Marsh & McLennan Cos. has agreed to pay $850 million to settle civil fraud charges brought by New York state's attorney general and the state insurance department, the Wall Street Journal reported.
The agreement also involves an apology to the clients of the New York City-based financial services company, which allegedly rigged bids for insurance contracts and directed business to insurance companies that paid lucrative “contingent commissions" to the Marsh Inc. insurance brokerage.
The settlement, reached late Sunday night, will be paid in four annual payments and roughly equals the amount of commissions the firm collected in 2003. The settlement is considered restitution for about 100,000 Marsh Inc. clients who were overcharged from 2001 to 2004.
The apology reads, “Marsh Inc. would like to take this opportunity to apologize for the conduct that led to the actions filed by the New York state attorney general and superintendent of insurance. The recent admissions by former employees of Marsh and other companies have made clear that certain Marsh employees unlawfully deceived their customers. Such conduct was shameful, at odds with Marsh's stated policies and contrary to the values of Marsh's tens of thousands of other employees.
In response, we have taken prompt, corrective action and implemented a series of business and corporate governance reforms. The employees of Marsh Inc. ask our clients and others to allow us the opportunity to regain their trust."
While top management at the company and some business practices had already been changed, Marsh formally agreed to certain changes to prevent potential conflicts of interest. They include banning contingent commissions, limiting payment for insurance-brokerage business to one fee and barring the practice of steering business to insurers who promise to use services at other Marsh units.
New York Attorney General Eliot Spitzer told The New York Times that the changes at Marsh "have created an entirely new template for the way business will be done." He said he preferred to negotiate restitution with Marsh rather than impose fines or penalties "because the money should go back to the victims."
Spitzer's office continues its investigation, and additional criminal charges and civil settlements are expected. The agreement covers only the claims listed in Spitzer's October lawsuit.
Marsh Chief Executive Michael G. Cherkasky said he hoped the settlement would put the company "back in the family of the favored" among its clients.