Marsh & McLennan Cos. (MMC), one of the world’s biggest insurance brokerages, said Friday it agreed to pay $435 million to settle a class-action lawsuit by investors who claimed they lost money because of the broker’s solicitation of rigged commercial-insurance bids for insurance contracts.
In October 2004, investors led by state pension funds in New Jersey and Ohio sued Marsh after its shares lost more than half their value as the bid-rigging allegations emerged. A lawsuit followed by then-New York Attorney General Eliot Spitzer, who alleged “the firm steered its unsuspecting clients to insurers with whom it had lucrative payoff agreements”. The lawsuit also claimed the firm solicited rigged bids for commercial coverage and raised the issue of “contingent commissions,” payments based on steering business to favored insurers. The scandal cost then-CEO Jeffrey Greenberg — the son of ‘Hank’ Greenberg, the former CEO and Chairman of AIG — his job and plunged the firm into a deep crisis from which it is still struggling to recover.
Marsh agreed to pay $400 million to settle a securities suit and $35 million settlement in a case filed on behalf of employees tied to declines in their holdings through their retirement plans, the New York-based company said in a statement. Of the total, $230 million will be covered by insurance. The remainder will be come from cash on hand, which will be tax deductible and result in a cash refund.
Marsh didn’t admit wrongdoing in the settlement which is still subject to court approval in the Southern District of New York.
MMC shares declined 1 cent to $23.98 at 2:20 EST in NYSE composite trading. The firm traded at nearly $46 level on Oct. 8, 2004, then nosedived to $24 by Oct. 19 of that year.