NEW YORK -- One of the nation's largest insurance companies, AmericanInternational Group Inc., said yesterday it has been notified that it is atarget of a federal grand jury investigation related to a civil case allegingthat it helped another company falsify its earnings.
Meanwhile, a major insurance brokerage, Willis Group Holdings Ltd. ofLondon, announced that it would stop accepting contingency commissions, thefees that are at the center of a probe announced last week by New YorkAttorney General Eliot Spitzer.
Willis Group, with offices in New York and London, also said that aninternal review in response to subpoenas from Spitzer's office found noevidence of bid rigging or tying placements with insurers.
Marsh & McLennan Cos. Inc., the New York brokerage Spitzer sued Oct. 14,earlier said it was stopping the use of incentive fees. Brokers receive thesefees from insurance companies for steering profitable clients the insurer'sway.
The federal investigation into AIG in Indiana concerns "nontraditionalinsurance" or "income smoothing" products marketed by the New York company.They apparently involved agreements with businesses that would appear to beinsurance and would be accounted for as insurance, but did not involve anyactual risk transfer, AIG said.
AIG said the investigation is directed at a contract between AIG andBrightpoint Inc., a cellular phone distributor based in Plainfield, Ind., thatwas previously investigated by the Securities and Exchange Commission andresolved in a September 2003 settlement.
In the settlement AIG agreed to pay a $10 million civil fine to settlefederal regulators' allegations that it fraudulently helped another companyfalsify its earnings report and hide losses.
Spitzer's investigation into the insurance industry has focused oncontingent commissions, also known as placement service agreements or marketservice agreements.
In filing his civil suit against Marsh & McLennan, Spitzer called them"payoffs" and also accused the insurance brokerage of bid rigging.
The Willis Group said yesterday that it is introducing what it called a"client bill of rights" to underscore the company's commitment to its clients.
"We want our clients to know that we have heard them loud and clear: Theydon't like contingency agreements," said Joseph J. Plumeri, the Willis Group'schairman and chief executive officer.Copyright © 2015, Los Angeles Times