A Boston Globe report said that was the central allegation in a lawsuit filed Monday by state Attorney General Thomas Reilly against Boston broker O’Neill, Finnegan & Jordan. Reilly charged O’Neill had given Unum Life Insurance pricing information about its competitors after the broker had been hired by the state Group Life Insurance Commission to find a life insurance vendor for state workers, an act Reilly said violated state contracting rules.
Reilly said both O’Neill and Unum have agreed to settle the allegations by paying $1.3 million, of which about $500,000 will go to the state commission, according to the news report.
Of the allegations leveled against the two firms, it was the alleged leaking of sensitive information during the bidding that provided the most explosive.
O’Neill ”certainly gave us some great information yesterday,” an unidentified Unum employee wrote in a December 2000 e-mail about the bidding, according to Reilly’s complaint. In another, a UnumProvident Corp. sales manager wrote to a colleague that O’Neill ”wants us to get this business.” Unum is a subsidiary of UnumProvident.
According to the Globe, at the same time it was giving the insurance firm inside information, Reilly said in his lawsuit, O’Neill was negotiating with Unum for a ”special” agreement that provided the broker with commission payments – even though prosecutors said such fees were explicitly prohibited by O’Neill’s contract with the state.
Unum won a five-year contract worth more than $27 million annually in premiums to provide up to $3 billion worth of life insurance coverage. The insurer paid O’Neill about $659,000 in commissions, most of which Reilly said were attributable to the state business.
UnumProvident spokesman James Sabourin told the Globe that the company disputes several of Reilly’s allegations, including that the commissions led to higher insurance costs for the state. ”The compensation paid to the broker was not included in the price of the policy, and therefore did not impact the Commonwealth’s costs,” he said.
In a statement yesterday, Reilly said the case highlighted the ”conflicts of interest” created when a broker or consultant, hired to give objective advice, is also quietly being paid by an insurer for placing business with it.
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