilty pleas from 17 other insurance executives, including two from AIG.

Marsh and its parent company do not face any criminal sanctions in the case, and in its civil settlement with Spitzer earlier this year the company did not admit or deny the attorney general’s allegations.

Commenting in a statement on the new charges against the company’s former employee, Cherkasky, the Marsh & McLennan chief executive, yesterday said, ”This indictment is about the past. MMC today is focused on the future and is committed to excellence and the highest standards of professionalism and service.”

Andrew Caffrey can be reached at


September 15, 2005

Spitzer: Eight Ex-insurance
Executives Indicted

Charges for bid-rigging that cost
corporate customers millions of dollars

MSNBD – The Associated Press

ALBANY, N.Y. – New York Attorney General Eliot Spitzer on Thursday announced that a grand jury has indicted eight former insurance executives on felonies involving bid rigging that cost corporate customers millions of dollars.

The former executives – including seven from Marsh & McLennan Companies, Inc. the nation’s largest insurance broker – are accused of colluding with executives at major insurance companies to arrange noncompetitive bids. These bids then were given to Marsh & McLennan clients “under false pretenses,” according to Spitzer’s statement….

Former Marsh & McLennan employees indicted on charges of first-degree scheming to defraud, restraint of trade and competition, and grand larceny – all felonies – were: William Gilman, was executive marketing director; Joseph Peiser, head of global broking excess casualty and managing director; Edward J. McNenney, global placement director and managing director, and Thomas T. Green Jr., a senior vice president.

Greg J. Doherty, former local broking coordinator and team leader and senior vice president of the ACE USA insurance company, a division of Bermuda-based ACE Ltd, was indicted on the same charges, Spitzer’s office said.

Indicted on charges of scheming to defraud, restraint of trade and grand larceny were three former Marsh & McLennan executives: Kathleen M. Drake, who was local broking coordinator team leader and managing director; William L. McBurnie, coverage and carrier specialist and senior vice president, and Edward J. Keane Jr., assistant vice president.

If convicted, Gilman, Peiser, McNenney, Green and Doherty face a maximum sentence of 25 years in state prison. The other defendants face a maxiimum of 15 years in prison….

Spitzer has alleged that bid-rigging by insurance companies – along with special commissions aimed at steering customers to insurers in exchange for bonuses – has been widespread in the industry. That can keep customers from receiving the best deal.

In January, Marsh & McLennan agreed to pay $850 million in restitution to end Spitzer’s investigation into bid rigging and price fixing. The settlement became a model for other insurance company settlements.

Marsh & McLennan as a corporation faces no criminal sanctions, Spitzer said.

The indictments handed down Thursday allege bid rigging from November 1998 to September 2004.

Spitzer said the defendants colluded with executives at American International Group, Zurich American Insurance Company, ACE USA, Liberty International Insurance Co. and other unnamed companies.

Agreements have not been reached with ACE, AIG, Zurich or Liberty, Spitzer said.

(For more on alleged “rigged bids” by a Marsh broker in Hawaii, Rocco Sansone, GO TO > > > Claims By Harmon)




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September 13, 2005

Marsh & McLennan Co.
launches $1.3 billion debt

Yahoo! News

Marsh & McLennan Cos. on Tuesday launched a $1.3 billion two-part note sale, with pricing expected later on Tuesday, said market sources….

The global coordinators on the sale are Citigroup Global Markets and Goldman Sachs.

Marsh & McLennan is rated “Baa2″ by Moody’s Investors Service and “BBB” by Standard & Poor’s.


August 4, 2005

3 More Execs Plead Guilty in Ongoing
Spitzer Insurance Brokerage Probe

Insurance Journal

Former employees of Marsh & McLennan, Inc. and Zurich Financial Services have pleaded guilty to bid rigging in insurance charges brought by New York Attorney General Eliot Spitzer.

According to the Washington Post, Regina Hatten and Nicole Michele, both formerly of Marsh, pleaded guilty in state court to single felony counts of scheming to defraud. Jim Spiegel, who had worked at Zurich, pleaded guilty to a one felony count of restraining competition and trade.

Since Spitzer began his probe into the compensation and placement practices of large insurance brokerage houses, 14 executives have admitted wrongdoing.


May 24, 2005

Brokerage’s Colorado Restitution Set

By Christine Tatum, Denver Post

More than 100 Colorado companies will collect a total of $12.7 million as part of a settlement with Marsh & McLennan, the worlds’ largest insurance brokerage.

“Even sophisticated consumers of insurance products can become victims of unethical and unlawful conduct,” Colorado Insurance Commissioner David Rivera said in a statement released Monday….

The settlement is one more reminder of the scandal that has plagued the insurance industry in recent months. Some of the biggest names in the business are accused of accepting or giving kickbacks to win business.

Marsh & McLennan agreed this year to pay $850 million in restitution to policyholders nationwide after New York Attorney General Eliot Spitzer accused the firm’s insurance brokers of steering clients to certain insurers in exchange for kickbacks commonly known as “contingent commissions.”…

One Colorado company will collect more than $2.4 million.

Qwest spokesman Bob Toeve confirmed Monday that the Denver-based local-phone-service provider is expecting to receive settlement money….


May 23, 2005

Marsh Settlement Offers $14M to Washington Clients

Puget Sound Business Journal

More than 15,000 businesses, associations, individuals and organizations could share nearly $14 million in restitution as part of an $850 million national settlement of a suit against insurance broker Marsh & McLennan Cos. Inc….

The parties reached a settlement in January, said Mike Kreidler, Washington’s insurance commissioner.

Kreidler said the company sent letters with individual settlement offers last week to more than 15,000 of its clients in Washington….

Some of the claims are very small – below $20 – but some, especially for the region’s larger companies are substantial.

The agency initially posted the full list of claims on its Web site, but state officials later removed the list after Marsh claimed the information is confidential.

The highest single offers are for about $952,000 for Washington Mutual Inc., and for about $950,000 for New Cingular Wireless Inc., the former AT&T Wireless Services Inc. operation in Redmond that was purchased last year by Cingular.

Other large settlements are about $661,000 for Costco Wholesale Corp.; $650,000 for Providence Medical; and about $487,000 for Immunex, the biotech firm purchased a few years ago by Amgen.

Kreidler said clients who accept the settlement must sign a release forfeiting the right to pursue any claims against Marsh related to the fraud and anti-competitive practices. Clients who elect not the accept the settlement can pursue legal remedies, he said….


May 19, 2005

Marsh & McLennan:
Shareholders Elect CEO Cherkasky As Director

By Shaheen Pasha, Dow Jones Newswires

NEW YORK – Marsh & McLennan Cos. will right past wrongs but will stop apologizing for the actions of some of its former employees, the company’s top executive said Thursday.

Speaking at the company’s annual investor meeting in New York City, Michael Cherkasky, president and chief executive, who was addressing his first annual meeting with shareholders, said he was optimistic that the company will be successful despite its challenges, and will continue to be a market leader.

“I’m not going to apologize anymore… we’ve apologized enough,” he said.

He added that while actions at its Marsh unit raised trust issues among clients, the company was committed to making sure that people won’t fail in their responsibilities….

Marsh & McLennan shareholders elected Cherkasky to the company’s board of directors and ratified Deloitte & Touche as the company’s independent auditors.

The company’s chairman, Robert Erburu, said the majority of shareholders approved Cherkasky, Stephen Hardis, Lord Lang, Morton Schapiro and Adele Simmons – all current directors of the board – for a three-year term expiring in 2008….


May 15, 2005

SEC Targets Pensions

By Neil Weinberg, Forbes

Now the U.S. Securities and Exchange Commission is taking on the pension business.

The expected action involves companies that advise public and private pension funds how to allocate trillions of dollars in investments and which money managers they recommend. This has led to accusations that “pay-to-play” is rampant among consultants. Critics charge they favor money managers who buy services from them.

The consultants have denied such bias.

The SEC may have felt compelled to act in part because many pension fund managers appear oblivious to the conflicts inherent in the advice they are receiving. Forbes last year cited an official in charge of investments for the Santa Clara Valley Transit Authority who had no idea his consultant, Mercer Investment Consulting, a unit of Marsh & McLennan (nyse: MMC), was also receiving payments from many of the managers it recommended….

Although the SEC is not expected to announce specific enforcement proceedings against pension consultants on Monday, it is likely that such action will become public in coming months, a person familiar with the situation said.

The SEC’s report is expected to recommend that pension funds use a checklist of questions when evaluating consultants to ensure that the funds understand how their advisers are compensated and the potential conflicts of interest inherent in their businesses, these people said.

“It’s great that the SEC is finally alerting pensions to the dangers involved in hiring these consultants,” said Edward Siedle, president of Benchmark Financial Services, an Ocean Ridge, Fla., firm that investigates wrongdoing among money managers.

“This goes to the heart of a system involving corrupt gatekeepers that is costing many pension funds millions or billions of dollars.”

Among the firms the SEC reportedly requested to submit information in 2003 are Mercer, Callan Associates, Segal Investment Solutions, Watson Wyatt and Wilshire Associates….


May 5, 2005 

FBI Targets Insurance Industry in
Widening Fraud Probe

Insurance Journal

The insurance industry, already under scrutiny by state and federal authorities for various practices, now faces another questioner.

The Federal Bureau of Investigation has launched a probe of the insurance industry that targets some of the accounting mistakes found at American International Group to see how widespread the problems might be.

The FBI review is not confined to insurer accounting but is also looking into agents and brokers who may be diverting premiums for their own use and into the operations of workers’ compensation plans sold by professional employer organizations (PEO).

The FBI said its agents are talking to industry executives and regulators as well as looking for patterns in existing complaints and civil records.

“We do not want to be caught napping on this,” Chris Swecker, an assistant director at the FBI who oversees the financial crimes unit, told The New York Times. “We are taking a very, very hard look at this to see if it represents a pervasive problem.”

The FBI said it would conduct traditional investigations as well as “utilize sophisticated techniques, to include covert undercover investigations, to apprehend the fraudsters.”

Insurance fraud continues to maintain a top investigative priority due in large part to the insurance industry’s significant status as one of the largest U.S. industries (more than doubling the Gross Domestic Product contributions of the securities industry),” said the report, which points out that the insurance industry consists of more than 7,000 companies with over $1 trillion in premiums each year.

Among the FBI’s concerns is that the “insurance industry is in the midst of technological and regulatory changes which will result in foreign insurance entities playing a larger role.” The report maintains that regulation of the industry is becoming more difficult as more foreign players enter the market.

The FBI said it is working with the National Association of Insurance Commissioners to identify “the top echelon fraudsters defrauding the insurance industry and most prevalent schemes within the insurance industry.”…

The Times said that the FBI official suggested this could be “the next big one,” apparently referring to the 1980’s savings and loan crisis and the more recent headlining corporate fraud cases at Enron and other big firms.”

The FBI has also recently joined the International Association of Insurance Fraud Agencies, an international non-profit organization which addresses insurance and insurance-related financial crimes on a global basis.

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 (A Catbird Note: If any of you insurance industry insiders would like to assist the FBI in their investigations (ha), you can GO TO >

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For more, GO TO > > > More Claims By Harmon: The FBI


April 20, 2005

Insurance Cos. Eyed By Global Watchdogs


The United States promoted the formation of the Financial Action Task Force during the 1989 G-7 Summit, motivated by the global range of the money-laundering problem and the competitive disadvantage its own anti-money-laundering regime imposed on its financial sector.

The FATF has helped develop a coordinated international response to money-laundering, which is defined as taking illicit proceeds and moving them into the legitimate economy. The FATF initially put forth 40 recommendations intended to help national governments implement effective anti-money-laundering regimes; these were first revised in 1996 and then further updated in 2003….

The FATF promotes policies at the national and international levels to combat money-laundering and terrorist-financing….

In October 2001 the FATF expanded its remit beyond its original mandate of traditional money-laundering to cover terrorist finance, which has been describes as “reverse money-laundering,” in that it takes legitimate sources of funds and turns them toward illicit ends….

The FATF currently consists of 33 full member, including 31 countries and territories, and two regional organisations. Members are mainly drawn from advanced countries but also include the European Commission and the Gulf Cooperation Council (GCC) – Dahrain, Kuwait, Omar, Qatar, Saudi Arabia and United Arab Emirates….

The FATF has become increasingly concerned that some money-laundering activities are migrating from banks to other parts of the formal financial sector. Therefore, the FATF is currently working on a report, scheduled to appear in June, which analyzes the role of the insurance sector in money-laundering. This exercise could lead to additional recommendations concerning the “best practices” to discourage money-laundering within this sector.

However, any additional scrutiny of problematic practices in the insurance sector comes at a difficult time as, in the United States, insurance firms such as Marsh & McLennan (nyse: MMC), Ace (nyse: ACE), AIG (nyse: AIG) and Berkshire Hathaway’s (nyse: BRKA) General RE unit are facing significant scrutiny by various state and federal regulators for various transgressions, including fraud, bid-rigging and improper transactions….

The FATF remains the principal international policy-making body dedicated to coordinating efforts to counter money-laundering and shut down terrorist finance. … Later this year, the FATF will probable extend its sectoral reach by making new recommendations covering the insurance sector….


April 12, 2005

Marsh cuts jobs as it overhauls price plan

By Patrick Hosking, Times Online

BRITAIN’S biggest insurance broker, Marsh, is to cut 750 UK staff and revolutionise its pricing structure.

The job cuts will be across the board among Marsh’s 6,000 British employees, who are based in 24 different offices.

Marsh, part of Marsh & McLennan, the US group, also unveiled plans to ensure that the benefits of the reforms, induced by Eliot Spitzer, the New York attorney-general, should be passed on to clients….

Bruce Carnegie-Brown, Marsh’s chief executive for Europe, said that every client would know what Marsh was earning on their account as part of its global clean-up….

Marsh & McLennan was forced into an $850 million (£449 million) settlement with Mr. Spitzer in January after allegations of bid-rigging, client fraud and accepting kickbacks.

Although an investigation by Freshfields, the law firm, into Marsh’s UK arm found no evidence of malpractice, the group decided last October to give up taking contingent commissions, the discredited fees at the heart of the old pricing system….


        Oct 14, 2004: Eliot Spitzer, New York attorney-general, accuses Marsh & McLennan of price fixing and collusion.

        Oct 25: Jeffrey Greenberg, Marsh & McLennan chief executive and chairman, resigns under pressure from Spitzer. Replaced by Michael Cherkasky.

        Oct 27: Marsh’s UK office appoints Freshfields to carry out internal investigation.

        Nov 8: two Marsh & McLennan executives responsible for divisions where price-fixing took place asked to step down.

        Nov 9: Marsh & McLennan sets aside $232m for settlement with Spitzer.

        Nov 18: Five members of Marsh & McLennan board step down.

        Dec 3: Freshfields clears Marsh UK of wrongdoing.

        Jan 6, 2005: Spitzer files complaint against Marsh & McLennan.

        Jan 31: Marsh & McLennan agrees $850m compensation fund with Spitzer. He drops charges.


March 17, 2005

Marsh & McLennan Names New Chairman


Marsh & McLennan Cos., the world’s largest insurance brokerage, on Thursday named lead director Robert F. Erburu as its non-executive chairman.

Erburu, a former Times Mirror Co. chairman, has served on Marsh & McLennan’s board since 1996.

Marsh & McLennan was the target of an investigation by New York Attorney General Eliot Spitzer that accused it of price fixing and bid rigging. Former chairman and chief executive Jeffrey Greenberg resigned in the wake of that investigation.

In October, the insurance brokerage named Michael Cherkasky as president and chief executive after Greenberg’s resignation. Cherkasky had been the chairman and CEO of the company’s risk and insurance services unit Marsh Inc…


February 24, 2005

Former Marsh Executive Pleads Guilty


A former managing director at Marsh & McLennan Companies Inc. pleaded guilty Thursday to criminal charges in connection with a state investigation of bid-rigging and price-fixing in the insurance industry.

Kathryn Winter, 50 of Manhattan, pleaded guilty in Manhattan’s State Supreme Court to a felony count of scheme to defraud. She admitted that from 2001 to 2004 her schemes “resulted in clients being tricked and deceived by a deceptive bidding process.”

Winter’s plea agreement with Attorney General Eliot Spitzer’s office requires her to cooperate with his ongoing investigation and testify when needed. This is the same deal Spitzer has with nine other former insurance executives who have pleaded guilty.

Justice James Yates told Winter her sentence, which will likely be imposed upon completion of the probe, will depend on her level of cooperation. The judge said she could get anything from probation, fines to the maximum of four years in prison.

With Thursday’s pleas, Spitzer’s office has obtained 10 guilty pleas from executives of four different companies. Previously, four executives at American International Group Inc., two from Zurich American Insurance Co., two from Marsh and one from ACE Financial Solutions Inc. pleaded guilty to criminal charges.

Winter told the court that with employees of other insurance companies she “intentionally engaged in deception and intentionally caused noncompetitive quotes to be conveyed to Marsh clients under false and fraudulent pretenses.”

Winter said the employees who participated with her in the scheme worked for AIG, Zurich and ACE.

“The primary goal of this scheme was to maximize Marsh’s profits by controlling the market, and protecting incumbent insurance carriers when their business was up for renewal,” Winter said in a statement to the court.

Through this scheme, Winter said, she and other Marsh employees “obtained more than $1,000 from each of numerous clients and insurance carriers in the form of premiums, commissions and fees.”

Winter’s lawyer, David Wikstrom, said his client resigned from Marsh last week.

In January, Marsh executives insisted the wrongdoing was by a few individuals who violated company policy. The company agreed to pay $850 million in restitution to end Spitzer’s investigation into bid rigging and price fixing.

The company, which is based in New York, had hoped the settlement would end similar investigations by other states, including Connecticut, and private lawsuits. Marsh also issued an apology and promised to adopt reforms…

– For much earlier claims of bid rigging and price fixing, GO TO >>> More Claims By Harmon: Marsh & McLennan


February 16, 2005

3 from AIG and Marsh admit
insurance fraud

Bloomberg News

Two executives from American International Group and one from Marsh & McLennan pleaded guilty Tuesday to fraud charges resulting from a sweeping investigation into the insurance industry by the New York State attorney general, Eliot Spitzer.

The men, Josh Bewlay, a former managing director in Marsh’s global broking unit, and Carlos Coello and John Mohs of AIG, pleaded before a New York State Supreme Court judge, James Yates. Coello is an underwriter in an AIG liability insurance unit and Mohs has worked as an assistant vice president in the same unit, their lawyers said.

Spitzer, who is investigating kickbacks and collusion between insurers and brokers, has charged six other executives from Marsh, AIG, Ace and Zurich Financial Services since he sued Marsh on Oct. 14.

Marsh, the largest insurance broker in the world, ousted its chief executive and agreed last month to pay $850 million to settle its case.

Bewlay, Coello and Mohs were led out of a New York Police Department precinct in Lower Manhattan in handcuffs before appearing in court….


January 21, 2005

Connecticut AG Sues Marsh, Ace Financial in Broker Commission Case

Insurance Journal

Connecticut Attorney General Richard Blumenthal on Friday sued insurance broker Marsh & McLennan Inc., and insurance provider ACE Financial Solutions Inc., for a scheme in which ACE reportedly paid Marsh a secret $50,000 commission to steer an $80 million state contract to the company.

Blumenthal’s office is investigating whether ACE may have paid additional illegal commissions to Marsh in the deal.

Marsh reportedly never told the Department of Administrative Services (DAS), which paid the company $100,000 to act as its advisor on the contract, about the $50,000 or any additional payments. Marsh reportedly solicited and accepted the $50,000 commission, even though the DAS clearly expected the company to accept no additional fees.

It was also reported that Marsh failed to inform the DAS that ACE was in serious financial difficulty at the time it sought the contract.

The lawsuit is the first of a series of legal actions that Blumenthal expects to bring soon in his ongoing investigation into insurance industry abuses.

“As offensive as this specific scheme is the outrageously common pattern and practice of illegal commissions and kickbacks that it reflects,” Blumenthal said…

Blumenthal’s suit accuses Marsh of violating Connecticut consumer protection laws by accepting a commission other than the $100,000 paid by the state, falsely claiming that it considered only the state’s best financial interests in arranging the contract, and falsely claiming that it recommended ACE sole on ACE’s qualifications.

The attorney general’s action seeks actual and punitive damages, information allowing determination of how much Marsh was falsely paid and reimbursement for legal and investigative expenses.

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(Catbird Note: For an earlier case of alleged corruption, collusion, kick-backs, racketeering, bid rigging and price fixing involving Marsh & McLennan, ACE, The Chubb Group, and other birds of a feather, GO TO > > > Harmon’s Letter to the Hawaii Attorney General; Harmon’s Claim Letter to John Sinnott; Harmon’s Letter to the FBI; Harmon’s Letter to the IRS; Harmon’s Letters to Insurance Commissioners; RICO in Paradise; Claims By Harmon; More Claims by Harmon: Marsh & McLennan )


January 8, 2005


By Diane Levick, The Hartford Courant

The St. Paul Cos. – now part of The St. Paul Travelers Cos. – was among the insurers that benefited from alleged bid-rigging by broker Marsh Inc., the New York attorney general’s office said.

A court document released Thursday on the guilty plea of a Marsh senior vice president draws St. Paul Travelers into the controversy, but does not make clear whether the insurer intentionally participated in any wrongdoing….

Robert Stearns, an executive in Marsh’s excess casualty business, pleaded guilty in a New York court Thursday to the felony of scheming to defraud in the first degree. It was the sixth guilty plea in a far-reaching probe of the insurance industry by New York Attorney General Eliot Spitzer.

Stearns asked various insurers to submit bids that were less favorable than others, so Marsh could steer business to maximize its profits and protect incumbent insurers on certain accounts that were up for renewal, the felony complaint says.

The sham bids were sometimes called “B Quotes” or simply “B”.

In one example in March 2003, Stearns asked a Marsh broker in an e-mail to get a B quote from insurer Zurich on an account that would be renewing insurance with St. Paul, the complaint says. Stearns suggested “325,000 should work” because St. Paul’s price was $270,000, the complaint says.

Later that day, Stearns repeated the request, and the next day, a Zurich underwriter provided a $360,000 quote to Marsh, the document says.

In another March 2003 example, Stearns was asked by another Marsh executive to get B quotes on an account that was up for renewal with American International Group. “Further e-mails reflect that Zurich, ACE, and St. Paul subsequently offered losing quotes on this account,” the complaint states.

The document does not say whether St. Paul knew its quote for the account would be used in bid-rigging.

However, a Marsh broker’s e-mail that was cited in the document strongly implies he considered the B quotes laughable, as the broker told an ACE underwriter: “need a B for [expletive] and giggles.”

The client renewed insurance with American International Group.

St. Paul Travelers was not named in Spitzer’s bid-rigging lawsuit against Marsh in October, though the suit implicated several insurers including The Hartford Financial Services Group Inc. without naming them defendants.

However, Spitzer’s office has subpoenaed information from St. Paul and dozens of other companies.

Meanwhile Friday, Spitzer said he expects the guilty pleas he has gotten so far will lead to more charges.

“We are laying the foundation with these criminal cases that permit us to make criminal cases and bring criminal actions against those more senior within the companies,” Spitzer said after a state assemble hearing in New York, according to Bloomberg News.

In addition to Stearns, guilty pleas have come from two executives at AIG, two from Zurich American Insurance Co. and one from ACE.

In another development, Marsh & McLennan Cos. Inc. said Friday it has named E. Scott Gilbert to the new post of senior vice president and chief compliance officer effective Jan. 24. He was chief compliance counsel for the General Electric Co.

For more, GO TO > > > Claims By Harmon; Office of the U.S. Trustee vs. Harmon; Translyvania Travelers in St. Paul


November 17, 2004

Cooking the Insurance Books

A Decade of Lax Regulation Lays Groundwork for Scandal

By Lucy Komisar, Special to CorpWatch

In October, New York Attorney General Eliot Spitzer filed suit against the world’s largest insurance broker, Marsh, accusing it of rigging bids and receiving kickbacks in order to defraud clients such as other corporations, city governments, school districts and individuals of billions of dollars through inflated premiums.

“Greedy trial lawyers were the usual excuse for premium increases. Now we know that greedy corporations also have a starring role,Spitzer said, accusing several insurance companies as co-conspirators in making phony or inflated bids and paying kickbacks to the brokerage to get business.

Spitzer also announced that two executives from the insurance conglomerate American International Group (AIG) had already confessed to related criminal charges. But his investigations into AIG may have only scratched the surface. A paper trail stretching back a decade reveals that AIG used offshore shell companies to skirt the law.

The current scam which Spitzer has uncovered works like this: Marsh, an insurance broker, is supposed to find the best insurance policies for its clients from a wide range of companies. Instead it steered the policies to companies such as AIG that agreed to pay kickbacks. It solicited phony competitive bids for insurance contracts to deceive customers into thinking there was real competition for the business. Marsh made $800 million on kickbacks in 2003 alone – over half its $1.5 billion profit. With a 40-percent share of the global insurance brokerage market, its fraud drove up prices for everyone….

Lax Regulators Give AIG a Free Pass

At Spitzer’s press conference, New York State Insurance Superintendent Gregory V. Serio said: “This has gone from an inquiry into failure to disclose compensation to an active investigation of bid rigging and improper steering. This certainly proves the adage that where there is smoke, there is fire.”

But AIG’s comportment could not have been much of a surprise to Serio, who was New York’s deputy insurance superintendent in the late 90s. That’s when New York and three other states gave the powerful company a pass on some very questionable practices. If they had paid attention to the smoke then, perhaps this billion-dollar fire wouldn’t have ignited.

In the late 90s, four state insurance departments – New York, Delaware, Pennsylvania and California were aware that AIG was moving debt off its books via the use of an offshore shell company it secretly set up and controlled. But despite clear evidence of wrongdoing, no sanctions were ordered….

In the mid-80s, two of AIG’s reinsurers failed. The bankruptcy liquidators paid creditors, including AIG, over several years but meanwhile the amount owed was liable to show up as unacceptably high levels of debt on the AIG books.

Trevor Jones, an insurance investigator who for 20 years has run Insurance Security Services in London, explained,Hank [Greenberg] decided to set up Coral Re [a reinsurance company] to move the debts he couldn’t claim as assets into this other company. … No real company would play ball, because you are fiddling the accounts, moving your bad debts off your books.”

So AIG went to elaborate lengths to set up a shell company in Barbados, where capital requirements and regulation was minimal compared to the U.S., where American regulators couldn’t readily discover AIG’s involvement and where, as an added incentive, it could move money out of reach of U.S. taxes….

Though it is an American company listed on the New York Stock Exchange, AIG makes extensive use of offshore jurisdictions such as Barbados, Bermuda and Luxembourg that are immune from U.S. regulatory and tax scrutiny. They help the company launder profits to evade U.S. taxes and hide insider connections in supposedly “arms-length” deals. This is especially important as the company has moved into financial services and asset management, handling the wealth of “high net-worth” clients – the mega-rich.

Greenberg has enviable political clout, never so much in evidence as when, with the help of Henry Kissinger – chair of AIG’s international advisory committee and a paid consultant via Kissinger Associates – AIG became in 1995, the first company licensed to sell insurance in China. AIG was the only foreign firm that owned 100 percent of its license there….

Goldman Sachs and Robert Rubin

Coral Re, a Barbados reinsurance company, was launched with a private sale of shares organized by Goldman Sachs, then headed by Robert Rubin, who would become President Clinton’s Treasury Secretary and is now chairman of the executive committee of Citigroup. A confidential memorandum … told why the company was formed: “AIG’s interest in creating the Company is to create a reinsurance facility which will permit the U.S. companies to write more U.S. premiums. For a U.S.-domiciled company, a high level of surplus is required to support insurance premiums in accordance with U.S. statutory requirement. The statutory requirements in Barbados are less restrictive.”…

Rubin buddy Bill Clinton, then governor of Arkansas, may also have thrown his weight behind the project. The Arkansas Finance and Development Authority (ADFA), headed by a man who went to work in the Clinton White House, became lead investor, although state law banned it from buying stocks.

The new company was not a legitimately independent business. For investors, there was no money at risk; the board of directors never made a decision; and Coral Re had no office of its own but was managed by American International Management, a subsidiary of none other that AIG.

Eventually, the scheme unraveled. State insurance examiners look at company books every five years. “In 1992, Delaware examiners auditing Lexington (an AIG subsidiary) smelled a rat,” a former regulator from one of the four investigating insurance departments told CorpWatch….

Things have gotten tougher for the company since the Enron affair caused the SEC to look more serious about corporate corruption. … Last year, AIG paid a $10 million fine to the SEC for helping the Indiana wireless telecom company Brightpoint commit accounting fraud. AIG marketed a “non-traditional” insurance product aimed at “income statement smoothing,” spreading a loss over future reporting periods. The SEC called such financial products “just vehicles to commit financial fraud” and said the insurance giant refused to give it subpoenaed documents, compounding its misconduct. The U.S. Justice department is currently investigating but has yet to file criminal charges.

Business Insurance, a trade publication, editorialized on the timidity of regulators for giving AIG “little more than a tap on the wrist” in exchange for “a promise not to do it again.”

“The message delivered here is that a company of AIG’s power and complexity can afford to be openly hostile to state oversight and, in the end, have things pretty much its own way. That is a disheartening message, indeed,” wrote the magazine’s editors….

(Read the complete article in CorpWatch)

Lucy Komisar is an investigative journalist who is writing a book about offshore bank and corporate secrecy. She receive research assistance on this report from the Arkansas Committee. The committee was started in 1990 by University of Arkansas students, who, suspicious that Arkansas Development Finance Authority was selling more bonds than it could use to finance state projects, demanded the agency’s documents under the Freedom of Information Act. It fought the case to the Arkansas Supreme Court before it got the papers describing the AFDA deal to buy shares of Coral Re.


October 15, 2004


Insurance Scheme
Rigged Bids

By Gregory Bull, AP, USA Today

ALBANY, N.Y. – New York Attorney General Eliot Spitzer on Thursday sued No. 1 insurance brokerage Marsh & McLennan and arrested two American International Group executives in his first prosecution of the insurance industry.

Spitzer alleged that Marsh & McLennan took “lucrative payoffs” for steering unsuspecting clients to certain insurers. Spitzer also said American International (AIG), Hartford Financial Services Group, Ace, and Munich Re participated in “steering and bid rigging.”

“Where is the ethical compass of this industry?” Spitzer said in a news conference, calling it “thoroughly corrupt.”

The victims were mostly large corporations who were deceived into buying property and casualty coverage that may have cost more, but also included small and midsize businesses, municipal governments, school districts and individuals, Spitzer said.

Spitzer announced the civil suit against Marsh & McLennan of New York City, the nation’s leading insurance brokerage firm, accusing it of steering clients to insurers for lucrative payoffs under long-standing agreement. The firm collected $800 million in so-called contingent commissions in 2003 alone, investigators said.

Spitzer also accuses the company of soliciting rigged bids for insurance contracts.

He said other insurance companies are being investigated….

Spitzer bases part of his insurance industry probe on internal e-mails and memos, in which he said insurance executives openly discussed actions that were aimed at maximizing Marsh’s revenue and insurance companies’ revenue, without regard to clients’ interests….

In some cases, Spitzer said, companies provided false and inflated quotes to help another in the scheme win a bid, with the idea that a subsequent bid would be steered to them….

“If the practices identified in our suit are as widespread as they appear to be, then the industry’s fundamental business model needs major corrective action and reform,” said Spitzer, who has forced Wall Street to adopt measures against conflicts of interest among stock analysts….


December 18, 2004

Sleepless Nights for Marsh CEO

The Washington Post

NEW YORK – Michael G. Cherkasky, the longtime prosecutor now running embattled financial services giant Marsh & McLennan Cos., says he has figured out the main difference between investigating corporate wrongdoing and taking charge of a company targeted by a white-collar probe:

“I see the same issues, but now I don’t sleep at night. I go home and worry,” said Cherkasky, 54. “It’s so personal.”

Cherkasky became chief executive of Marsh & McLennan in October, 11 days after one of his former prosecutorial protégés, New York Attorney General Eliot L. Spitzer, accused the firm’s Marsh Inc. insurance brokerage unit of bid-rigging and accepting kickbacks.

His first brief was to reassure Spitzer and Wall Street that the firm was making changes, and he did, renouncing the “contingent commissions” at issue in the probe, jettisoning two top insurance executives and the firm’s general counsel, and laying off nearly 3,000 people. He has also met with more than 120 big clients to personally apologize, and responded personally to thousands of anguished e-mails from laid-off employees.

Bigger challenges

Now the pressure is on for Cherkasky, who spent 15 years in the Manhattan district attorney’s office, to prove that he’s more than a crisis manager chosen simply for investigative experience and his ties to Spitzer….

In some ways, Cherkasky fits the classic ex-prosecutor model. He spent 15 years prosecuting white-collar crime for Manhattan District Attorney Robert M. Morgenthau, supervising cases against the Mafia and Bank of Commerce and Credit International, among others. While there, he proved to be both a strong courtroom advocate and a good manager of people, his former colleagues said….

Analysts say Cherkasky is in for a tough haul at Marsh & McLennan. Not only must he find a way to settle with Spitzer – some estimates put the likely price tag at more than $500 million – but he must also find a new business model for Marsh Inc., which has lost at least 10 big clients and may be in the process of losing more.


December 23, 2004

SEC Probing Investments in
Marsh & McLennan’s Buyout Funds

NEW YORK – The Securities & Exchange Commission (SEC) is currently conducting an investigation into investments by Marsh & McLennan’s directors, shareholders and executives in the company’s buyout funds.

According to a Bloomberg report this morning, the SEC has asked the US-based insurance brokerage company to submit documents about “related party transactions” in which the directors, executives and shareholders of the company acquired a material interest in entities managed by Marsh McLennan’s MMC unit.

The New York based company said in a statement yesterday that it was cooperating with the investigation.

Marsh McLennan is currently also facing a regulatory scrutiny related to price fixing and the receipt of kickbacks. The company’s CEO, Jeffrey Greenberg was forced to quit from his post after a lawsuit was filed by the New York Attorney General in October this year.

According to an article in the New York Times, the SEC investigation includes the company’s dealings with its Trident funds. The company’s private equity unit, MMC Capital, had created three funds, namely Trident I, II and III, which received significant investments from the company’s board members and top executives.


December 23, 2004

Marsh & McLennan Probe
May Have Wider Implication

Standard & Poor’s Equity Research reiterated a “hold” rating on Marsh & McLennan, saying the Securities and Exchange Commission has requested information regarding transactions with parties in which company insiders or major shareholders had an interest.

The SEC specifically cited transactions with Trident Funds, a series of private equity portfolios managed by Marsh & McLennan.

“We believe the Trident Funds have held investments in several reinsurers and property and casualty insurers,” S&P Equity Research said, adding that the probe might be part of an industry-wide probe into possible abuses of financial insurance and reinsurance transactions in order to manipulate accounting and earnings.

For more, GO TO > > > Marsh & McLennan’s Trident Funds


December 21, 2004

Fitch Downgrades Debt
of Marsh & McLennan

NEW YORK – Marsh & McLennan Cos., the embattled financial-services giant, had the ratings of some of its debt lowered by Fitch Ratings to one step above speculative grade.

The downgrade, announced Monday after the financial markets closed, lowered some of the senior debt of the world’s largest insurance brokerage firm by one notch to triple-B-minus, the lowest investment-grade rating, from triple-B….

New York-based Marsh is girding from what might be a steep settlement on an Oct. 14 civil suit by New York state Attorney General Eliot Spitzer.

Spitzer alleged that Marsh cheated clients by rigging bids for insurance contracts and steering business to insurers who paid Marsh large so-called contingent commissions, which Spitzer likened to kickbacks….

Last week, Marsh completed deals for $3 billion in new financing, comprised of a $1.3 billion term loan maturing at the end of 2006 and $1.7 billion in revolving credit lines with $1 billion due in June 2007 and $700 million due two years later.

The credit agreements, with 22 banks including Citigroup Inc.’s Citibank, Bank of America Corp. and Deutsche Bank Ag, are important to Marsh’s short-term financial health because they are a source of money if the company is unable to sell the short-term debt it typically uses to finance its cash needs.

Fitch has lowered the company’s senior debt rating five notches, and its commercial paper rating one notch since the civil suit brought against the company by Spitzer.


December 31, 2004

Delphi Suspends 2 Workers
Over Practices

Associated Press – Forbes

Delphi Financial Group Inc. said Friday it suspended two employees after finding “potential issues” with past insurance solicitation practices involving its Safety National unit and Marsh & McLennan Cos….

In November, Delphi said its insurance units had received subpoenas or other regulatory inquiries for officials in New York, Illinois and North Carolina, in connection with industry-wide investigations. In October, New York Attorney General Eliot Spitzer alleged that Marsh & McLennan, the world’s biggest insurance broker, cheated clients by rigging bids and collecting improper fees from insurance companies.

Delphi, an employee benefit services company, said in a statement Friday that the two employees responsible for Safety National’s relationship with Marsh & McLennan were suspended pending the completion of Delphi’s internal review….

Delphi said it has reported on these issues to the New York State Attorney General’s office and the Missouri Department of Insurance.

* * *

April 1, 2005

Delphi Faces FBI Inquiry

CNN money

DETROIT (Reuters) – The FBI said Friday it had launched an investigation into Delphi Corp., the auto parts maker that confirmed last month it improperly accounted for cash payments to former parent General Motors Corp.

“The FBI is involved in the investigation,” said Dawn Clenney, a spokeswoman for the FBI’s Detroit office.

“We are coordinating with the Securities and Exchange Commission, Department of Justice and the United States Postal inspectors,” she said….

On March 22, Delphi said it improperly accounted for $237 million in cash payments made to GM in 2000 to release it from pre-separation warranty claims and future post-retirement health care obligations.

Delphi also said it was determining the appropriate treatment of $30 million of $85 million in credits it received in 2001 from GM….

Early in March, Troy, Michigan-based Delphi said its chief financial officer had resigned under pressure from its audit committee and a former chief accounting officer left the company as well….

* * *

April 8, 2005

Class Action Suit Against Delphi Corp.

A class action commenced against Delphi Corp. for violations of the Employee Retirement Income Security Act of 1974 (“ERISA”)….

The class action focuses on investments in DPH stock by the Delphi Savings-Stock Purchase Program for Salaried Employees from May 28, 1999, through March 11, 2005…

Specifically, the Plaintiffs allege in the Complaint:

(1) the Defendants who administered the Plan had a duty to disclose to and inform the other fiduciaries of the Plan of information, which the other fiduciaries of the Plan reasonably needed to know to fulfill their fiduciary duties to the Plan participants and beneficiaries;

(2) that Defendants who communicated with participants regarding the Plan’s assets, or had a duty to do so, failed to provide participants with complete and accurate information regarding DPH stock sufficient to advise participants of the true risks of investing their retirement savings in DPH stock;

(3) that Defendants made affirmative, material misrepresentations to the participants and beneficiaries of the Plan about the appropriateness of investing in Company stock and about Delphi’s financial condition through incorporation of the material, untruthful information contained in the company’s SEC filings into the Plan’s summary plan description; and

(4) that Defendants breached their fiduciary duties to Plaintiffs in violation of ERISA by failing to prudently and loyally manage the Plan’s investment in DPH stock when the stock was no longer a prudent investment for participants’ retirement savings…

For more, GO TO > > > The Great Nest Egg Robberies


November 10, 2004

ERISA Class Action Lawsuit Filed
Against Marsh & McLennan

Source: Business Wire

A class action lawsuit was filed against Marsh & McLennan Companies on behalf of participants and beneficiaries of the Marsh & McLennan Companies Stock Investment Plan, the law firm Scott + Scott, LLC said in a press release on Wednesday.

The lawsuit, filed in U.S. District Court for the Southern District of New York, alleges that defendants Marsh & McLennan Companies and other plan fiduciaries breached their fiduciary duties under the Employment Retirement Income Security Act.

According to the Complaint, the alleged conduct was particularly damaging for Plan participants and beneficiaries because, under the Marsh & McLennan Companies Stock Investment Plan, matching contributions were made in MMC Stock and MMC Stock was offered as an investment alternative in the 401(k) component of the Plan. As a result of Defendants’ fiduciary breaches, the Plan has suffered substantial losses, resulting in the depletion of hundreds of millions of dollars of the retirement savings and anticipated retirement income of the Plan’s participants, attorneys for the plaintiffs said.

Under ERISA, the breaching fiduciaries are obligated to restore to the Plan the losses resulting from their fiduciary breaches.

Eliot Spitzer, the New York Attorney General, sued Marsh & McLennan on Oct. 14 for allegedly rigging bids and accepting improper commissions in return for steering business to favored insurers. In the aftermath of the lawsuit, Marsh & McLennan announced that it would lay off 3,000 employees, or 5 percent of its work force. Earlier this week, the Company also announced that, in the third quarter of 2004, net income dropped to $21 million from the $357 million of a year earlier, a 94% decline.

“The drop was due to the creation of a reserve fund for potential litigation and to the permanent loss of certain fee and commission income,” Plaintiff’s attorneys said.


November 1, 2004

Spitzer’s controversial insurance lawsuit

Why claims he is overreaching are wrong

By Anthony J. Sebok, Special to

(FINDLAW) — After taking on the mutual fund industry, New York Attorney General Eliot Spitzer is now setting his sights on the insurance industry. Two weeks ago, at a news conference, he announced he had found wide-spread wrongdoing.

Since then, the stocks of various insurance brokers and companies have dropped. The major CEO of one insurance broker has resigned. The Wall Street Journal has denounced Spitzer on its editorial pages, alleging that he’s overreaching, and turning his office into a regulatory agency.

In this column, I will examine Spitzer’s civil suit. I will also consider the claim that Spitzer – rather than doing his job, and enforcing the law — is actually, in effect, trying to write new laws without consulting the legislature or the voters.

I will argue that this claim is in error: In fact, Spitzer is doing his job. Moreover, if he is overstepping the limits of his office, it is in part because the insurance commissioners of New York and other states are not doing their jobs….

The advantage of cartelization

On Spitzer’s theory, why might insurers like AIG, ACE, or Zurich–huge, powerful companies–have allowed this to happen? Why wouldn’t one of them blow the whistle on the fake bids, and demand to submit genuine, lower bids and win even when Marsh didn’t pick them?…

The answer Spitzer can give is simple. All the big insurers had an interest in creating a system where the brokers — and not the market — decided which company the client would pick. That is, they preferred cartelization to competition. And the brokers were more than happy to set up a system to manage the cartel — for a price.

The harm that was caused if Spitzer’s claims prove true

Some press accounts have asked: Even if Spitzer’s right, what’s the harm to the insurance-buying companies? Isn’t the extra money all coming from the insurers – who are the ones bribing the brokers for policy placement?

The answer is no. In the end, the cost of the “bribes” is paid by the clients — companies like Ford. Second, and most important, the real problem with the contingent commission system is not the commissions themselves. It is the system of price-fixing that the contingent commission seems to inevitably produce. The cost of price-fixing is not really borne by the large corporate customer, but by all of society.

For example, in his complaint, Spitzer describes the case of Greenville, South Carolina. Greenville retained Marsh as a broker to purchase insurance for a school renovation project. The value of the insurance contract was approximately $3 million.

Marsh allegedly steered the contract to one insurer, Zurich, in exchange for a contingent commission. In order to persuade Greenville that Zurich had the best price, it allegedly arranged with another insurer, CNA, that CNA would produce a dummy bid which would be guaranteed to lose, but which would make the Zurich bid look good. Of course, Greenville opted for the lower, Zurich bid.

Who really was hurt by this scheme, if it occurred as alleged? The taxpayers of Greenville – who paid more than they should have to insure their school renovation…


October 14, 2004

Spitzer To Sue Marsh,
Other Insurers

By Carrie Coolidge, Forbes

Today, New York Attorney General Eliot Spitzer will announce that he is filing both criminal and civil lawsuits against Marsh & McLennan, the largest U.S. insurance brokerage firm.

A source from Spitzer’s office confirms that several other insurance companies will also be named in the suit, including American International Group, ACE, Hartford Financial Services Group and Munich American Risk Partners.

The indictment relates to what the insurance industry refers to as “contingent commissions”, which Spitzer believes are actually kickbacks and payoffs to steer business toward a particular insurance company.

Last April, he issued subpoenas to several insurance brokerage firms, including Marsh, Aon, and Willis Group Holdings, seeking information as part of a preliminary inquiry into compensation agreements between insurance brokers and insurance companies.

The hatchet is now beginning to drop.

“This rigged business has the appearance of a competitive bidding process, when in fact it isn’t,” says a member of Spitzer’s staff who requested anonymity. The source confirmed that more indictments will soon follow, involving several other brokerage firms and insurance companies.

According to the Spitzer staff member, three executives have already pleaded guilty to felony charges, including two from AIG and one from ACE. These executives are now cooperating with Spitzer’s office and may face both prison sentences and stiff fines for their actions.

Spitzer is expected to announce today that in 2003, Marsh & McLennan collected $800 million in contingent commissions, which he believes were kickbacks.

“In September, we announced investigations into the mutual fund industry, including market timing and late trading,” says the Spitzer staffer. “This is our public announcement of an investigation of the practices of the insurance industry.”

“This is not the last you will hear from our office’s involvement in the insurance industry,” he says, adding that Gregory V. Serio, the superintendent of the New York State Insurance Department, is working closely with Spitzer on the investigations.

“It appears the last priority on Marsh’s list of priorities were their own customers,” says the Spitzer staffer.

“They appeared to come last of all.”


October 15, 2004

Insurance Stocks Tumble On Fraud Case Woes

By Aleksandrs Rozens, Reuters

NEW YORK – Shares of insurers and insurance brokers fell sharply on Friday for a second straight day after New York Attorney General Eliot Spitzer leveled fraud charges against major industry players.

The downdraft was again led by Marsh & McLennan Cos., the world’s top insurance broker, accused by Spitzer of rigging prices and steering unsuspecting clients to certain insurers in exchange for lucrative payoffs.

Marsh, which lost nearly $6 billion in market value on Thursday as its stock sank to a five-year low, fell further in early Friday dealings, down $9.65, or 28 percent, to $25.20.

Other insurance brokers also slumped. Willis Group Holdings lost $3.16, or 9.2 percent, to $31.32, while Aon Corp fell $1.49 or 6.4 percent, to $21.69.

The Spitzer lawsuit, alleging market manipulation since the late 1990s, also implicated Hartford Financial Services Group, Chubb Corp., Bermuda-based ACE Ltd., a unit of the German company Munich RE, and American International Group, the world’s largest insurer by market value….

News of the probe gutted insurance company and broker share prices on Thursday. In the SAP 500, six of the 10 biggest percentage losers were insurers, with the fall wiping out a collective $28.5 billion of market value for the six.

Two executives from AIG have already pleaded guilty to criminal fraud charges for their involvement in the alleged manipulation.

AIG Chief Executive Maurice Greenberg was scheduled to hold a news conference Friday morning. AIG shares were down $3.65, or 6.1 percent, to $63.70.

Hartford shares fell $4.80, or 8.2 percent, to $53.60, adding onto a 6.1 percent decline on Thursday. Chubb shares fell $1.95, or 3 percent, to $63.70.

“It’s kind of a black hole right now. We don’t know what’s involved. Our big concern is AIG right now,” said Michael Nix, portfolio manager at Greenwood Capital Associates LLC, whose portfolio includes shares of AIG and Chubb….


December 3, 2004 

Marsh Admits Overcharging
School Districts

Insurance Journal

State insurance regulators are investigating Marsh USA, which has acknowledged overcharging six Oregon school districts and Lane Community College since 2000.

Marsh, the nation’s biggest insurance brokerage, alerted the districts to the inflated bills in late October and has offered to reimburse them, said Ed Healy, managing partner of Marsh’s office in Portland.

In return for the $1.2 million in reimbursements, Marsh asked its clients to sign a release waiving their right to take legal action against the brokerage. Most of the districts rejected Marsh’s request, and the company agreed to repay them anyway.

The Oregon Insurance Division decided to investigate after learning of the matter last week, said Cory Streisinger, Director of the Oregon Department of Consumer and Business Services.

Streisinger said Marsh deserves credit for admitting the overcharges and offering the reimbursements. But she was surprised to learn that Marsh had asked for legal releases in exchange.

“We would expect the brokerage to make restitution unconditionally,” she said. “If a district came to us with a complaint about that practice (of requesting legal releases), that’s certainly something we’d look into.”

School districts in Beaverton and Eugene were told by Marsh that they each had been overcharged more that $180,000 since 2000, district officials told The Oregonian on Tuesday. Officials at Salern-Keizer schools and the Reynolds School District in Troutdale said they each had been overcharged by more than $200,000.

Healy said the overcharges were unrelated to accusations out of New York that the company masterminded widespread insurance bid-rigging.

Eliot Spitzer, New York attorney general, sued Marsh in October claiming the company collected more than $800 million from insurance companies in return for engineering sham bidding and steering them new business.

Spitzer filed his lawsuit October 14. Days later, Marsh alerted its Oregon clients about the overbilling.

Healy said suspicions first arose within the local Marsh office in August. The company then review years of records, determining that a handful of clients had been overcharged.

“We have turned this place upside down,” Healy said. “We have confirmed that it is seven clients who were involved. That is the scope of it, period.”

The school districts and state regulators are not ready to accept Marsh’s version of events. The districts have asked Marsh to pay for an independent audit of Marsh’s services and billings.

Copyright Associated Press. All rights reserved.

~ ~ ~

Catbird Note: For an earlier case of alleged overcharging a school (Hawaii’s Kamehameha Schools), which Marsh has NOT yet admitted, or offered to reimburse, GO TO > > > Claims By Harmon; Confessions of a Whistleblower; The Harmon Chronicles; Office of the U.S. Trustee vs. Harmon


October 15, 2004

NY Insurance Probe Casts Light
On Greenberg Family

By Joseph A. Giannone, Reuters

NEW YORK – New York Attorney General Eliot Spitzer’s far-reaching probe into price-fixing and kickbacks in the insurance industry has cast a spotlight on three member of one family who control almost a trillion dollars in assets.

Spitzer, who prompted reforms in stock research and mutual funds, announced a lawsuit on Thursday against Marsh & McLennan Cos. The Boston-based company, led by Chairman and Chief Executive Jeffrey Greenberg, were accused of price-fixing and misleading clients by accepting payments to steer business to certain providers.

Among the insurers implicated in the suit were American International Group Inc (AIG), the global insurance giant and largest U.S. insurer led by Maurice “Hank” Greenberg, Jeffrey’s father, and ACE Ltd., the big Bermuda-based insurer led by Jeffrey’s brother Evan Greenberg….

… Continued at Jeffrey W. Greenberg


October 15, 2004

MMC Names New Chairman,
CEO at Marsh Inc.

Insurance Journal

Marsh & McLennan Companies Inc (MMC) on Friday announced a change in the management of Marsh Inc., its risk and insurance services subsidiary.

Michael Cherkasky has been named chairman and chief executive officer of Marsh Inc. effective immediately.

Formerly CEO of Marsh Kroll, MMC’s risk consulting subsidiary, Cherkasky has a record as a manager, prosecutor, investigator, and trial attorney. He joined Kroll in 1994, rising to the position of president and CEO in 2001.

Prior to joining Kroll, Cherkasky spent 16 years in the criminal justice system, including serving as chief of the Investigations Division for the New York County District Attorney’s Office.

Cherkasky succeeds Ray Groves, who has served as chairman and CEO of Marsh since 2003. Groves will become senior advisor to Marsh. Roger Egan will continue as president and chief operating officer of Marsh Inc.

Jeffrey Greenberg, chairman and CEO of MMC, said, “Since learning about the Attorney General’s allegations, we have taken strong and immediate action. We are committed to determining the facts, and we will take all appropriate action to deal with any incidence of wrongdoing and assure we are serving the best interests of our clients. Mike’s appointment as chairman and chief executive officer of Marsh recognizes the new additional priorities that the company faces….

“Pending completion of the investigation, we have suspended market service agreements (MSAs), and we are actively reviewing every aspect of Marsh’s business to identify and stop any practices that might encourage behavior that is inconsistent with our values and commitment to the highest professional and ethical standards.

“We thank Ray for his service to Marsh and look forward to his contributions in his new role.”


October 25, 2004

Marsh & McLennan Chairman
Resigns Post

Associated Press, Forbes

Jeffrey W. Greenberg, chairman and chief executive of Marsh & McLennan Companies Inc., which is the target of a bid-rigging investigation by New York’s attorney general, submitted his resignation on Monday, the company said.

He will be replaced by Michael Cherksaky, 54, who just last week was named head of Marsh Inc, the company’s insurance brokerage unit. Before that, Cherkasky had been chief executive of Marsh Kroll, the Marsh & McLennan risk consulting subsidiary. He had joined Kroll in 1994; the company was purchased by Marsh & McLennan in July 2004.

New York Attorney General Eliot Spitzer filed a civil suit against the New York-based brokerage on Oct. 14, charging that Marsh & McLennan was rigging bids and fixing prices in the sale of property and casualty insurance to businesses. Spitzer also charged that the company’s commission system was the equivalent of accepting payoffs.

Spitzer had said he wouldn’t negotiate with Marsh & McLennan’s management, alleging his office was “misled at the very highest levels of that company.”

The announcement came after several days of reported negotiations between Spitzer’s office and independent directors of Marsh & McLennan’s 16-member board. The board met Monday to discuss the issue and announced after the meeting that it had accepted Greenberg’s resignation….

Marsh & McLennan’s shares ended the day down 37 cents at $26.42 on the New York Stock Exchange. That’s down 43 percent from the $46.13 that Marsh & McLennan shares traded at before Spitzer’s probe was announced.


October 25, 2004

Marsh’s Chearkasky Gave
Funds To Spitzer

By Neil Weinberg, Forbes

NEW YORK – Mike Cherkasky, the new chief executive of scandal-plagued Marsh & McLennan, gave $12,000 to New York State Attorney General Eliot Spitzer earlier this year, even though he was not running for office, according to

The contribution was one of four Cherkasky has given to Spitzer since 1998 for a total of $18,500, according to the site.

While there is nothing illegal, or even necessarily unethical, about the contributions, they do create at least the appearance of a conflict of interest for the attorney general.

Spitzer was unavailable for comment. “Eliot considers Cherkasky to be a friend and a mentor,” said Marc Violette, a spokesman in Spitzer’s Albany office. “They have a long-standing relationship. It’s not unusual in that context for Cherkasky to contribute to Eliot’s campaign.”

The relationship between the two men goes back to the 1980s, when Cherdasky served as Spitzer’s boss in the Manhattan district attorney’s office. He has since referred to Spitzer as one of the most capable prosecutors he has ever worked with, and the two men are close friends, according to a source familiar with their relationship.

Following his public service, Cherkasky moved to Kroll, where he served as chief executive. In July the firm was purchased for $1.9 billion in cash by Marsh & McLennan, and Cherkasky stayed on to run Kroll. MMC has been engulfed in scandal since Oct. 14, when Spitzer unveiled a civil suit charging it with rigging bids in its giant insurance-brokerage unit, Marsh Inc….

Cherkasky was promoted the next day from chief executive of Kroll to the top job at Marsh Inc. That move now appears to have been a precursor to his elevation to the top job at parent Marsh & McLennan….

For more, GO TO > > > Axis of Evil; KROLL, The Conspirator


October 27, 2004

Questions on conflicts of interest

State pension official wants details
of execs’ investments

By Alistair Barr, CBS MarketWatch

A North Carolina state pension official has asked executives of his fund’s major holdings if they have the same apparent conflicts of interest found at Marsh & McLennan, the embattled insurance broker.

Marsh & McLennan officials have been found to invest in businesses that provide services to their company, according to a letter distributed Wednesday by North Carolina Treasurer Richard Moore.

The North Carolina state retirement system, with $60 billion in total holdings, owns $16 million of Marsh & McLennan shares.

Moore said that allowing executives to hold economic interests in customers or service providers is “fraught with potential and real conflicts of interests and can result in transactions that misappropriate value rightly belonging to shareholders.”

Among the companies Moore contacted are Citigroup (C), Prudential Financial (PRU) and Wells Fargo (WFC).

Marsh & McLennan (MMC) was sued by New York Attorney General Eliot Spitzer on Oct. 14 for allegedly rigging bids and accepting payments for steering business to favored insurers.

Moore’s objections referred to MMC Capital, the private-equity arm of Marsh & McLennan that has raised more than $3 billion to invest in the insurance industry.

Jeffrey Greenberg, the deposed chief executive of Marsh & McLennan, and other top company executives and board members have invested in MMC Capital, the New York Times reported this week.

In recent years, MMC Capital has invested in at least 12 insurers, including Ace Ltd. (ACE), a company run by Evan Greenberg, Jeffrey’s brother; XL Capital Ltd. (XL); and Axis Capital (AXS), the New York Times reported. Those companies could do business with Marsh & McLennan, which would raise the appearance of a conflict of interest.

Charles Davis, chief executive of MMC Capital, is also a director on Marsh & McLennan’s board and sits on the board of Axis.

Jeffrey Greenberg used to be chief executive of MMC Capital from 1996 to 2002, the newspaper added.

Moore is not alone in his concern. The largest U.S. pension fund, the California Public Employees’ Retirement System, has voted against such directors as Warren Buffett for having business holdings on both sides of a transaction.

Marsh & McLennan shares closed 18 cents lower at $28.69 Wednesday.

For more, GO TO > > > Axis of Evil; Confessions of a Whistleblower; Harmon’s Letters to Insurance Commissioners; The Great Nest Egg Robberies; The Kamehameha Schools Retirement Plan


November 1, 2004

The Secret World Of Marsh Mac

By Marcia Vickers, Business Week

CEO Jeff Greenberg presides over the arrogant and tight-lipped culture of Marsh & McLennan, where conflicts of interest abound. There’s more trouble coming for the world’s largest insurance broker.

When Jeffrey W. Greenberg took the helm of notoriously secretive Marsh & McLennan Cos. (MMC ), a $12 billion financial-services company, on Nov. 18, 1999, analysts were happily buzzing that Greenberg was a gregarious, outgoing executive. The word on Wall Street was that he would raise the profile of Marsh Mac with more public appearances and open communication than his tightlipped predecessor, A.J.C. “Ian” Smith.

They couldn’t have been more wrong. In the past four years, Greenberg sightings have been scarce. The company, true to its secretive history, became even more cloistered. But on Oct. 14, Marsh & McLennan was forced into a harsh public spotlight when New York Attorney General Eliot Spitzer charged its insurance brokerage with fraud. In a civil complaint filed in New York State Supreme Court, Spitzer alleges that the company engaged in bid-rigging, price-fixing, and accepting payoffs from insurance companies.

Marsh & McLennan, the world’s largest insurance broker, is paid millions annually to manage clients’ risks and crises. Now it’s having epic problems of the same nature itself.

In a three-month investigation, BusinessWeek spoke with some 50 former and current MMC employees, insurance industry executives, and investigators — and discovered that the firm’s problems may well go far beyond Spitzer’s initial charges.

BusinessWeek has learned that MMC and its executives could face a raft of further legal and regulatory problems. Spitzer’s office is mulling criminal charges against several execs connected with the insurance brokering scandal. It is also looking into whether Mercer, MMC’s pension-consulting arm, and Putnam Investments, MMC’s mutual-fund company, push clients into buying Marsh insurance products.

As part of an industry-wide sweep, the Securities & Exchange Commission is probing Mercer’s alleged “pay to play” practices of requiring payoffs from money managers who want it to recommend them to pension clients. At the same time regulators are examining payments Putnam and other mutual-fund outfits make to companies to ensure that their funds are featured in corporate 401(k) plans.

As if that’s not enough, several class actions have sprung up — at least one regarding the alleged fraud at Marsh Inc., as the insurance brokerage is known, and others involving Putnam.

Already, the legal onslaught is taking a toll. On Oct. 19, Moody’s Investors Service downgraded the firm’s debt, citing concerns about “financial consequences” arising from Spitzer’s lawsuit. And fear that some of MMC’s revenue streams could dry up has knocked down its share price. In the four trading days following Spitzer’s Oct. 14 announcement, the stock plummeted 48%, wiping out $11.5 billion in market cap.

At the center of the storm stands Jeff Greenberg, 53. If you ask almost anyone about him, you’ll hear that he is smart as a whip, incredibly knowledgeable about the insurance business, well-spoken, and polished. Much like his father, Maurice R. “Hank” Greenberg, 79, the legendarily hard-charging chairman and CEO of insurer American International Group Inc. (AIG ), he has a history of being opportunistic when it comes to scoring profits for his company. Even now, his defenders insist that he inherited serious problems, particularly in the brokerage and mutual funds businesses, when he moved into the top slot….

The firm’s obsessive focus on secrecy helps keep any misdeeds under wraps, say the sources. “Some companies have a culture based on kickbacks and undisclosed financial arrangements, and their people are forced to remain silent about wrongdoing,” says Edward A.H. Siedle, a former Putnam compliance director and SEC official who now heads the Center for Investment Management Investigations in Ocean Ridge, Fla., which looks into pension fraud….

The day after Spitzer announced his charges, MMC’s board expressed full confidence in the CEO. That’s no surprise: Greenberg chairs the board, which Nell Minow, editor and corporate governance expert at the Corporate Library, says is fiercely loyal and “rife with cronyism.” Six of its 16 members are directly involved in running Marsh Mac or one of its subsidiaries, says Glass Lewis & Co., a San Francisco proxy-research firm.

The board may be compelled to take action against top execs if enforcers now circling the company are able to force fundamental changes in the way it does business. Analysts and other experts say that could damage the company’s financial health.

“If you eliminate all the questionable payments at Marsh & McLennan, you eliminate half of their profits,” says a former executive. Spitzer’s complaint says contingent commissions — lucrative payments Marsh receives for steering unsuspecting clients to certain insurers — alone amount to $800 million a year, or about half the insurance brokers’ 2003 net income….

“Throwing the Quote”

Perhaps William Gilman, Marsh Global Broking’s executive director of marketing and a managing director, was doing the worrying. Gilman, in his 60s, is a larger-than-life character who some call Kill Bill, after the Quentin Tarantino movies. The nickname could also have something to do with an internal AIG memo about bidding for business that was an exhibit in the Spitzer case: “Per W. Gilman — get to right number [regarding a bid] or ‘we’ll kill you.”‘ Says a former colleague: “He’s the kind of guy who stubs a cigarette out in your coffee cup.”

Gilman, says Spitzer’s complaints, strictly enforced the system of rigged bids and payoffs from insurers. He also rated insurers by how much they paid Marsh in contingent commissions. A September, 2003, e-mail from his office released by Spitzer reads: “We need to place our business in 2004 with those that…pay us the most.”…

On Oct. 19, MMC suspended Gilman and four others….

Gilman, according to the complaint, oversaw Marsh’s “throwing-the-quote” scheme, whereby some insurers were told to quote artificially high bids for business. Several times, Gilman refused to allow AIG to relay competitive bids to clients, according to Spitzer’s complaint, warning AIG that “it would lose its entire book of business with Marsh” if it didn’t provide higher price quotes than the insurer Marsh favored…

The phony quotes were often referred to as “throwaway quotes,” “protective quotes,” “backup quotes,” or “B quotes,” says the complaint. In return, according to Spitzer, Marsh protected AIG and other firms that played ball when it was their turn to win. AIG declined to comment.

Gilman also staged what he called “drive-bys” — in which insurers were asked to attend presentations for prospective clients even when they knew they had no chance of snagging the deal, according to Spitzer. A regional manager for Munich-American RiskPartners, a division of American Reinsurance, who was so frustrated by constant requests from Marsh for “live bodies” to attend drive-bys that he wrote in an all-caps e-mail: “We don’t have the staff to attend meetings just for the sake of being a body. While you may need a live body, we need a live opportunity.”…

“They have both their clients and insurers by the cojones,” says a competitor.

But now it’s MMC’s top brass who are squirming. Being in the spotlight is highly uncomfortable for MMC — long known as a patrician, white-shoe firm with an air so understated and secretive that at least one former exec likened it to working at the CIA. Its ranks have included Ambassador L. Paul Bremer III, former Presidential Envoy to Iraq, who recently ran MMC’s crisis-consulting business; Stephen Friedman, President George W. Bush’s top economic adviser and former Goldman, Sachs & Co. (GS ) co-chairman, who was an MMC senior principal; Craig Stapleton, the husband of George W. Bush’s cousin Dorothy, who was an MMC president; and Lord Lang of Monkton, a former British Member of Parliament who still sits on the board….

“I’d Love to Talk…But”

MMC certainly goes to extraordinary lengths to ensure loyalty. A former Putnam executive recalls being grilled by a company psychiatrist in a hotel room for hours during a job interview. Says the former exec: “Everyone has a Dr. [James] Terry story. He would ask questions like: ‘What’s the worst thing that ever happened to you?’ ‘What are your views on religion?’ ‘Who do you vote for?’ They tell you they’re looking for any signs of malfeasance or criminality. But they’re also looking for people who will fit in, lockstep, at the company.” An MMC spokeswoman claims that using a psychiatrist for screening purposes is “industry practice.” Terry could not be reached for comment.

Once they’re in, most people who join MMC’s upper echelons must sign binding noncompete agreements, say both current and former employees. “Each time you exercise stock options, you have to sign a new one,” says one former exec. MMC calls this, “a generally accepted practice.” Employees who leave MMC and then disparage it in public risk losing any deferred compensation to which they are entitled.

One former MMC exec told BusinessWeek: “Gee, I’d love to talk to you. There’s a lot to say. But they’ve got my money.”

Since moving to rival broker Willis Group Holdings Ltd. (WSH ), a former Marsh exec says he has been spied on by a private investigator who he suspects was Kroll Inc., which MMC bought in July for $1.9 billion. He says he believes MMC wants to ensure that former employees are not using its proprietary information…

And despite the unfolding scandals, most industry players still seem to respect Greenberg. He certainly got high marks in his early days as MMC CEO for his handling of the aftermath of the September 11 World Trade Center attacks. Three years earlier, Marsh had leased floors 93 to 100 in Tower One, and 294 MMC employees — mostly salesmen, secretaries, and analysts in their 20s and 30s — lost their lives after the first airplane hit. At services, Greenberg spoke movingly about the makeshift memorial that had occupied an entire wall next to the cafeteria at MMC’s Sixth Avenue headquarters.

After Andrew

Still, just days after September 11, Greenberg and top MMC execs met to figure out how to profit from the disaster. They formed a subsidiary — Axis Specialty Ltd. to sell insurance to corporate customers at three or four times the rates before September 11…

For some industry players the move recalled what Greenberg did in 1992 after Hurricane Andrew slammed into South Florida and wiped out some $15 billion worth of property. Jeff, who was working for dad at AIG, sent out an internal memo stating: “This is an opportunity to get price increases now.”

It was leaked to the press, which had a field day — with one newspaper branding him “a vulture.” The memo moved Ralph Nader to complain and Florida regulators to freeze rates….

When Jeff was working under his father in the early ’90s, heading up AIG’s domestic brokerage group, Marsh sources say Hank raked him over the coals at a meeting in front of top executives.

Hank, they say, had ordered Jeff to deal with a personnel issue, but Jeff had dragged his feet. Says one: “Hank started yelling at Jeff in front of everyone: ‘You either fix your management problem, or I’ll fix mine!”‘

But the coup de grace came in 1995 when Hank abruptly promoted Jeff’s younger, less experienced brother Evan, making them equals in AIG’s hierarchy. Two weeks later, Jeff left.

Evan, 49, is a college dropout and nonconformist who, by his own admission, had a bit of a troubled youth. But he had a knack for the insurance business and rose quickly at AIG. Unlike Jeff, Evan is one of the few people who stand up to his father. “Evan’s scrappy — a yeller,” says an insurance industry veteran….

But in 2000, Evan also resigned from AIG. He now heads Ace Ltd. (ACE), a Bermuda company named in Spitzer’s complaint — along with AIG — as one of those involved in Marsh’s alleged bid-rigging and price-fixing schemes.

Months after exiting AIG, Jeff landed at Marsh & McLennan, where he had worked as a broker in the mid-’70s. As a partner in MMC Capital, the firm’s risk-capital unit, he excelled at building MMC’s Trident Funds, which invested billions in various insurance entities and real estate, and hoisted himself onto the fast track. He was determined “to show up his dad and brother,” says a source familiar with the family.

At Marsh Mac, Jeff was able to take advantage of the Greenberg name: Then-CEO and Chairman Smith — an old acquaintance of Hank’s — was Jeff’s personal mentor. Jeff was named chairman and chief executive of MMC Capital in 1996. By the beginning of 1999, he had been promoted to president of Marsh & McClennan. And by the end of that year, he was CEO. He was elected chairman in May, 2000.

Even if Greenberg did inherit the Marsh Mac mess, he’s under fire for how he handled it. “Despite seeming like a hero for ousting [former Putnam CEO Lawrence J. ] Lasser and moving toward cleaning up Putnam, the truth is, Greenberg didn’t address things until he absolutely had to,” says a former colleague.

In November, 2003, after Putnam was slapped with a securities-fraud charge, longtime CEO Lasser, 61, was forced to resign. Regulators alleged that company brass had been aware of illegal trading in Putnam funds since 2000….

A Frustrating Process

In the past year, Putnam has lost some $70 billion in assets. Recently, several pension funds, including CalPERS, the California Public Employees’ Retirement System, agreed to let Putnam compete for its business, but with stipulations: Putnam must consider pruning executive pay and ramp up financial disclosure….

But governance gurus still aren’t happy with MMC or Greenberg. The Corporate Library says the company still awards its execs excessive compensation. In 2003 it paid an aggregate $60 million to its top five officers, vs. an average $21 million at other large financial companies, according to Glass Lewis.

MMC says: “Our independent directors and outside consultants set compensation.” This past year, several large pension funds joined forces to propel an independent director, Zachary W. Carter, a lawyer, onto the board.

Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County & Municipal Employees, says it was a slow-moving and frustrating process: “Jeff thought he knew what was right, and he wasn’t going to let anyone rock the boat.”…

Earlier this year Greenberg asked mentor Smith, 69, to come out of retirement to help him. Insiders say Greenberg was intimidated by Lasser and needed Smith to negotiate with the former Putnam CEO. Smith, who has an office close to Greenberg’s, was named chairman of Putnam. Greenberg also promoted Steven Spiegel, Lasser’s right-hand man, to vice-chairman of Putnam….

Some of the bad stuff may have had to do with Putnam funds being pushed by Mercer, Marsh Mac’s pension-consulting arm. Mercer was long considered a sleepy, less profitable outpost of the Marsh kingdom. Then, say insiders, in the mid-’90s it came under pressure to turn bigger profits. That’s when it started offering pricey conferences for money managers at $50,000 to $60,000 a pop.

“If you don’t attend those, it’s nearly impossible to get on Mercer’s list to manage pension money,” says Jack Silver, a former trustee at Chicago’s teachers’ pension fund. MMC denies this. The SEC is investigating these allegations. And Spitzer will likely look into whether Putnam pushes Marsh-brokered variable annuity products onto investors.

“There’s no disclosure about this conflict to Putnam clients,” says Selva Ozelli, a securities lawyer close to the investigation. There could also be an investigation into how Marsh, allegedly slow to pay out premiums, profits from the float.

That means deepening troubles for Greenberg, who some critics say has done far too little to shore up MMC’s reputation over the past year.

“Print it, post it, and pray — it seems as if that’s all Greenberg’s done when it comes to ethics,” says Patrick McGurn, special counsel at Institutional Shareholder Services Inc., a corporate governance consultant. Until now, say analysts, Greenberg’s main focus has been on acquiring more companies. Now he’s forced to deal with spreading legal woes and a public-relations nightmare.

Says David D. Brown IV, Spitzer’s investment protection chief: “We’re really just at the beginning here. We’re pursuing a number of leads and will follow them where they take us.”

In an Oct. 15 press release Greenberg announced that MMC was appointing a private investigator to look into the alleged insurance broker fraud. It’s a move some might have applauded, except for one thing: He gave the job to the head of MMC’s Kroll — who’s now the head of Marsh.

Business Week


July 6, 2004

SEC eyeing fund payments to 401(k)s

Regulators want to know if firms
pay for shelf space

By Kathie O’Donnell, CBS MarketWatch

BOSTON – The Securities and Exchange Commission Tuesday said it’s looking into payments that mutual funds make to 401(k) plans to determine what use is made of them.

Fidelity Investments, T. Rowe Price Group Inc., and Putnam Investments, a unit of Marsh & McLennan Cos. (MMC) were among firms that received questionnaires from the SEC which is examining payments that funds and their advisers make to 401(k) plans, consultants and plan platforms….

“We want to better understand the nature and purpose of these payments and their disclosure, including whether they’re reimbursements for plan expenses or payments for shelf space or some other purpose,” the agency said in a statement….

Putnam spokeswoman Nancy Fisher confirmed the company received a questionnaire regarding its defined contribution practices.

“We are cooperating fully,” she said….


What goes around comes around …

October 20, 2004

Investors Are Losing Ground as
Insurance Inquires Expand

By Gretchen Morgenson, The New York Times

The disastrous decline in Marsh & McLennan’s stock that has followed Eliot Spitzer’s lawsuit of last week has injured a broad array of institutional and individual investors. But the pain of losing almost 50 percent in share value is perhaps most excruciating to the thousands of Marsh & McLennan employees who have bought Marsh stock in the company’s employee stock purchase plan or in their retirement plans.

In the months after the market crash of 2000, the lesson of diversifying beyond one company’s stock was hammered home. But as the market recovered, many workers seemed to forget that important lesson. Marsh employees were among them; at the end of last year, one employee-benefit plan had $1.3 billion invested in Marsh & McLennan stock.

Now, of course, the risk in those holdings is all too apparent. But employee-benefit experts say that Marsh may be putting its 60,000 employees at additional risk, even as it enriches itself, by limiting the alternative investments to mutual funds that are for the most part managed by its Putnam Investments subsidiary.

“Fiduciaries of 401(k) plans are charged with making decisions that are in the best interests of the participants in the plan,said Edward A. H. Siedle, a former Securities and Exchange Commission lawyer who is president of the Center for Investment Management Investigations, a unit of the Benchmark Companies in Ocean Ridge, Fla., that investigates money management abuses on behalf of pensions. “When they are also employees of a money management company that gets hired by the plan there is a conflict of interest. This is especially problematic when the money manager is a high-cost, poor performer.”…

Given that the company is in the financial services industry it is perhaps not surprising that workers at Marsh & McLennan and its subsidiaries have been given many opportunities to buy their company’s stock or its money management services. There is a pension plan, a stock purchase plan, 401(k) accounts, stock option grants and a cash bonus deferral plan to name a few. And in all cases, Marsh stock or Putnam funds dominate the offerings.

Sadly for these employees, Marsh shares have gone pretty much straight down since Mr. Spitzer filed his lawsuit against the company, contending that bid-rigging and other improprieties occurred in Marsh’s insurance brokerage unit.

Yesterday, Marsh stock fell another $1.47 a share, or 5.7 percent; it closed at $24.10 and has lost 48 percent since Mr. Spitzer filed the suit.

Workers who have participated in the Marsh stock purchase plan have taken perhaps the biggest brunt of this slide. Last year, 3.8 million shares were bought in the stock plan, well above the 2.85 million Marsh shares purchased in the plan in 2001. And employees working in the company’s international division, which is broken out separately, bought 1.2 million shares in 2003, far more that the 717,000 shares they purchased during the previous year.

Taken together, the shares bought by employees in the Marsh stock purchase plan amounted to five million shares, or almost 1 percent of the 533 million shares outstanding at the company at the end of last year.

Marsh employees have also bought their company’s stock aggressively in various 401(k) plans, a decision they now almost certainly rue. According to Marsh filings, at the end of last year, a defined-contribution plan for Marsh & McLennan employees has assets of $2.4 billion.

Almost 60 percent of the plan’s assets were in Marsh stock – $1.3 billion worth.

Another $938 million in the plan was in funds managed by, you guessed it, Putnam Investments. Of the 17 fund choices on the plan’s menu, 10 are Putnam Funds….

At Putnam Investments, employees have their own 401(k), with assets of $441 million at the end of last year. As is typical in such accounts, Putnam employees can invest their contributions, and any that are matched by the company, in a variety of investment options.

One of those options is Marsh stock and as of December 2003, Putnam employees held 344,000 shares with a value of $16.5 million, or $47.96 a share. Those shares, if they are still in the plan, have been cut in half….

Most peculiar, the Putnam 401(k) plan offers no low-cost index funds intended to mimic the performance of a broad market average, like the Standard & Poor’s 500 index. Such funds are usually ubiquitous in 401(k) plans. Mr. Siedle said such an omission at any plan was “an invitatation to litigation.”…

Trustees of the 401(k) plan for Putnam employees are Francis N. Bonsignore, senior vice president for executive resources and development at Marsh & McLennan, and Sandra S. Wijnberg, the company’s chief financial officer. They have a fiduciary duty to plan participants to provide the best array of investment options. But as Marsh executives, they may be tempted to benefit their company by propelling their workers into Putnam funds. The Marsh spokeswoman declined to comment of the trustees.

About the only Marsh employee plan not holding Marsh stock is the defined-benefit pension plan, which had $2.4 billion in assets as of last December. Employees in this plan do not choose the investments; money managers oversee the money.

But it is in the selection of those money managers that Marsh may be putting its interests ahead of its employees. Of the $2.4 billion under management, $1.8 billion is overseen by Putnam. And, adding to the potential for conflicts, the pension plan employs as an investment consultant Mercer Inc., the Marsh subsidiary that helps pension funds decide which money managers to hire.

Given Mercer’s role as a consultant, it is troubling but perhaps surprising that so much of the Marsh pension plan would be managed by Putnam.

For more on pension plan fraud, GO TO > > > The Great Nest Egg Robberies.


June 29, 2004

Marsh & McLennan Creates
Outsourcing Unit

NEW YORK (AP) – Marsh & McLennan Cos, a professional services firm, combined the defined contribution administration business of Putnam Investments and Mercer HR Outsourcing to offer global human resources outsourcing services, the company said.

The combined unit, Mercer Human Resource Consulting, will oversee the organization, and the U.S. arm of the business will be led by Dave Carlson, Mercer’s national practice leader for human resources outsourcing, the company said….

See also: Mercer Human Resource Consulting


May 19, 2004

Marsh & McLennan to buy Kroll

By Eric Dash, The New York Times

Marsh & McLennan, the giant insurance and financial services company, has agreed to pay $1.9 billion in cash for Kroll, a leading corporate security business.

The transaction, announced Tuesday, will broaden Marsh’s reach into data recovery and corporate detective work at a time when the New York company’s three main businesses face separate regulatory investigations.

Jeffrey Greenberg, chairman and chief executive of Marsh, declined to discuss the effect of those investigations. He preferred to highlight the “strategic fit” between New York-based Kroll, which helped find the hidden assets of Saddam Hussein in the early 1990s, and his own company, which provides insurance brokerage services to corporate clients through Marsh Inc., money management through Putnam Inc., and consulting through Mercer Inc.

“We see this transaction as being able to help us serve clients more effectively with complementary services,” Greenberg said, noting Kroll’s expertise in employee background checks, data recovery and global restructuring advice, in addition to its traditional investigative work….

Given the growth potential and cost savings, Greenberg said that he expected the transaction to add to earnings in 2005. Still, some analysts expressed concern that the price was steep and noted the difficulty of cross-selling services.

Marsh now derives a little less that 10 percent of its $11 billion in revenues from risk-related consulting and processing services. But Greenberg said that heightened global security concerns and more stringent corporate compliance requirements had led to double-digit growth in the area.

Greenberg said he had approached Jules Kroll, whom he has known for about a dozen years, in February about a potential acquisition of the company that he founded….

Upon the deal’s completion, Kroll will become part of the risk and insurance subsidiary of Marsh.

Michael Cherkasky, Kroll’s chief executive, will run the new unit and Jules Kroll will serve as vice chairman….

For more, GO TO > > > Kroll, The Conspirator


April 23, 2004


USA Today

NEW YORK (Rueters) – New York Attorney General Eliot Spitzer, whose investigations of the mutual fund and stock research businesses led to industry-wide reforms, is now probing the fees earned by insurance brokerages.

Marsh & McLennan (MMC), Aon (AOC) and Willis Group Holdings (WSH), the world’s three largest insurance brokers, said late Thursday and Friday they received subpoenas from Spitzer’s office asking for information about compensation arrangements made with the insurance companies whose policies they sell.

At issue is whether fees and commissions paid to brokers by insurance companies as incentive to sell their products is a fair business practice. Brokers have a duty to get clients the best policy at the best price, which would be compromised if brokers simply sell what makes them the most money.

A public watchdog group, the Washington Legal Foundation, said the compensation agreements “can compromise the broker’s fiduciary duty to represent the best interest of their clients.”

While the investigation is only in the early stages, any increase in regulation that may result could have a significant impact on the industry. On average the compensation agreements account for about 20% of brokerages’ profits, a study showed….

Such agreements have similarities to arrangements that were at issue in the mutual fund industry investigations….

Marsh, Willis and Aon all said they adequately disclosed the compensation agreements, either through fee agreements with clients, invoices to clients or on Web sites.

However, the Washington Legal Foundation said the disclosures are “often so convoluted – and in some cases omitted altogether – that many companies are unaware their brokers have these side agreements in place.”…


December 8, 2003

Funds Want Marsh & McLennan
Board Changes

By Associated Press

NEW YORK — Four big public pension funds plan to sponsor a shareholder resolution to change the board of Marsh & McLennan Cos., the parent of Putnam Investments, in response to the company’s role in the widening mutual-fund probe.

The pension funds will seek access to Marsh & McLennan’s proxy to nominate and elect independent directors, pending approval by the Securities and Exchange Commission of a new rule governing shareholder access to corporate proxies.

The pension funds involved are the California Public Employees’ Retirement System; the California State Teachers’ Retirement System; the New York State Common Fund; and the AFSCME Employees Pension Plan, a union pension fund.

In a news release issued Monday, chiefs of the pension funds sharply criticized Marsh & McLennan and Putnam, even going so far as to compare the companies to Enron Corp., the former energy giant.

They singled out Lawrence Lasser, former Putnam CEO, for criticism related to what they called his “excessive compensation.”

“Marsh & McLennan deserves to be the first company in U.S. history to face a binding proxy access proposal because of its gross failure to have proper controls that could have prevented the Putnam disaster,” AFSCME pension Chairman Gerald W. McEntee said in the release….

In October, public pension funds began firing Putnam as a manager of their retirement assets after the firm was charged in an industrywide probe of mutual fund trading practices.

Launched in September by New York Attorney General Eliot Spitzer, the investigation is looking into rapid-fire and after hours trading of mutual funds by favored investors.

Some 11 states, including Vermont, Massachusetts and Rhode Island, ended up pulling out of Putnam, citing concerns related to the probe.

“Investors have pulled more than $32 billion in assets out of Marsh’s Putnam subsidiary due to its involvement in this terrible mutual fund scandal, and Marsh’s stock price is down about 10 percent,” New York State Comptroller Alan Hevesi said in the news release.

“I can’t think of a stronger case worthy of shareholder involvement, and I have no doubt that given the chance, shareholders will respond favorably to our initiative.”


January 7, 2002

Turning to sleepy insurance
to jazz up portfolios

By Beth Healy, Boston Globe

Forget tech. The hot new deals for deep-pocketed private equity firms are in the least sexy business on the planet: insurance.

In the wake of Sept. 11, a host of new insurers and reinsurers are opening their doors, with billions of dollars in backing from existing insurers and big-name buyout firms, including Boston’s Thomas H. Lee Co. Lee recently has bet $475 million on three Bermuda insurance deals, after a year in which it made only one investment (in phone book publisher TRW) from its massive $6.1 billion fund.

Other investors leaping into the sector include Blackstone Group; Goldman, Sachs & Co.; and Warburg Pincus, all based in New York. Marsh & McLennan, the New York insurance brokerage (and parent of Boston fund manager Putnam Investments) is backing a start-up, as is Chicago’s Aon Corp….

This is opportunism at its best. The last time new insurers launched was after Hurricane Andrew struck in 1992. Rates on property-casualty insurance policies soared following that natural disaster, much as they’ve skyrocketed since the terrorist attacks.

Some customers are seeing renewal rates jump 300 percent and 400 percent.

And they’re faced with having to buy more coverage, as their sense of risk has increased and as acts of terror are struck from typical policies. New kinds of special coverage will be required to guard against losses from terrorism and acts of war.

All this adds up to big new potential revenue streams for at least six —— and possibly as many as a dozen —— new insurers and reinsurers (firms that pick up excess liability from other insurers) and their investors. The start-ups are virtually all based in Bermuda, not for the golf, but for its tax-haven status.

And they are filling a need, industry experts say, with losses sustained by current insurance players estimated conservatively at $40 billion. The new entrants figure they can jump in and be competitive because they aren’t grappling with losses from the latest catastrophe.

“A lot of capital went out of the business with the catastrophe and has to be replaced,” said Lanny Thorndike, managing director at Century Capital, a Boston-based insurance investor.

Because of Sept. 11, he said, “there’s a higher appreciation for risk, and with that comes higher returns for those who assume the risk.”…


March 4, 2002

ISS Press Release

Internet Security Systems and Marsh Introduce Joint Program to Simplify and Expedite Qualification for CyberRisk Insurance

Atlanta, Ga – Internet Security Systems, Inc. (ISS) (Nasdaq ISSX), a leading global provider of information protection solutions, announced today a joint program in conjunction with Marsh Inc., the world’s leading risk and insurance services firm, designed to aid companies in expanding their risk management strategies to include online exposures.

“The increasingly restrictive property and casualty insurance market today has created an environment where companies cannot rely of traditional insurance policies to provide much protection for cyber-related risks. By many organizations have found it difficult to meet the strict and sometimes costly underwriting requirements of the insurance companies that provide specific cyber-risk coverage. This program will help clients qualify for state-of-the-art ciber-risk insurance and provide them with a robust risk mitigation solution,” said Hank Whiting, a managing director of Marsh….

Internet Security Systems’ Secure Steps program is composed of select Internet Security Systems’ managed security services, bundling managed firewall, intrusion detection and antivirus services together with emergency response services, to provide customers with the peace of mind that comes with 24×7 protection and a lowered total cost of ownership. Internet Security Systems designed this program specifically to provide the opportunity for its customers to contract with Marsh for cyber-risk insurance. ISS’ managed security services customers, and customers of ISS’ reseller partners that meet the program requirements, are pre-qualified for the insurance, which will be underwritten by either AIG eBusiness Risk Solutions – a division of American International Companies – or Zurich North America.

“Having worked with Marsh in pioneering cyber insurance in the marketplace, we are excited about the addition of ISS’s capabilities to the underwriting process,” stated David O’Neill, vice president, e-Business Solutions, Zurich North America Financial Enterprises.

“Used in conjunction with our innovative E-Risk Edge™ insurance product, the program will provide powerful protection for companies involved in e-commerce.”…


From “On the Take”, by Stevie Cameron, (McClelland-Bantam, Toronto, 1995, p.365):

Marsh & McLennan Ltd:
An American-controlled insurance company

When the Montreal Port Corporation was looking for new insurance policies in May 1984, it went to Charbonneau-Dulude for advice and then followed up with a consulting contract.

Two months later the port gave its business to Pratte-Morrissette, Inc., a subsidiary of insurance giant Marsh & McLennan.

Tory Senator Guy Charbonneau [a partner of Charbonneau-Dulude] not only was on the board of Marsh & McLennan, but was the chairman of the Pratte-Morrissette board.

“They [Charbonneau-Dulude] planned the coverage, prepared the tenders, sent them out, submitted the list of competitors to the Montreal Port Corporation, and made recommendations about which company should get the contract”, said one source at the port corporation.

“Other firms got some of the business, but Pratte-Morrissette got 90 per cent of it.”


January 11, 2001

Ex-Priceline Exec Flees to Old Economy

By Keith Regan, E-Commerce Times

Priceline hired Heidi Miller as CFO in February, in a move praised by analysts and investors.

Heidi Miller, hailed as a potential savior for (Nasdaq: PCLN) when the e-tailer hired her last year as chief financial officer, said Wednesday she has taken a job in the insurance industry….

The 47-year-old Miller joined professional services giant Marsh & McLennan (NYSE: MMC). Effective next week, Miller will serve as vice chairman of Marsh, Inc., the company’s risk and insurance division based in New York City….

Extending a Trend

In announcing Miller’s hiring, Marsh & McLennan barely acknowledged her dot-com experience. In fact, Miller’s eight months at Norwalk, Connecticut-based Priceline got merely a one-sentence mention at the bottom of Marsh & McLennan’s press release, which focused on her tenures at other financial services companies, including Citigroup, Travelers and Solomon Smith Barney.

“She has the right combination of skills and experience in the professional services and financial services industries to make a significant contribution,” said Marsh & McLennan CEO John T. Sinnott, Miller’s new boss….

Departed Amid Layoffs

Miller quit Priceline in November, concurrent with what would become one in a series of layoff announcements from the e-tailer.

A week later, Priceline said it would forgive a $3 million loan it had made to Miller, raising questions about whether she had left of her own accord or had been forced out.

Continued at Heidi Miller


June 19, 2001

From Pollution Litigation Review – by Charlie Kingdollar:

Investors file suit against Marsh & McLennan over asbestos losses

On June 19, 2001, it was reported that 104 investors of Lloyd’s of London have filed suit against Lloyd’s brokers alleging that they deliberately concealed the extent of asbestos losses facing Lloyds.

The investors have filed suit in New York against Marsh & McLennan Cos. Inc. and Marsh’s wholly owned agents Marsh Inc., Guy Carpenter & Co. Inc., Bowring & Co. Ltd. and Sedgwick Group PLC.

According to the investors, Marsh has been the sole broker for Johns Manville since 1943….


From the Racketeer Influenced and Corrupt Organizations (RICO) lawsuit: Harmon v. Federal Insurance Co, Marsh & McLennan, Inc., Trustees of Kamehameha Schools/Bishop Estate, Pricewaterhouse Coopers, et al: . . .

Defendant Marsh & McLennan Companies, Inc. (M&M) is the world’s largest insurance brokerage firm that conducts business throughout the United States and in many foreign countries, and is a licensed General Agent for Federal in the State of Hawaii.

On or about May 25, 1994, Plaintiff, in his capacity as Risk/Insurance & Safety Manager for KSBE, obtained a Captive Management Fee Proposal from Peter Lowe, VP, M&M Insurance Management Services, Inc. (M&MIMS), which detailed their proposed services and fees for managing P&C. Their services were to be on a time and expense basis, with an estimated annual cost of around $70,000. There was no mention in this proposal that their related subsidiary, M&M, would charge an additional flat annual fee of $200,000 for providing “brokerage”, “risk management” or other purported services to the captive.

This proposal, the subsequent contract, and periodic invoices from M&MIMS and M&M were transmitted by mail and/or wire. Plaintiff relied upon this proposal, its costs and representations, as an inducement to contract for these captive management services. Plaintiff alleges that M&M’s failure to disclose in their proposal an additional flat annual fee of $200,000 constitutes wire fraud, mail fraud, fraudulent inducement and misrepresentation.

Defendants M&M and M&MIMS, their employees, Rocco Sansone and Peter Lowe, and others in their organizations benefitted financially from these excessive fees in the form of salaries, commissions, bonuses, or other manner of compensation. Plaintiff alleges that M&M’s acts in collusion with some or all of trustees of KSBE, with officers and directors of P&C, and with Federal constitutes a conspiracy to defraud P&C and the beneficiaries of the Estate of Bernice Pauahi Bishop; racketeering; mail fraud; wire fraud; extortion; and violations of the “interim sanctions” regulations of the IRS….

(Catbird Note: A former M&M employee, Christine Lee, replaced Harmon as KSBE’s Risk Manager in 1997, but has since left. Rodney Park, KSBE’s head of the Administration Group and one of the co-investors in the McKenzie Methane deal, replaced Harmon as President of P&C. Rodney Park has since left KSBE. M&M was eventually replaced by AON as the insurance broker for KSBE, and the captive manager for P&C. Rodney Park was replaced by Clyde Mark, former risk manager for Outrigger Enterprises. Clyde Mark left in early 2004, reason unknown….)

See also: Claims By Harmon; Confessions of a Whistleblower; The Harmon Chronicles; The Harmon Arbitration


January 23, 1996

Insurers of Merrett agents
declare policies invalid

Financial Times

Managing agents at Lloyd’s of London facing claims by hard-hit investors in the Merrett syndicates have been told that their insurance policies against such actions are invalid.

Solicitors for the insurers said yesterday that because the judgement in the Merrett case found that investors had been “wilfully” misled, the errors and omissions policies were void.

The move will be challenged vigorously by the agents and by Merrett Names – the investors whose assets have traditionally supported the insurance market. If the insurers are successful the move could expose other parties to the action to potentially higher claims – especially Ernst & Young, the Merrett syndicates’ auditors.

In November the High Court ruled in favour of 2,000 Names on Merrett syndicates, having seen fresh evidence of negligent practice at the market.

The Merrett case centred on “run-offcontracts agreed in the early 1980s by which Merrett Names took on responsibility for claims outstanding on policies sold by other insurers. These left Merrett Names facing rapidly escalating bills for unforeseen US asbestosis and pollution claims.

For the first time auditors were also found to be negligent – paving the way for all auditors involved in litigation to make contributions to the market’s recovery plan.

A number of Lloyd’s agencies handling Names’ funds and Mr Stephen Merrett, the underwriter and former deputy chairman of Lloyd’s, were also found negligent in the way that they had handled their business.

Clyde & Company, solicitors to the errors and omissions insurers, said: “This is not something that we have relished. The judgement was so fierce – we have been driven to take this step.” The solicitors confirmed that the Merrett managing agency had been informed the cover was “void”.

“This was prompted by the very trenchant findings of the judge about the behaviour of the Merrett managing agency – particularly that they wilfully withheld information in some matters.”

Clyde & Company said: “The terms of the judgement took our clients by surprise. The strong implication is that if the Names were kept in the dark – then so were the underwriters.”

Mr John Mays, the chairman of the Merrett Names association, said: “They have given us notice of this but we will of course dispute it. We are not pleased, but it is not a shattering blow – it is an encumbrance.”

Mr Nick Land, senior partner of Ernst & Young, said: “The whole thing is still a moving feast but this does indicate the uncertainty which springs from the injustice of joint and several liability.”

The parties in the Merrett case are attending hearings in the High Court which will decide the principles on which damages will be set. Names want an interim payment while seeking total damages of up to £300m.

See also: Henry Peters


January 30, 1996

Annual Meeting of the Institute of London Underwriters:

Statement by the Chairman, Mr L N Campbell

The ILU’s value and influence

Last year I referred to the agreement between Nationale Nederlanden and the ILU regarding claims arising on certain Institute policies issued on behalf of the Orion Insurance Company and the London & Overseas Insurance Company, both of which, as you know, are in provisional liquidation.

To date, the funds remitted to policyholders under the facility are just short of US $36 million.

You will know too that English & America Insurance Company, a former member of the ILU, is also in a scheme of arrangement.

As a result of an agreement with a former owner, Marsh McLennan, holders of ILU policies during the time that Marsh McLennan owned the company are having their claims paid in full.


May 11, 1998

Insurance Brokers’ fire-levy scheme may be fraud – does this create conflict of interest?

An indemnity scheme for fire-levy avoidance, advocated by an insurance broking firm, may be a fraud on the Fire Service Commission, according to advice from the Crown Law Office.

A letter from Crown Counsel E Aspey of 3 November 1997 states, “[What] [unnamed firm] advocate would consist of contracts made with the purpose of evading all or part of the levy properly payable to the Fire Service Commission, pursuant to s 48. That, it seems to me, may arguably involve the commission of a fraud on the Fire Service Commission and the public.

“If, therefore, those contracts of insurance were made with, or for, that fraudulent purpose then, I understand, they would be illegal at law; and, by virtue of s 6(1) of the Illegal Contracts Act 1970.”

“I have been reliably informed, and inferences that can be drawn from Ministerial briefing papers support this, that there is little doubt that the firm referred to is Marsh McLennan,” says Alliance MP Grant Gillon.

“The letter that sparked this interest is from the unnamed company to its clients and dated 20 September 1996. The current chairman of the Fire Service Commission, Roger Estall, was a director of Marsh McLennan at that time.

“Further, I have written documentation that shows Mr Estall will return to Marsh McLennan as a director as soon as his term on the commission concludes. He is currently advertised as being a managing consultant for Marsh McLennan.

“If the unnamed firm is Marsh McLennan, this would show an obvious conflict of interest.

“If this is so, the conflict of interest must not be allowed to continue.

“Mr Estall must resign, or be sacked.”

Mr Gillon wants a new chair appointed to the Fire Service Commission.

“The commission needs a person as its chair who actually knows something about firefighting and the wider issues of the service.

“The person also has to have the guts to proceed with an immediate independent audit of insurance brokers and their clients.

“Until that happens, the public’s fire service will continue to miss out on the estimated $150 million levy shortfall that has been lost for each of about the last six years.”


From the 10/14/99 edition of The Honolulu Star-Bulletin by Russ Lynch: Isle Insurer Sues State for Snub in Bidding.

A Honolulu insurance business is suing the State of Hawaii, charging that it was improperly dropped out of the running for work as an insurance broker for the state government.

Aon Risk Services, Inc. filed suit in Circuit Court yesterday accusing the state Department of Accounting & General Services of bypassing the steps the state spelled out in its request for proposals to provide risk insurance for the state… John D. Beck, president of Aon Risk, said the company is charging that the state “summarily rejected” Aon’s proposal, contrary to the recommendation of a selection committee, and “arbitrarily selected another brokerage firm,” Marsh USA, Inc….

For more, GO TO > > > The Poop on Aon; More Claims … Aon


February, 2000

How George W. Bush Got Rich

A heartwarming tale of influence, cronyism, and $1.7 billion

by Joe Conason, Harper’s Magazine

On December 6, 1994, one month after he defeated Ann Richards to become governor of Texas, George W. received a large but belated campaign contribution from an acquaintance named Thomas O. Hicks….

Of the scores of appointments made by an otherwise weak governor under the Texas constitution, a seat on the University of Texas Board of Regents is among the most desirable. It carries significant prestige, opportunities for patronage, and preferred access to coveted season tickets (or luxury boxes) at Longhorn football games.

For someone like Tom Hicks, however, being a regent provided something far more valuable than any such trifling tokens of status. The prolific Hicks had conceived an ambitious plan for the state university system’s financial assets — more than $13 billion — that matched his own bold investment style, and, with the governor’s support, he parlayed his appointment into a position of unprecedented control over the university funds.

While the University of Texas invested hundreds of millions of dollars with Republican-linked partnerships under the guidance of Tom Hicks, it also placed hundreds of millions of dollars more with his friends and associates as well as with firms that did business with Hicks, Muse….

Two former classmates of Hicks’ at the University of Texas also were awarded large investments by UTIMCO. One was his old fraternity brother Bruce Schnitzer, a New York insurance man who set up Wand Partners, which received more than $60 million in at least three separate deals with UTIMCO between 1996 and 1998. Schnitzer’s record of success was mixed at best; his companies’ rates of return lagged behind the Dow average….

Nor was it reassuring that he had resigned in 1985 as the president of Marsh & McLennan, then the world’s biggest insurance brokerage, after the company lost $165 million in unauthorized trading and was fined by the New York State insurance department.

Despite those problems, Schnitzer maintained close connections not only with Hicks, Muse but with Richard Rainwater and the Bass family. After quitting Marsh & McLennan he had done multimillion-dollar deals with all of them, including one of the first major partnerships put together by Hicks, Muse….

* * *

(A Catbird Note: Texas University Investment Management Co. is one of the largest institutional investors in Bedford Property Management. Other large institutional investors in Bedford are Barclays Bank and Invesco Management & Research. Among the largest institutional investors in Marsh & McLennan are Barclays Bank and Invesco. Bedford is one of the nation’s largest real estate development and property management companies, doing millions of dollars a year in business with Bishop Estate.)

For more, GO TO > > > Broken Trust; Dirty Money, Dirty Politics and Bishop Estate


January 24, 2000

German Inquiry Hints at Old Boy Network

By Joseph Fitchett, International Herald Tribune

PARIS – Germany’s political funding scandal shows signs of bringing to light a political culture that has grown up outside the public eye and runs counter to Germany’s reputation for transparency in its governing practices.

The parliamentary inquiry that gets into full swing this week will investigate not only former Chancellor Helmut Kohl but also a wider cast of prominent Germans, according to officials close to the process. If the investigation reveals influence peddling with the slush funds, and not just a practice of topping up campaign war chests, the dimensions of the scandal could escalate and lead to a crisis of confidence in the system of political parties in Germany.

So far, allegations have surfaced about at least one insider, Walter Leisler Kiep, a well-known international figure in the German and U.S. power elite, who is under investigation in connection with the transfer of a suitcase of cash from an arms dealer in 1991 – the incident that led to the discovery of the slush funds.

Often described simply as a former treasurer of the Christian Democrats, a description suggesting an obscure party bureaucrat, Mr. Kiep is in reality a much larger figure. A successful businessman, he has also been an international go-between with wide connections throughout the German and U.S. establishments.

For decades, he has enjoyed access to top corporate management and academic institutions in both countries, chairing the international advisory board at Marsh & McLennan, the giant U.S. brokerage, until the end of last year. He has been a pillar in the sophisticated institutional world of private trans-Atlantic exchanges via the organization he headed, Atlantik-Brucke.

The investigation surrounding Mr. Kiep involves a possible charge of tax evasion in connection with a suitcase of money handed over in a parking lot in Switzerland by Karlheinz Schreiber, an arms dealer who is now in detention in Canada. Mr. Kiep has maintained that he passed along the funds to the Christian Democrats as a contribution for which other party officials were responsible….

But the still murky transaction in Switzerland – which Mr. Kiep insisted involved payment not to himself but to the Christian Democrats under Mr. Kohl – has been widely portrayed in the German and international media as linked to an arms sale to Saudi Arabia that required Kohl government approval. Mr. Kohl has denied that he was influenced by any payment over the arms sale or any other political decision.

Mr. Kiep has denied any knowledge of improprieties in connection with the payment he passed on or any close acquaintance with the contributor who turned out to be an arms dealer. But Mr. Schreiber told a German newspaper, Bild, that he subsequently met Mr. Kiep again at an event sponsored by Atlantik-Brucke.

No suggestion has surfaced that Mr. Kiep used his position at Atlantik-Brucke or corporate access to facilitate bribes from the United States – which has had tough anti-corruption laws since a rash of arms-related scandals in the 1970s – or any wrongdoing of the sort that has led to Mr. Kohl’s embarrassing discrediting.

But Americans and Germans closely acquainted with Mr. Kiep say that his role – simultaneously fund-raiser for a political party, prominent corporate leader and philanthropic promoter of international cooperation – runs counter to perceptions about the separation of politics and business in Germany and points up the existence of an extensive ”old boy network” among Bonn politicians that was never apparent to voters.

Beyond the Schreiber incident, the current inquiry is expected to investigate alleged kickbacks, perhaps running to millions of dollars, during the privatization of the oil industry in former East Germany. French and German intermediaries under investigation by Swiss magistrates were quoted by Le Monde in Paris as saying that Mr. Kohl’s demand for payments was pressed on French officials by a company run by Mr. Kiep.

Whatever the outcome of the investigation, the mingling of business and politics at the top of the Christian Democratic party has already jolted perceptions in Germany. The notion that their country has a clear separation of government and business is part of the reason most Germans have prided themselves on thinking that they have cleaner politics than other European countries.

In practice, German political life and corporate business have overlapped via an elite that includes Mr. Kiep….

Trim and patrician at 73, Mr. Kiep has been an influential figure for decades in the rarefied world of elite trans-Atlantic contacts. In 1984, he took charge of Atlantik-Brucke, a privately funded body designed to promote closer ties, in meetings largely out of the public eye, among government officials and business and financial communities in the United States and West Germany.

In the course of a business career that took him to the top of a German insurance company, he always worked closely with American companies, including a stint as an executive in West Germany for Marsh & McLennan. The American company took over a German brokerage in which Mr. Kiep was a senior partner in 1990 until his retirement in 1996.

On the U.S. side of Marsh & McLennan, Mr. Kiep was chairman of the company’s international advisory board – a group of dozen influential people from outside the United States – before his term ended on schedule in December.

He has served on similar bodies at Columbia University and other American and German academic institutions. He kept all of these positions during a criminal trial that ended last year – with his discharge – over alleged financial malfeasance when he was party treasurer for the Christian Democrats. . . .

In Germany, the old boy network has been less visible than elsewhere in Europe, specialists said, because the country’s postwar political system is meant to have special democratic openness marked by the absence of privilege.

This helps explain why the Christian Democrats’ practices have stunned Germans. ”It’s a challenge to the German system and requires the country to come up with a new generation of political leaders and move toward a real meritocracy that can maintain its credibility,” said Catherine Kelleher, a former U.S. government official who heads the Aspen Institute in Berlin.

Karl Kaiser, head of the German Foreign Policy Association, said the revelations were pivotal because they contradicted Germans’ ”pride in having a modern approach to political party funding that was well policed and beyond reproach.”

He said the scandal would affect leftist parties, too. The governing Social Democrats’ reactions have been muffled, he said, because ”they fear the impact on younger voters and realize that the crisis is bound to impact our entire political culture.”


Footloose and Taxfree

A syndicated monthly column by Miami-based Offshore Business News & Research Inc.

November, 2001 edition

Billions of new capital flows into
Bermuda’s insurance market

Billions of dollars of new capital is flooding into the Bermuda insurance and reinsurance market as existing firms seek to replenish reserves and Wall Street seeks to take advantage of soaring rates in the wake of the September 11 terrorist attacks in the United States. So far, plans have been disclosed for four new reinsurers with combined targeted capital of more than $3.5 billion, while existing firms have raised or are raising over $2.2 billion in securities offerings.

It is the Third Wave of new capital to flow into the Bermuda market over the last 15 years. In the mid-1980s, the asbestos crisis led to the formation of ACE and EXEL; in 1992/93, Hurricane Andrew led to the formation of several massive property catastrophe reinsurers and, now, the terrorist attacks are leading to the current activity.

The backers of the new firms include blue-chip firms such as Goldman Sachs, Marsh & McLennan, American International Group and Chubb Corp.

Meanwhile, Bermuda’s insurers and reinsurers have taken massive hits in the Third Quarter as a result of the World Trade Center incident. XL Capital reported a quarterly loss of $840 million, ACE lost $442.6 million and IPC Re lost $69 million….

For more on the 9-11 terrorist attack and the cover-up in progress, GO TO >>> Axis of Evil; The Eagle Hooded


NOVEMBER 7, 2001 < < < (Note the date!)



Philippine Center for Investigative Journalism

This three-part story documents what has been called a “never-ending scam.” It tells how the Government Service Insurance System (GSIS), in collusion with local brokers and some of the world’s biggest insurance firms, has charged hefty commissions from overpriced insurance sold to government agencies.

The GSIS is mandated by a 1951 law to insure all state assets. The state pension fund has taken advantage of this monopoly to issue inflated insurance policies, usually in connivance with the top finance people of the insured government agencies.

The series cites the particular case of the National Power Company (Napocor), whose officials allege that the $14-million insurance it got from the GSIS last year was overpriced.

In September, Napocor did what no other government agency did before: it charged the GSIS at the Presidential Anti-Graft Commission and the Insurance Commission. It also accused two of the world’s biggest insurance brokers – Jardines and Marsh & McLellanof complicity in the deal.

Parts 2 and 3 of the series shows how the current GSIS chief, Winston Garcia, appears to be bent on going on with “business as usual” as far as GSIS insurance transactions are concerned.

The series also explains how Garcia – who in the past transacted reinsurance deals with the GSIS through a well-known insurance agent – has been partial to Jardines, which in 2000 earned a hefty $3.3 million in commissions and fees from Napocor’s account. Napocor alleges that the contract was overpriced by nearly $8 million.

~ ~ ~

FOR years, local firms in collusion with some of the biggest insurance companies in the world, including the likes of the British company Jardines, have fattened themselves from bloated premiums and commissions from government agencies.

Their accomplice: no less than the Government Service Insurance System (GSIS).

Republic Act 656, enacted in 1951, gave the state pension fund the sole authority to insure all property owned by the government – from power plants to roads and bridges to office buildings.

The GSIS estimates it currently insures P1.5 trillion worth of state assets. To limit potential losses from such a big exposure, it passes on much of the risks to private insurance companies that then “reinsure” what the GSIS had not covered. The GSIS employs the services of brokers that negotiate with private reinsurers, most of them based in London, the world’s insurance capital.

“The spirit of the law gave GSIS the advantage of a monopoly for it to be in a position to command rates in the market that will benefit the government,” says Honesto General, an insurance columnist and president of the Association of Insurance Brokers of the Philippines (AIBP).

But, says General, this has not been the case. Rather than using its monopoly to bargain for better rates, the GSIS has conspired with private brokers and reinsurers to skim off huge commissions that can be made from fat insurance premiums.

The GSIS, says Senator Sergio Osmeña III, has been part of “a never-ending scam” to defraud the government through inflated insurance fees.

Private insurers interviewed for this report say that since the Marcos administration, insurance firms and their brokers have made a killing on GSIS reinsurance contracts.

These brokers normally set aside huge entertainment allowances to wine and dine officials of the GSIS and those of the insured government agencies, says a long-time insurance consultant who asked not to be named.

The GSIS, say several sources in the insurance industry, has consistently charged government agencies overpriced insurance premiums so it could pay fat commissions to favored brokers and reinsurers.

Such overcharging is done with the collusion of the top finance people of the insured government entities, who inflate the losses on insured properties to justify higher premiums….

Ultimately, the high cost of insuring government property is borne by the public, either in the form of higher government fees or of deteriorating public services.

Osmeña says the scam continues because the public is not interested in the esoteric workings of the insurance industry. The reinsurance process is also made up of layers of deals, making it difficult to track down the extent of the fraud.

In 1994, a team from the Commission on Audit (COA) tried to go to London to investigate the reinsurance fraud, COA auditors say. This was after they had uncovered huge losses in the GSIS arising from premium advances to favored brokers, and unpaid insurance claims.

COA found that when the insurance claims of some government agencies rose, these brokers suddenly declared bankruptcies, leaving huge unpaid claims in the books of GSIS and the state agencies insured.

The Senate also did a probe in 1996, on the basis of a COA report that showed the GSIS had more than P500 million in uncollected claims from foreign and local reinsurance firms as of end-1994.

As a result of the Senate probe, the GSIS charter was amended in 1997, placing its investment activities under the Insurance Commission’s watch. Still, this did not plug the loopholes that made connivance on reinsurance deals possible.

Osmeña, who was a member of the joint Senate committee investigation in 1996, likened the reinsurance scam to the Russian matrushka doll. “Once you opened it, you end up discovering another doll inside. You won’t know how deeper it goes.”

Osmeña said close friends of Marcos cronies had set up reinsurance brokers with British-sounding names to create the illusion they were reputable members of the Lloyds Group of London. With the collusion of GSIS officials, these local brokers overpriced the insurance premiums on government property and got fat commissions, he said.

By the time the insured agencies filed huge claims, some of the reinsurance brokers had closed shop. For years, these brokers merely paid smaller claims out of the premiums from the insured state agencies but did not set aside a buffer to cover huge losses. When the claims mounted, they delayed payment as long as they could until they went belly up….

The GSIS advances the payment of insurance premiums and commissions to the reinsurance brokers and companies even before it gets paid by the insured government agencies. These receivables are treated in the GSIS books as part of current assets instead of money due from the reinsurers, which would be reflected as current liabilities. The simple accounting trick thus creates an illusion of improving financial health.

As of end-1999, GSIS reported only P432.6 million in premiums due from reinsurers, while P1.4 billion were booked as premiums receivable. A request for the latest figures was denied.

In 1994, COA already recommended a ban on the practice of advancing payment. Back then, the practice was carried out in reverse: when the insured government agency files a claim, GSIS would pay its share of the risk and advance that of the reinsurers.

COA discovered the scheme when the GSIS booked a “staggering” P666.5 million in 1994 as outstanding claims from 117 reinsurance firms and brokers. Of the amount, 81 percent was due from only 10 favored companies. Not all of the claims were recovered as some of the companies had collapsed.

COA said in effect this practice made the GSIS absorb all the risks instead of reinsuring them.

Even if this were done in reverse, GSIS also in effect assumes all the risks when it advances the premiums to favored reinsurers and brokers. But there is a reason for this: as soon as the GSIS releases the premiums to brokers, commissions are paid out.

Unfortunately, the other side of the deal does not usually move as fast: the payment of claims to the insured government agencies.

The scheme, coupled with allegations on favored brokers, would have gone unnoticed were it not for Napocor president Jesus N. Alcordo. He was scraping the barrel of Napocor’s finances when he discovered that the state power firm has accumulated $41 million (around P2 billion) in insurance claims from GSIS in the past five years.

Intrigued, Alcordo ordered a closer look into the five-year history of the insurance policy and found that the contract was “seriously overpriced.” He says: “I was shocked with what I discovered.”

Alcordo accused the world’s biggest foreign reinsurance brokers – Jardines and Marsh & McLennan “with possible complicity of the underwriting companies and syndicates involved in the reinsurance placement” of Napocor’s $10-billion assets last year.



December 21, 2001

S&P comments on Enron-related insurer lawsuits

NEW YORK (Standard & Poor’s) Dec. 21, 2001 – Standard & Poor’s today commented on the insurance industry in the wake of J.P. Morgan Chase & Co.’s announcement that it has filed lawsuits against several large insurance companies – including Chubb Corp., CNA Financial Corp. and Travelers Property Casualty Corp.

These insurers had issued surety bonds that guaranteed various assets of Enron Corp., which filed for bankruptcy earlier this month.

At this time, it is unclear what impact, if any, these lawsuits will have on the ratings on various insurers. Standard & Poor’s will continue to monitor the situation, particularly with respect to the insurers that are the largest issuers of surety bonds, and will make further comments when appropriate….

Copyright 2001, Reuters News Service


December 21, 2001

XL exposure to Enron $75 million

(Business News) – Contrary to earlier indications, XL Capital Ltd. said its exposure to claims arising from the bankruptcy of energy trader Enron Corp (ENE) might total $75 million, but it said it could not yet estimate its Enron losses.

XL said it faced about $45 million in exposure to surety bonds and could face further large payouts on liability policies if Enron’s directors are successfully sued….


* * *






A. J. C. Smith – Chairman of the Board and CEO of Marsh & McLennan Companies from 1992 to 2000. Mr. Smith is a trustee of the various mutual funds managed by Putnam Investment Management, Inc., a subsidiary of MMC.

In 1998, A.J.C. Smith raked in $6.5 million in salary, bonus and other compensation from Marsh & McLennan Companies. Add to that $11.3 million in stock option grants, and Mr. Smith goes to Washington with a total of $17.9 million. He also has $25.2 million in unexercised stock options from previous years.

On Nov 18, 1999, the Board of Directors of Marsh & McLennan Companies elected Jeffrey W. Greenberg as CEO to succeed A.J.C. Smith, age 65, who will remain chairman of the board until he retires from the company at its 2000 annual meeting. It was announced that Mr. Smith will continue as a member of the company’s board….

For more, GO TO > > > A.J.C. Smith


Adele Smith Simmons – Director of Marsh & McLennan Companies since 1978. President of the John D. and Catherine T. MacArthur Foundation from 1989 to 1999. She is also a director of the Synergos Institute and the Union of Concerned Scientists and a member of the Council on Foreign Relations.

Simmons presided over the MacArthur Foundation’s billions during the period when most of the foundation’s Florida real estate was sold off — the last of which was sold to WCI Communities at the same time Ms. Simmons announced her decision to resign as president of the foundation….

For a quick course in HOW TO MAKE MILLIONS FROM NON-PROFITS, using simple illustrations of the MacArthur Foundation, Kamehameha Schools and the Hershey Trust, GO TO > > > How to Pluck a Non-Profit

For more, GO TO > > > Adele Smith Simmons


Conseco, Inc. – Indiana-based insurance company.

August 14, 2002

Putnam may suffer as
Conseco’s troubles mount

By Svea Herbst-Bayliss

BOSTON, Aug 14 (Reuters) – Mutual fund firm Putnam Investments, already facing declines in money management fees, may suffer another blow this quarter as a stake in insurer Conseco Inc is likely to shave millions off its pre-tax income.

In a regulatory filing, Putnam’s parent, No.1 insurance broker Marsh & McLennan Co., said owning a stake in the ailing Carmel, Indiana-based insurer and financial company could cost the Boston-based money manager up to $15 million….

Conseco last week missed a bond interest payment and said it plans to extend three more bond interest payments due later this month as it begins work on restructuring its huge debts.

Putnam is entangled in the Conseco saga because it owns an equity interest in Boston-based buyout firm Thomas H. Lee Partners, L.P. whose Thomas H. Lee Equity Fund IV L.P. owns a chunk of Conseco’s public stock.

“The significant capital restructuring that may result from the actions announced by Conseco may adversely impact the value of Fund IV’s investment in Conseco, and consequently the value of Putnam’s investments related to Fund IV,” Marsh said in the filing….

The news comes at a critical time for Putnam as America’s fourth-biggest fund firm’s portfolios take a battering in the stock market’s relentless declines.

The firm drew heavy criticism for its decision to stop naming individual fund managers of its funds, a step that some firms had hoped would keep them out of the limelight when managers quit or are fired.

Amid investor complaints, Putnam quietly reversed itself and went back to naming fund managers earlier this summer.

Putnam’s woes have already hampered Marsh & McLennan’s earnings in the second quarter when money management fees fell even though insurance-related revenues offset the drop….

In the second quarter, investment management revenue at Putnam fell to $581 million from $696 million a year ago while average assets under management, used to calculate fees for managing money, slumped 11 percent to $301 million.

Putnam’s growth funds, once a main money maker, have been a particular trouble spot as assets under management there tumbled to $39 billion from $76 billion over the year. Putnam has also laid off scores of employees to help trim costs.

Conseco’s troubles have also deepened in the last weeks and on Monday the New York Stock Exchange moved to kick it off the exchange after it suspended trading its stock which was last quoted at 34 cents a share. REUTERS

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September 11, 2001 <<< (Note the date ! ! !)

Conseco Sues Six D&O Insurers Over Litigation Coverage

Conseco Inc. is suing six of its own insurers, claiming they are attempting to dodge legitimate potential claims on directors and officers policies bought by the Indianapolis-based insurer.

In its annual 10-Q filing with the U.S. Securities and Exchange Commission, Conseco said it “maintained certain directors’ and officers’ liability insurance that was in force at the time the Indiana securities and derivative litigation was commenced and, in our view, applies to the claims asserted in that litigation,” according to BestWire.

The Indiana litigation involves 45 lawsuits filed against Conseco in U.S. District Court for the Southern District of Indiana. Conseco said 19 of those cases were putative class actions on behalf of people or entities that purchased the company’s common stock during alleged class periods that generally run from April 1999 through April 2000.

In those cases, plaintiffs allege that the company and individual directors and officers violated federal securities laws by, among other things, making false and misleading statements about the then-current state and future prospects of Conseco Finance – particularly with respect to performance of certain loan portfolios of Conseco Finance – which allegedly rendered the company’s financial statements false and misleading.

Because it had directors and officers coverage, Conseco didn’t establish any reserves for possible losses with respect to those claims, the company said in its 10-Q. “The insurers have denied coverage for those claims, so we commenced a lawsuit against them on June 13, 2001, in Marion County Circuit Court in Indianapolis,” Conseco said.

Named as defendants are National Union Fire Insurance Company of Pittsburgh, a subsidiary of American International Group Inc., Royal Insurance Company of America, a unit of Royal & Sun Alliance; Westchester Fire Insurance Co., a unit of Ace Ltd.; RLI Insurance; Greenwich Insurance Co., a unit of XL Capital Ltd., and HSBC Insurance Brokers Ltd.

Morgan Stanley analyst Alice Schroeder, in an Aug. 31 property/casualty insurance briefing, wrote that she doesn’t believe an unfavorable outcome for the defendants would have a material impact on the earnings of AIG, XL or Ace.

Schroeder said in her report that AIG’s National Union Fire “was apparently the primary carrier issuing the policy, which carries limits of $10 million.”

“With jury awards rising at a rapid pace, insurers are getting tougher to protect against larger losses–whether they succeed remains to be seen,” Schroeder said in her report. “This event also confirms our view that the D&O market remains difficult, and prices must continue to rise.”…

See also: Putnam Investments

For much more on Conseco, GO TO >>> Birds in the Trailer Park


Craig Stapleton President of Marsh & McLennan Real Estate Advisors, Inc.

From Identities of George Bush’s 115 Pioneers

Each ‘Pioneer’ has raised at least $100,000 for Bush’s Presidential Campaign…

Craig & Dorothy Stapleton, Greenwich, CT – Executive, Marsh & McLennan Companies – Contributions to Bush’s Gov. Races: $10,000.

* * *

October 14, 2004

White House For Sale



Craig Stapleton worked in the White House of the first President Bush (who appointed him to the Peace Corps board) and married the second President Bush’s cousin, Dorothy.

From 1982 until President George W. Bush nominated him as U.S. Ambassador to the Czech Republic in 2001, Stapleton was president of Marsh & McLennan Real Estate Advisors, the leasing unit of Marsh & McLennan Companies. Stapleton also invested with Bush in the Texas Rangers ball team that made Bush a millionaire 15 times over.

Bush’s profits got a boost from the other partners, who gifted him extra equity in the deal, and by local taxpayers, who paid $135 million for the team’s new stadium.

When the hospitality division of the Blackstone Group investment bank merged with CUC International in 1997, CUC designated Stapleton as one of its directors on the board of the new Cendant Corp. The following year, Cendant slashed its reported earnings over the past three years by $650 million due to massive accounting fraud at CUC.

With Stapleton, ex-Defense Secretary William Cohen and ex-Canadian Prime Minister Brian Mulroney on its board, Cendant then settled investor lawsuits for a record $3.1 billion.

That same year, Stapleton organized a 1998 Bush fundraiser that netted $250,000.

Stapleton’s longtime employer owns Marsh Mercer Consulting Group and Putnam Investments. After Massachusetts regulators issued subpoenas in 2003 to probe allegations that Putnam gave special privileges to elite mutual fund investors, the company fired 15 employees for personally profiting from rapid-fire, “market-timing” trades in Putnam mutual funds and then fired Putnam CEO Lawrence Lasser.

In 2004, research firm Morningstar, Inc. ranked a college savings plan that Putnam administers in Ohio as one of the five worst in the nation due to the excessive fees that it reaps from these educational accounts.

Marsh & McLennan had almost $2.5 million in federal contracts in fiscal 2002, mostly with the Treasury Department.

For more, GO TO > > > Craig Stapleton


Gwendolyn S. King – A director of Marsh & McLennan Companies since 1998 and member of President Bush’s Commission to Strengthen Social Security.

From MMC’s web site:

Director of Marsh & McLennan Companies since 1998. Ms. King, age 60, is president of Podium Prose in Washington, D.C. She was senior vice president, corporate and public affairs at Peco Energy from 1992 until 1998. From 1989 to 1992, she served as commissioner of the Social Security Administration in the U.S. Department of Health and Human Services. Ms. King is a director of Lockheed Martin Corporation, Monsanto Company, Pharmacia Corporation and the National Association of Corporate Directors and a member of the George Washington University Council on American Politics.

For more, GO TO > > > Gwendolyn King


Heidi Miller – Marsh executive who came from and Citibank.

November 22, 2000

Priceline Forgives $3M Loan
To Ex-Exec

Clare Saliba, E-Commerce Times

Claims that a CFO left on her own raise questions about the decision not to collect on the loan. Despite a string of well-publicized financial reversals, name-your-own price e-tailer has agreed to forgive a US$3 million loan it extended to a former top executive and will incur a roughly $3.3 million charge in the fourth quarter as a result.

According to published reports, the loan was made to Heidi Miller, who served as a senior executive vice president and chief financial officer until she left the company earlier this month. A highly regarded finance chief who had come to the company from Citibank, Miller departed after Priceline announced it was slashing 16 percent of its workforce in its continuing bid to trim operating costs….

For more, GO TO > > > Heidi Miller


Henry Peters – Ex-trustee of Kamehameha Schools/Bishop Estate.

From the RICO lawsuit : Civil No. CV 99 00304-DAE – Harmon v. Federal Insurance Co., P&C Insurance Co. Inc.; Marsh & McLennan, Inc., PricewaterhouseCoopers, et al:

Defendant Trustee Henry H. Peters, was appointed in 1984 by the Justices of the Supreme Court of the State of Hawaii, acting as individuals, and was entrusted with the fiduciary duty to administer the Estate of Bernice Pauahi Bishop for the education of the children of Hawaii…

Defendant Peters is also Chairman of the Board of Directors of P&C. Peters has also served on the Board of Directors of Mid-Ocean Reinsurance Co. (a Bermuda company); Underwriters Capital (Merritt) Insurance Co. (a Bermuda company); SoCal Holdings, Inc.; and numerous other companies owned by, or related to, KSBE….

Beginning around March 1996, Harmon began questioning what appeared to be excessive premium charges being made by Marsh & McLennan … and for fees M&M was billing to P&C.

For the next several months, Plaintiff was subjected to threats, intimidation and various abuses from Aipa and Kam for questioning the excessive fees of M&M… Harmon asked Aipa about the status of his transfer (to P&C). Aipa’s response was that it wasn’t going to happen because “arms-length was no longer an issue,” (referring to previous legal opinions from Price Waterhouse that the IRS might revoke the Trust’s tax-exempt status if it did not maintain arms-length from its taxable subsidiaries)….

* * *

From Honolulu Star-Bulletin, 4/14/99, by Rick Daysog:

EMBATTLED EMPIRE . . . Larry Landry, former chief financial officer for the $4 billion John D. and Catherine T. MacArthur Foundation, which is a co-investor with the estate in a Boston-based investment fund and a Florida apartment complex, describes Peters as a savvy and thorough investment manager. . . . Deal promoters often approach large foundations and charitable trusts thinking they have deep pockets. But Peters brings a healthy skepticism to anyone who brings an investment to the estate, according to Landry. . . .

“Henry is extremely bright and has the right kind of conservative (investment) philosophy,” said Landry, who now serves as CEO of Florida-based Westport Realty Advisers.

Peters, charges stand out in lengthy Bishop Estate investigation. The state’s exhaustive investigation into the Bishop Estate appears to focus on trustee Henry Peters as a central figure in the two-year controversy that’s rocked the multibillion-dollar charitable trust….

In a September Probate Court petition to permanently remove several trustees, Attorney General Margery Bronster alleged that Peters took part in repeated acts of self-dealing and mismanagement. The state’s charges include: … Between 1993 and 1998, Peters received options to acquire 6,000 shares of stock as well as substantial director’s fees from a Bermuda-based insurance company, Mid Ocean Ltd. The estate was a big investor in Mid Ocean. Peters has since declined to exercise the stock options, which would have been worth more that $400,000 under Mid Oceans’s 1993 merger with competitor Exel Ltd. [another Marsh & McLennan financial venture]….

* * *

Reporter Sally Apgar, in the 02/18/00 edition of The Honolulu Advertiser, revealed that the ousted Bishop Estate trustees used the trust money to “enlist” the aid of U. S. Sens. Dan Inouye and Daniel Akaka in 1995 to influence fellow members of Congress to vote against “interim sanctions” regulations that threatened the trustee’s $1 million-a-year paychecks. According to Apgar:

Thirteen confidential memos during the fall of 1995 through April 1996 detail the trustees’ strategy against the bill…

The memos express the trustees’ intent “to kill the measure” and their recruitment of influential contacts such as Inouye, Akaka and the Rev. Jesse Jackson. They also targeted others, including Sen. Daniel Patrick Moynahan of New York and even White House insiders such as Leon Panetta, then President Clinton’s chief of staff, to win support….

As previously reported, the ousted trustees hired former Gov. John Waihee and his Washington, D.C.-based law firm Verner Liipfert Bernhard McPhearson Hand to lobby against the federal legislation… Other Verner firm members enlisted in the effort included former Treasury Secretary Lloyd Bentsen of Texas, former Senate Majority Leader George Mitchell of Maine and former Texas Gov. Ann Richards….

The state Attorney General’s Office has said previously that the trust paid the firm more than $900,000 for its lobbying efforts on intermediate sanctions legislation between 1995 and 1998….

For more, GO TO > > > Henry Peters


Jeffrey W. Greenberg – From Business Wire – 11/18/99 – The Board of Directors of Marsh & McLennan Companies (MMC) today elected Jeffrey W. Greenberg CEO of the company.

Mr. Greenberg who continues as president of MMC, succeeds A.J.C. Smith, age 65, who will remain chairman of the board until he retires from the company at its 2000 annual meeting. Mr. Smith will continue as a member of the company’s board…

Jeffrey Greenberg is the son of American International Group head Maurice (Hank) Greenberg….

For more, GO TO > > > Jeffrey Greenberg


John Sinnott – Former Chairman and CEO of Marsh, Inc.

October 1, 2002

Marsh Chairman & CEO to Step Down in 2003

Marsh & McLennan Companies, Inc. (MMC) announced that John Sinnott, chairman and CEO of Marsh Inc., the company’s risk and insurance services business, will retire from the firm in July 2003.

Ray Groves, president and COO of Marsh Inc., will succeed Sinnott as CEO in January and as chairman in July 2003….

See also: Ray Groves

For more, GO TO > > > John Sinnott; Harmon’s Claim Letter to John Sinnott; Office of United States Trustee vs. Harmon: Witness John Sinnott


L. Paul Bremer – Chairman and CEO of Marsh Crisis Consulting company; Bush’s pick to be his special envoy to Iraq and “oversee its transition to democratic rule”

For more, GO TO > > > Paul Bremer


Lawrence Landry – From Journal Inquirer, 11/22/00, by Don Michak: . . . A former top official with one of the nation’s wealthiest foundations denied Tues that he was able to start his own investment partnership with $100 million in Connecticut pension money because he agreed to go along with an extortionate demand by former state Treasurer Paul J. Silvester.

But Lawrence L. Landry, who until two years ago was chief financial officer at the Chicago-based MacArthur Foundation, confirmed that he paid at least $1.09 million in “finder’s fees” to a mysterious New York investment banker, Andrew Ferdinand Moses, only after Silvester suggested that Moses was the man to help him get the state’s backing.

Landry said the corrupt former treasurer also had arranged for Moses to meet him and his associates in the Palm Beach, Fla-based Westport Senior Living Investment Fund, which buys and develops retirement communities….

A protégé and longtime business partner of Landry’s, Brad K. Heppner, heads another partnership that has received several state pension fund investments since 1987: The Crossroads Group of Dallas, Texas….

For more, GO TO > > > Lawrence Landry; A Connecticut Yankee in King Kamehameha’s Court; How to Pluck a Non-Profit; Vultures in WCI Communities


Lawrence Lasser – Putnam Investments’ ousted CEO.

November 5, 2003

Ousted CEO May Get Millions

Putnam’s former leader could receive more than
$32.7 million under an employment agreement

By Aaron Pressman, Bloomberg News

Putnam Investments’ former chief executive officer, Lawrence Lasser, who was the second-highest-paid executive at a publicly traded mutual-fund company, may be owed more than $32.7 million after Monday’s ouster amid fraud charges against the company he ran for 18 years.

Lasser, who was paid $163 million over the last six years, signed an employment agreement with Putnam in 1997 that included $15 million due when he retired, according to filings with the Securities and Exchange Commission. An amendment to the plan signed in 2000 created an additional $16.7 million payout due when the agreement expired at the end of 2005.

Lasser, 61, was forced out in the industry-wide probe of improper trading. The SEC and Massachusetts regulators have alleged that Putnam failed to prevent two former money managers from taking advantage of inside knowledge about the international funds they oversaw to generate quick profits for themselves at the expense of clients.

For more, GO TO > > > Lawrence Lasser


Lord Lang – A former secretary of state for Scotland; a Marsh & McLennan director.

November 14, 2004

Lord Lang Accused Over Marsh Fraud

By John Phelps, The Scotsman

LORD LANG of Monkton, a former secretary of state for Scotland, has become embroiled in a US class action over his role as a part-time director of Marsh & McLennan, the world’s largest insurance brokers, which has been accused of massive fraud….

It follows a collapse in shares of the company after New York’s attorney general Eliot Spitzer alleged his office’s review of documents from 2003 found that Marsh collected $800 million in improper contingent commissions – more than half of the $1.5 billion in profit it reported – last year in return for business….

For more, GO TO > > > Lord Lang


Mercer Human Resource Consulting – “The world’s largest consulting firm in their business.”

See also: Synhrgy HR Technologies

For more, GO TO > > > Mercer Consulting


Marsh Affinity Group Services – Marsh’s group marketing arm to flocks of a feather.

* * *

From the Hawaii State Bar Association website (


HSBA Member Benefit Provider – Marsh Affinity Services – Call Blossom Tong at (808) 585-3615 for more information.

* * *

See also: Marsh Affinity Group Services; Seabury & Smith


Maurice R. Greenberg – CEO of American International Group (AIG).

In 1998, Greenberg bulldozed in an amazing $21.47 MILLION in salary, bonus and other compensation from AIG. Plus, you can add in over $5.48 MILLION more in stock option grants for a total of over $26.95 MILLION. But hold on, Greenberg has also accumulated over $63.3 MILLION in unexercised stock options from previous years.

That’s some chicken-feed!

For more, GO TO > > > Maurice “Hank” Greenberg


P&C Insurance Company, Inc. – Bishop Estate’s captive insurance company, domiciled in Hawaii, managed by Marsh & McLennan.

From: RICO LAWSUIT: Harmon v. Federal Insurance Company, P&C Insurance Co, Marsh & McLennan, PricewaterhouseCoopers, Henry Peters, Nathan Aipa, Rodney Park, et al: . . .

Defendant P&C Insurance Company, Inc. (P&C), is a single parent captive insurance company formed in September, 1994, and was a wholly-owned subsidiary of Pauahi Holdings Corporation which, in turn, was a wholly-owned, for-profit subsidiary of KSBE….

Although Harmon was the president of P&C, he alleges that he was actually set up as a “straw man” to be controlled by Henry H. Peters, Trustee of KSBE and Chairman of the Board of P&C; Nathan Aipa, KSBE General Counsel and Assistant Secretary/ Assistant Treasurer of P&C; Louanne Kam, Esq., Litigation Manager for KSBE, and others….

* * *

From Equity No. 2088 – Report of Attorney General Concerning May 7, 1999 Order – 5/5/00:

The May 7, 1999 order regarding orders to show cause requires the former trustees immediately to resign offices and directorships in the trust’s subsidiary and affiliated organizations . . . P&C Insurance Company, Inc., is a captive insurance company, the sole stock holder which is Pauahi Holdings Inc.

The Attorney General respectfully invites the court’s attention to the annual report publicly filed on March 28, 2000 by P&C (Ex. 1). The annual report lists Henry H. Peters as a director. The Attorney General is unable to determine whether the listing is incorrect (and hence the signed certification of the annual report is incorrect) or whether Peters remains a director in violation of court order.

The Attorney General’s several inquiries of the trust concerning this matter remain unanswered despite the passage of three months. (Ex.2).

* * *

A footnote referring to Exhibit 2 states: The annual report is required to reflect the corporation’s state of affairs “as of December 31” of the preceding year. Hawaii Revised Statutes # 415-126(c). The court may recall that Louanne Kam attended the Feb 8, 2000 status conference and represented to the court that she was a officer of P&C. Yet, the annual report suggests that Kam resigned before year’s end.

* * *

A Catbird Note: The Annual Report was signed by Peter J. Lowe, Vice President of P&C, on 2/28/00. Lowe is also a senior vice-president of Marsh Management Services, Inc., the Marsh & McLennan subsidiary which manages P&C. Peter Lowe has since left the country….

* * *

June 12, 2000

Insurance disputes hit Bishop trust

Companies threaten to reject coverage if the estate takes
a role in a suit against former trustees

By Rick Daysog, Star-Bulletin

The insurance companies for the Kamehameha Schools are threatening to reject up to $75 million in coverage, in a development that could have far-reaching consequences on the litigation surrounding the $6 billion charitable trust.

In court papers filed on Friday, the estate’s interim board of trustees said that Federal Insurance Co. is reserving its right to deny $25 million in coverage if the trust takes an active role in the attorney general’s surcharge lawsuit against former trustees Henry Peters, Richard “Dickie” Wong, Lokelani Lindsey, Oswald Stender and Gerard Jervis.

Separately, Bermuda-based XL Insurance Co. also is reserving its right to deny $50 million in reinsurance coverage purchased by the trust’s captive insurance subsidiary, P&C Insurance Co. over a dispute over warranties provided by the estate, several people close to the trust said.

The insurance is supposed to protect the estate from damages such as alleged in the state’s lawsuit. In that suit, the state is trying to show that the former trustees took excessive compensation, mismanaged the Kamehameha Schools’ educational programs and incurred more than $200 million in investment losses during their tenures.

Denial of the insurance coverage could mean the trust gets stuck with millions of dollars in legal costs arising from the attorney general’s surcharge suit, which is set to go to trial on Sept. 18. It also could affect the size of any potential settlement in the case.

Federal Insurance, which has been paying for the legal defenses of the embattled former trustees, is taking the position that unless the former board members take part in court-mandated mediation in the surcharge proceeding, any role in that mediation effort by the current interim board could be a basis for denying coverage, the trust said.

The trust’s policy with XL has a similar clause that allows the reinsurer to deny coverage for legal actions against the trust’s former trustees if the Kamehameha Schools interim board actively participates in the case, the estate said.

However, XL put the trust on notice that it may pull its coverage more than two years ago, people familiar with the estate said. XL, which collected $3.9 million in premiums from the trust during the past several years, told the trust back in February 1998 that it was reserving its right to deny coverage due to an August 1997 warranty by a P&C official.

The warrantywhich is a statement by the insured customer that a certain condition or risk exists — noted that the trust was not a subject of any significant claims.

At the time the warranty was made, the attorney general’s office and the Internal Revenue Service had already launched their separate investigations of the estate’s former board members while retired Judge Patrick Yim had begun his encyclopedic fact-finding investigation of the Kamehameha Schools.

XL is a unit of Hamilton, Bermuda-based Exel Ltd., which previously had financial ties with the estate. Back in 1998, Exel merged with Mid Ocean Ltd., a reinsurance company in which the estate was a co-founder and once held a 5 percent stake.

Elizabeth Pitrof, XL’s Chicago-based attorney, declined response.

A trust spokesman, the attorney general’s office and the court-appointed special master for the trust’s insurance matters, attorney Michael Tanoue, also had no comment on the XL dispute, citing a protective order issued by the probate court.

As for its court filing on Friday, the estate’s interim board is asking Probate Judge Kevin Chang for guidance on its insurance matters, saying the state’s legal action places them in a bind.

While the trust would benefit from the attorney general’s surcharge suit, the estate’s involvement in such a suit could void their insurance coverages, the interim board said.

In particular, the estate’s interim board is asking Judge Chang whether they must take part in the court-mandated mediation for the surcharge proceeding or whether they must assist the attorney general in preparing their case against the former trustees.

Deputy Attorney General Hugh Jones said the interim board’s obligations in this case are crystal clear: It’s their fiduciary duty to pursue the former trustees for alleged breaches of trust or assist the state’s case even if their insurance policies won’t pay for those costs.

Just because an insurance policy doesn’t cover potential surcharges against the former trustees doesn’t discharge the board from its unabiding duty, said Jones, who recently asked for a one-year delay for the surcharge trial due to the interim board’s alleged delays in turning over pertinent documents.

“An insurance policy should not dictate a trustee’s fiduciary duty,” Jones said….

For more, GO TO > > > Harmon’s Claim Letter to John Sinnott; RICO in Paradise; Claims By Harmon; Confessions of a Whistleblower; Office of the U.S. Trustee vs. Harmon; New Songs by The Whistler

For Harmon’s letters to California and Hawaii Insurance Depts, GO TO > > > Harmon’s Letters to Insurance Commissioners


Paul J. SilvesterFormer Connecticut State Treasurer, now a confessed racketeer and money launderer.

From The Hartford Courier by Jon Lender and Mark Pazniokas, 09/24/99:

Three Plead Guilty in Corruption Case. Former state Treasurer Paul J. Silvester pleaded guilty in federal court Thursday to charges of racketeering and conspiring to launder money — and, in a deal to cut his jail time, agreed to cooperate as the investigation targets well-connected political figures from Connecticut to Washington, D.C….

Documents released Thursday detailed kickbacks from so-called finder’s fees totaling more than $330,000, but there may be significantly more money involved in activities still under investigation….

“We are looking at both other individuals and organizations,” U.S. Attorney Stephen C. Robinson said Thursday after the pleas were entered….

Although Robinson declined to give specifics about where the probe will go, court documents indicated that prosecutors are looking closely at Wayne Berman, a prominent Washington, D.C. business consultant who is a major fund-raiser for Republican presidential front-runner George W. Bush….

Sources in recent days have said Berman received more than $900,000 from a fee or fees by virtue of Silvester’s placement of tens of millions of dollars with an investment fund of the internationally known Carlyle Group….

For more, GO TO > > > Paul Silvester; A Connecticut Yankee in King Kamehameha’s Court; Carlyle Group: Birds That Drink From Cesspools; Vultures in WCI Communities


Putnam Investments – A subsidiary of Marsh & McLennan.

October 29, 2003

Putnam, 2 ex-officers
face fraud charges

By Justin Pope, Associated Press

BOSTON – State and federal regulators accused Putnam Investments and two of its former investment officers of fraud yesterday, the first formal allegations of wrongdoing by a mutual fund company in what is becoming a scandal for a once pristine industry.

The filings by the Securities and Exchange Commission and the Massachusetts Securities Division allege that Boston-based Putnam improperly allowed six employees, including four fund managers, to make market-timing trades using funds they oversaw and information not available to the public….

The complaints filed yesterday named two of the managers: Omid Kamshad and Justin Scott, identified as managing directors and chief investment officers of Putnam’s International Core Equity Group and International Equities Group respectively. Authorities said further action still might be taken against the four other Putnam employees alleged to have participated in the trading.

The SEC cited Putnam for failing to deter short-term trading and for fraud in connection with the sale of the funds.

Putnam is also accused of defrauding customers by allowing members of a New York union retirement plan to engage in market-timing of certain funds even though those funds prohibited the practice…

$ $ $

Some interesting incestuous relationships (circa 2001)…

        Citigroup is the 3rd largest institutional investor in Marsh & McLennan.

        Citigroup is the 3rd largest institutional investor in Chubb Group (Federal Insurance Co. et al)

        Citigroup is the 10th largest institutional investor in American International Group.

        Putnam is the 2nd largest institutional investor in Chubb Group.

        Putnam is the 6th largest institutional investor in Citigroup.

        Putnam is the 5th largest institutional investor in AXA Financial.

        Putnam is the 3rd largest institutional investor in Starwood Hotels.

        Goldman Sachs is the 10th largest institutional investor in Starwood Hotels.

        Wellington Management Co. is the 9th largest institutional investor in Starwood Hotels.

        Wellington Management Co. is the #1 institutional investor in Marsh & McLennan.

        Putnam is the #1 institutional investor in Harrah’s Enterprises.

        Putnam is the 6th largest institutional investor in Isle of Capri Casinos.

        Goldman Sachs is the 3rd largest institutional investor in Isle of Capri Casinos.

        etc., etc., etc.

For more, GO TO > > > Axis of Evil; Marsh & McLennan’s Putnam Investments


Ray J. Groves – Incoming chairman and CEO of Marsh, Inc.; director of American Water Works Company, Inc., Boston Scientific Corp and Gillette Co.; former director of Allegheny Technologies, Inc.

October 2, 2002


Marsh & McLennan Companies, Inc. (MMC) announced today that John T. Sinnott, chairman and chief executive officer of Marsh Inc., the company’s risk and insurance services business, will retire from the firm in July 2003.

Ray J. Groves, president and chief operating officer of Marsh Inc., will succeed Mr. Sinnott as chief executive officer in January and as chairman in July 2003….

Source: Marsh & McLennan Website:

For more, GO TO > > > Ray Groves


Rey Graulty – Former Hawaii State Senator, former Hawaii Insurance Commissioner, and now a state Circuit Court Judge.

October 31, 2000

Former Trustees Funneled
Donations to Lawmakers

By Rick Daysog, Honolulu Star-Bulletin

Former trustees of the Kamehameha Schools operated an underground political network that funneled money to the campaigns of dozens of key Hawaii lawmakers, according to trust documents obtained by the Honolulu Star-Bulletin.

Between 1992 and 1997, the $6-billion estate’s now-defunct government relations department orchestrated contributions to incumbent Democrats friendly to the trust’s interests or to high-ranking politicians with regulatory control over the trust’s massive land and business holdings.

Those on the receiving end of estate contributions included U.S. Rep. Neil Abercrombie, Honolulu Mayor Jeremy Harris and former Mayor Frank Fasi’s Best Party….

The state Campaign Spending Commission is looking into whether the trust illegally laundered contributions through former trustees, employees, relatives and outside contractors….

The list of recipients for that election year reads like a Who’s Who of island politics. They include:

Former state Sen. Rey Graulty: On March 22, 1994, Wong bought $250 worth of tickets for a Graulty fund-raiser … The check was delivered by a staffer. Graulty, now a state Circuit judge, could not be reached for response….

The ex-trustees deny that they took part in an organized effort to finance the campaigns of isle politicians. They say their political contributions and those of staffers and outside vendors were personal in nature and have nothing to do with trust business….

However, in sworn testimony, some staffers say they not only helped organize the campaign contributions but also used trust facilities to direct the money to local politicians….

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From RICO Case Statement, Harmon v. Federal Insurance Co; P&C Insurance Co; Marsh & McLennan, Inc; PricewaterhouseCoopers; Trustees of Bishop Estate, et al.:

Plaintiff alleges that the following persons and agencies have a duty in law to act upon complaints of citizens, yet failed to act, pretended to act but did not act, or misled or deceived Plaintiff in other ways when, in good faith, he brought to their attention evidence and suspicions of serious ongoing criminal activity endangering the citizens of the United States. By their acts and omissions they either sanctioned or perpetuated the crimes. It was clearly within the duties and functions of these people and agencies to act and take seriously the allegations plaintiff had set forth:

a) Insurance Commissioner’s Office, State of Hawaii.

b) Wayne Metcalf, Insurance Commissioner, State of Hawaii

c) Rey Graulty, former Insurance Commissioner, State of Hawaii

d) California Department of Insurance

e) Chuck Quackenbush, Insurance Commissioner, State of California….

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For more, GO TO > > > Rey Graulty; Insurance Commissioners; Confessions of a Whistleblower; New Songs by The Whistler


Richard Rainwater – Texas billionaire deal-maker and benefactor to the rich and famous.

From People Profiles, ( . . . Rainwater grew up in Fort Worth . . . and ended up at Stanford Business School along with Sid Bass…an heir to the Bass oil fortune.

After graduation, Rainwater took a job at Goldman Sachs, then went work for the Bass family as a financial advisor, growing their $50 million of assets into a $5 billion fortune….

In the 1980’s, Rainwater went out on his own and built up positions in real estate, oil and gas, and health care — most famously Columbia/HCA, recently the subject of federal investigations.

Along the way, Rainwater was one of the owners (with Texas Gov. George W. Bush, among others) who bought and sold the Texas Rangers baseball team; he’s still a part owner of the Dallas Mavericks. He also purchased Canyon Ranch….

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From the Honolulu Star-Bulletin, 09/03/97, by Rick Daysog: . . . Four years ago, Bishop Estate invested $30 million in Mid Ocean Reinsurance Co. with partners J. P. Morgan & Co., Marsh & McLennan Co., and Texas deal maker Richard Rainwater. The estate’s 5.36 percent in the Bermuda-based reinsurance company, which went public in late 1993, today is worth about $106 million….

For more, GO TO > > > Richard Rainwater


Seabury & Smith – The manager for Marsh Affinity Group Services.


About Us

We work hand-in-hand with our client organizations to create solutions to meet their members’ specific insurance needs. You know your members and, with a 50-year-plus history in the insurance management industry, we know how to best support them. Marsh Affinity Group Services specializes in the design, administration and marketing of custom insurance programs and financial planning services for client organizations and their members….

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For more, GO TO > > > Claims By Harmon; Confessions of a Whistleblower; Marsh & McLennan’s Seabury & Smith; Transylvania Travelers in St. Paul


Stephen Friedman – a senior principal of Marsh & McLennan Capital, Inc.

In 1994, Mr. Friedman retired as chairman of Goldman, Sachs & Co. He was co-chairman or sole chairman from 1990-1994, and from 1987-1990 he served as co-chief operating officer. He joined Goldman, Sachs in 1966 having previously held a position as a law clerk to a federal district court judge and as an attorney in New York City (1963-1966)….

Steven Friedman serves as a director of: Fannie Mae, Wal-Mart Stores, Inc., the National Bureau of Economic Research and the Concord Coalition….

Mr. Friedman is also a member of the President’s Foreign Intelligence Advisory Board and a director of In-Q-Tel, Inc. He is a former member of the Aspin/Brown Commission on the Roles and Capabilities of the U.S. Intelligence Community and the Jeremiah Panel on the National Reconnaissance Office.

For more, GO TO > > > Steven Friedman; The Stephen Friedman Flock; Dirty Gold in Goldman Sachs; The Secret Nests


Sukamto SiaIndonesian multi-millionaire businessman — before declaring bankruptcy arising, from among other things, millions in gambling debts to Las Vegas casinos which he allegedly paid with a rubber check.

Sia also owned a majority share of Bank of Honolulu, The Executive Center building, and the land purchased by the State of Hawaii for Hawaii Convention Center.

The land under The Executive Center is owned by Bishop Estate. The insurance broker for Sia is Marsh & McLennan. A prime lender on The Executive Centre was Citibank.

For more GO TO > > > Sukamto Sia; The Indonesian Connection


Synhrgy HR Technologies – A company you may not have heard of (unless you happen to have been an employee of Enron).

September 5, 2003

Locals jump on offshore
outsourcing bandwagon

By Christine Hall, Houston Business Journal

Synhrgy HR Technologies Inc., one of Houston’s fastest-growing technology companies, is looking to India for the right company to help it fulfill its mission in the most cost-effective way and improve customer service.

It’s a move Synhrgy is not taking lightly, as the topic of offshore outsourcing is raising heated discussions around the water coolers of companies throughout the country.

Besides human resources, Synhrgy also develops the technology it uses to carry out outsourcing functions. Although the programming and coding aspect of the technology is done elsewhere, the company wanted to continue managing the design and quality assurance of it in Houston, says Michael Taggart, president of Synhrgy….(c) American City Business Journals, Inc.

* * *

January 7, 2004

Mercer agrees to buy Synhrgy

Houston Business Journal

Mercer Human Resource Consulting has agreed to buy Synhrgy HR Technologies in a move to expand its consulting and outsourcing services.

Financial terms of the deal were not disclosed.

Mercer Human Resource Consulting, part of Mercer Inc. – a wholly-owned subsidiary of New York-based Marsh & McLennan Cos. Inc. – is the world’s largest human resource consulting firm providing consulting on human resource issues and employee benefit programs.

Houston-based Synhrgy provides human resource technology and outsourcing services to Fortune 1000 companies….

See also: Mercer Human Resource Consulting

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Catbird catcall: If you’re an ex-Enron employee, and want to check on your health benefits or your pension plan, you can ... GO TO > > > The Enron Health and Group Benefits Service Center. Or, if you don’t have your Password, call the Benefits Service Center at (800) 332-7979, Option 1. (Hopefully, you’ll get someone who can speak your language.)


Wayne Berman – A high-flying lobbyist.

From The Money Men: . . .

The wall of fund-raiser Wayne Berman’s office was papered with photos of himself glad-handing with virtually all of the big-name Republicans of the past two decades. As a longtime lobbyist, Berman knew— and was liked and trusted by— everyone from Ronald Reagan to Newt Gingrich and from George Bush to George W. Bush. They respected him both for his political savvy and for his ability to raise money— as much or more money, in fact, than almost anyone else in town.

It was no surprise, then, that a colleague of his, Scott Reed, interrupted my interview with Berman one day to ask for a favor. Reed was a Washington player in his own right; he had served as campaign manager for the 1996 Dole for President campaign. But Berman had the access that Reed lacked. Reed was pushing a “technical” amendment for a client that needed to be affixed to an appropriations bill that was on the verge of completion in the Senate.

So Berman picked up the telephone and called the chairman of the Senate Appropriations Committee, Ted Stevens of Alaska … A half hour or so later, Stevens called back. I didn’t hear everything that was said, but it was obvious that Berman’s reminder was all that was needed to insert the amendment into the bill….

For more, GO TO > > > Wayne Berman; A Connecticut Yankee in King Kamehameha’s Court; Aloha, Harken Energy!; Birds in the Lobby


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Last Update December 21, 2006, by The Catbird