Citing unnamed sources, the Wall Street Journal reported that Marsh & McLennan has offered to pay $600 million but that Spitzer has demanded $750 million and the public statement of contrition – which the Journal said Marsh & McLennan is resisting for fear it would open the firm up to future legal liability. In any event, the Journal reported, the pace of talks between the two sides has picked up in recent days and that a final pact could be made public as soon as next week.
According to the Journal sources, Marsh & McLennan has bristled at the notion of a potential statement of wrongdoing at Marsh Inc., the company’s insurance-brokerage unit. Such a document could open the company up to significant problems in expected litigation from shareholders and other states’ regulators, Marsh & McLennan officials feared, the news report said.
Marsh Chief Executive Michael Cherkasky, who pushed for a quick settlement last year and now is eager to put the matter to bed by month’s end, has visited and called the attorney general’s offices several times to help speed the process, according to the Journal.
The 134-year-old firm has had problems since last fall when Spitzer his it with a lawsuit that alleged Marsh cheated corporate clients by rigging bids for insurance contracts and steering business to insurers who paid Marsh hundreds of millions annually in “contingent commissions.” Spitzer called those payments to “kickbacks (See Spitzer Takes On Contingent Commissions ).”
Marsh has gone through wrenching changes since then, having replaced nearly all of its senior management, stopped taking the contingent commissions), pared all but one management representative from its board and laid off 3,000 employees (See Marsh & McLennan Discloses 3,000 Worker Cuts, Putnam SEC Settlemen ). Beyond monetary restitution, the Journal sources said Spitzer wants the pact to formally acknowledge reforms of Marsh’s business practices, many of them already put in place by Cherkasky (See Marsh & McLennan Enacts Compliance Reform Platform ).
According to the Journal, Spitzer’s staff has been carefully drafting the Marsh settlement because it likely will become a template for settlements with other firms in his broadening probe of the insurance industry. Marsh has suspended or dismissed at least nine employees and mostly is done with its own investigation. Last week, Robert Stearns, a veteran Marsh broker, became the first Marsh employee to plead guilty to criminal charges for his role in the alleged scheme (See Marsh SVP Pleads Guilty in Spitzer Bid-Rigging Probe ). Five others, all former employees of insurers, have pleaded guilty to criminal charges and are cooperating with Spitzer’s probe.