Spitzer Charges Marsh & McLennan in Insurance Racket

Investors in insurance stocks have a right to worry because Spitzer made no secret of his desire to bring additional cases.

But he voiced particular anger with Marsh, which has figured prominently in other investigations by Spitzer's office. Marsh's Putnam Investments was one of the worst offenders in the mutual fund scandal. In addition, the company's Mercer consulting business was implicated in the lawsuit Spitzer filed this summer seeking to recoup some of former New York Stock Exchange Chairman Richard Grasso's enormous $140 million pay package.

Spitzer advised Marsh's board to take a long, hard look at the firm's current management, claiming the firm had "corrupted the marketplace.''

"The leadership of that company is not one I will negotiate with,'' said Spitzer. He added that senior management had misled his office early on in the investigation about the nature of the payment agreements with insurers, called "placement service agreements,'' or "market services agreements.''

In 2003 alone, Spitzer says Marsh took in $800 million from these payment agreements. He says Marsh's actions could make it liable to its customers for billions of dollars in damages, stemming from insurance overcharges.

Marsh issued a statement saying it is "cooperating'' with Spitzer and is "committed to getting all the facts, determining any incidence of improper behavior, and dealing appropriately with any wrongdoing."

AIG, in a late Thursday press release, also said it is cooperating with Spitzer's office. The company said it is "saddened" by the guilty pleas of two of its employees.

"We take these charges seriously and will continue to cooperate with the attorney general's office," AIG said, adding that it plans to hold a conference call at 10 a.m. EDT Friday.

The two AIG executives who pleaded guilty are Karen Radke and Jean-Baptiste Tateossian. Both women work with AIG's American Home subsidiary, where Radke is a senior vice president and Tateossian is a manager.

Radke, in her plea agreement, admitted taking part in Marsh's bid rigging scheme and taking instructions from several Marsh employees on how to prepare the bid.