Marsh & McLennan:
THE MARSH BIRDS
Sightings from The Catbird Seat
~ o ~
September 29, 2006
9/11 and the Greenberg Familia
By Jerry Mazza, Online Journal
Democratic Underground Demopedia reports in Who Killed John O’Neill 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 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 www.sourcewatch.org, 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
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 democraticunderground.com, 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
“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
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
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
The latest documentary on the WTC, The 911 Mysteries from 911WeKnow.com,
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
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 O’Neill, 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
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
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
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
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
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
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
8thestate.com) 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
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…
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
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
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
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
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
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
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
See also: John Sinnott
For later news on the 9-11 tragedy and coverup, GO TO > > > Axis of Evil; The
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
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
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
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
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
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
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
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
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
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
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
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 firstname.lastname@example.org
September 15, 2005
Spitzer: Eight Ex-insurance
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
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
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
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
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
(For more on alleged “rigged bids” by a Marsh broker in Hawaii, Rocco Sansone, GO
TO > > > Claims By Harmon)
ATTENTION ! ! ! . . . INVESTORS, LAWMAKERS, FINANCIAL
REGULATORS, LAW ENFORCEMENT AGENCIES, PENSION PLAN
ADMINISTRATORS, TAXPAYERS AND ANYONE WHO DOES BUSINESS
WITH BANKS, CREDIT UNIONS, INSURANCE COMPANIES, STOCK
BROKERS, MAJOR CORPORATIONS, ETC….
WHAT’S WRONG WITH THIS PICTURE?
~ o ~
September 13, 2005
Marsh & McLennan Co.
launches $1.3 billion debt
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
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
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
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
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
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
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
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
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
May 5, 2005
FBI Targets Insurance Industry in
Widening Fraud Probe
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
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
The FBI said it would conduct traditional investigations as well as “utilize
sophisticated techniques, to include covert undercover investigations, to apprehend
“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.
~ ~ ~
(A Catbird Note: If any of you insurance industry insiders would like to assist
the FBI in their investigations (ha), you can GO TO > www.fbi.gov)
~ ~ ~
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
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
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
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
SETTLING WITH SPITZER
• 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
• Oct 27: Marsh’s UK office appoints Freshfields to carry out internal
• 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
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
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
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
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,
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
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.
~ o ~
(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
ST. PAUL LINKED TO MARSH FRAUDS
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
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
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
(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
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 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
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
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.
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
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
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
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
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
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,
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
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
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
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%
“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
November 1, 2004
Spitzer’s controversial insurance lawsuit
Why claims he is overreaching are wrong
By Anthony J. Sebok, Special to CNN.com
(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
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
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,
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
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
“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
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
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
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
“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
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.
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
“We thank Ray for his service to Marsh and look forward to his contributions in his
October 25, 2004
Marsh & McLennan Chairman
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
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
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
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
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
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
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
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
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
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
“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
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
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
“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
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.
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
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.
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
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
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
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
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
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
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
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
SPITZER OPENS PROBE OF
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
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
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
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
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
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
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
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
“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
“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
“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,
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
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
“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
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
Heidi Miller, hailed as a potential savior for Priceline.com (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
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
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
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
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
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’
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-off” contracts 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
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
“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
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
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,
For more, GO TO > > > The Poop on Aon; More Claims … Aon
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
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
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
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
Footloose and Taxfree
A syndicated monthly column by Miami-based Offshore Business News & Research
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
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!)
GSIS INSURANCE MONOPOLY
by SHEILA SAMONTE-PESAYCO –
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
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 & McLellan – of 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
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
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
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
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
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
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
Copyright © 2001 All rights reserved. PHILIPPINE CENTER FOR INVESTIGATIVE
December 21, 2001
S&P comments on Enron-related
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
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
* * *
NOW, FOR A CLOSER LOOK AT SOME BIG MARSH BIRDS, JUST
POINT YOUR BINOCULARS BELOW.
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
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 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
* * *
September 11, 2001 <<< (Note the date ! ! !)
Conseco Sues Six D&O Insurers Over
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
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
CONTRIBUTORS AND PAYBACKS
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
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
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
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 Priceline.com and Citibank.
November 22, 2000
Priceline Forgives $3M Loan
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 Priceline.com 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
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,
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
* * *
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
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
* * *
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
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
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
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
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
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
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
See also: Synhrgy HR Technologies
For more, GO TO > > > Mercer Consulting
Marsh Affinity Group Services – Marsh’s group marketing arm to flocks of a
* * *
From the Hawaii State Bar Association website (www.hsba.org):
PROFESSIONAL LIABILITY INSURANCE
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
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
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
* * *
From Equity No. 2088 – Report of Attorney General Concerning May 7, 1999 Order –
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
* * *
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
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
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 warranty — which is a statement by the insured customer that a certain
condition or risk exists — noted that the trust was not a subject of any
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
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
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. Silvester – Former 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
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
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
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
• 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
• Wellington Management Co. is the #1 institutional investor in Marsh &
• 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
• 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 CHAIRMAN & CEO JOHN T. SINNOTT
TO RETIRE IN 2003
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: www.marshmac.com
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
The state Campaign Spending Commission is looking into whether the trust illegally
laundered contributions through former trustees, employees, relatives and outside
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
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
* * *
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
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….
* * *
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
From People Profiles, (www.pathfinder.com): . . . Rainwater grew up in Fort Worth . . .
and ended up at Stanford Business School along with Sid Bass…an heir to the Bass
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
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
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….
* * *
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.
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….
~ ~ ~
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 Sia – Indonesian 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
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
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
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
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
~ ~ ~
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
# # #
FOR MORE MARSH BIRDS
A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
ACE UP THE SLEEVE
ALLIED WORLD ASSURANCE
NEW > AXIS OF EVIL < NEW
THE BAD FAITH BUZZARDS
BIRDS IN THE TRAILER PARK
BIRDS THAT DRINK FROM CESSPOOLS
THE BLACKSTONE GROUP
BUZZARDS OF PARADISE
CLAIMS BY HARMON
CONFESSIONS OF A WHISTLEBLOWER
DIRTY GOLD IN GOLDMAN SACHS
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
CLAIM LETTER TO JOHN SINNOTT
LETTERS TO INSURANCE COMMISSIONERS
HARTFORD INSURANCE GROUP
MARSH & McLENNAN’S KROLL ASSOCIATES
MARSH & McLENNAN’S MARSH AFFINITY SERVICES
MARSH & McLENNAN’S MERCER CONSULTING
MARSH & McLENNAN’S PUTNAM INVESTMENTS
MARSH & McLENNAN’S SEABURY & SMITH
MARSH & McLENNAN’S TRIDENT FUNDS
RICO IN PARADISE
THE CHUBB GROUP
THE DISSECTION OF FRISTY
THE GREAT NEST EGG ROBBERIES
THE HARMON ARBITRATION
NEW SONGS BY THE WHISTLER
THE PRUDENTIAL: A NEST ON SHAKY GROUND
THE SILENCE OF THE WHISTLEBLOWERS
THE STEPHEN FRIEDMAN FLOCK
THE STORY OF ENRON
THE EAGLE HOODED
THE POOP ON AON
THE ROYAL & SUN ALLIANCE
THE SECRET NESTS
THE WILLIS GROUP
THE TITLE INSURANCE VULTURES
TRANSYLVANIA TRAVELERS IN ST. PAUL
VAMPIRES IN THE CITY
VULTURES IN WCI COMMUNITIES
ZEPHYR INSURANCE COMPANY
ZEROING IN ON ZURICH FINANCIAL SERVICES
~ o ~
MORE OF THE CATBIRD’S FAVORITE LINKS
THE CATBIRD SEAT FORUM
THE CATBIRD SEAT
~ o ~
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Last Update December 21, 2006, by The Catbird