Marsh & McLennan in $850 Million Insurance Settlement

Updated from 9:43 a.m. EST

Marsh & McLennan(MMC Quote) is setting up an $850 million restitution fund as part of a settlement with New York Attorney General Eliot Spitzer over allegations the firm engaged in an illegal insurance industry kickback and bid-rigging scheme.

The settlement is one of the largest reached by Spitzer during his three-year campaign against corporate wrongdoing.

The settlement comes nearly four months after Spitzer filed civil fraud charges against Marsh in a sweeping investigation into abuses in the insurance industry. Spitzer charged that Marsh's big insurance broker division was at the forefront of an industrywide conspiracy that had driven up prices for insurance products for corporations and consumers.

The charges led to the ouster of Jeffrey Greenberg as chief executive of Marsh. In the immediate aftermath of the scandal, Marsh's stock lost nearly 47% of its value, the company announced a sweeping overhaul of its insurance commission practices, and it said it was slashing up to 3,000 jobs.

In early trading Monday, Marsh was up 93 cents, or 3%, to $32.02, as investors expressed relief that the company was putting its regulatory woes behind it.

"Today's settlement is a significant step forward for Marsh & McLennan, its people, its clients and its shareholders," said Michael Cherkasky, Marsh's CEO and president, in a prepared statement.

In a separate statement, Spitzer's office noted that Marsh would issue an apology for its "unlawful" conduct.

"To its credit, Marsh is not disputing the problems identified in our original complaint," said Spitzer.

However, in its press release, Marsh goes too pains to note that the restitution fund it is setting up should not be seen as "a fine or a penalty."

The settlement gives Marsh four years to establish the restitution fund. The first $255 million payment is due on June 1.