Marsh & McLennan Cos., the insurance brokerage sued by New York Atty. Gen. Eliot Spitzer for colluding with insurers to win fees, said Wednesday that it suspended five employees in connection with the allegations.
Marsh spokeswoman Barbara Perlmutter declined to identify the employees. Executives mentioned in the suit, e-mail exhibits and other court documents include William Gilman, Ed McNenny, Greg Doherty, Glenn Bosshardt, Joan Schneider and Jason Monteforte. None of them have been sued.
Spitzer's suit against Marsh alleges that the brokerage and insurers including American International Group Inc. fabricated bids on policies to create the appearance that insurers were competing for their business. In reality, Marsh and the insurers predetermined who would get the business and Marsh received payments from favored insurers, the suit says.
Gilman, executive director of marketing at Marsh Global Broking, told American International that it would lose its entire book of business with Marsh if it didn't provide deliberately uncompetitive quotes, according to the lawsuit.
McNenny and Monteforte were mentioned in court documents as having instructed American International executives to provide bids higher than those of a client's existing insurer to ensure that the incumbent would retain the business. In other cases, other insurers would do the same to protect American International's status as the incumbent insurer, the suit said.
The suit identified Schneider as a Marsh Global Broking executive who told an insurer identified as Zurich that it might lose a bid unless it offered Marsh an incentive payment. Bosshardt is a Global Broking vice president who reported to Schneider and told an insurer identified as CNA Financial Corp. to make a bid that was "reasonably competitive, but will not be a winner," according to an e-mail.
Meanwhile, Securities and Exchange Commission Chairman William H. Donaldson said Wednesday that federal regulators were watching the Spitzer probe, but staying on the sidelines for now. Insurance regulation is a state function.
"It's not under our purview," Donaldson said when asked by a reporter about the investigation.
Sources familiar with the matter said the SEC could become involved if insurance companies violated rules requiring disclosure of material information to investors.
Since Spitzer filed suit against Marsh last week, insurers including Philadelphia-based Cigna Corp., Hartford, Conn.-based Aetna Inc. and Dutch financial services group ING have said they received subpoenas from Spitzer.
MetLife Inc., the largest U.S. life insurer, and UnumProvident Corp., the largest disability insurer, have also said they received subpoenas.
Spitzer has made the SEC look flat-footed in the last three years by taking the lead in a variety of inquiries that ranged from conflicts of interest in Wall Street research reports to abuses in mutual fund trading that harmed small investors.
But the SEC says, for now, the insurance investigation appears to be a state matter. "If there was anything ... that was in our purview, we would do something," Donaldson said.