Spitzer Sues Insurance Broker Universal Life
Updated from 2:05 p.m. EST
New York Attorney General Eliot Spitzer on Friday widened his investigation of the insurance business, this time suing a broker that allegedly took kickbacks from big life insurers.
The civil fraud suit against
Universal Life Resources
alleges the San Diego, Calif.-based broker took "undisclosed payments'' from insurance firms selling life, accident and disability policies to corporations. In return, the broker steered work to the life insurers, a practice Spitzer contends "raised premiums for individual employees."
The lawsuit alleges some of the insurers agreeing to make the payments, called "override agreements'' in the insurance industry, include
MetLife
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,
Prudential Financial
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and
UnumProvident
. The insurers were not named as defendants in the civil suit filed in New York state court.
"What is particularly egregious in this case is that the costs of ULR's concealed payments were ultimately borne by individual employees, who were in no position to know about or contest these illegal practices,'' said Spitzer, in a press release.
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The lawsuit against Universal Life, a privately owned company, is similar to the one Spitzer's office filed a month ago against
Marsh & McLennan
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, the nation's largest insurance broker. In the Marsh suit, Spitzer alleged a scheme to take kickbacks from property and casualty firms such as
AIG
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and
Ace
(ACE)
.
Spitzer also charges that ULR hid these fee arrangements by "falsely representing its compensation" and "omitting its fees from mandatory government filings."
Like Marsh, Spitzer charges Universal Life also prodded some insurers to submit "fictitious bids'' for jobs in order to drive up premium prices. In another instance, Universal Life allegedly persuaded Unum Provident to submit a bid for a contract, solely to drive another insurer,
Aetna
(AET)
, out of the market. The complaint alleges that Universal Life wanted to prevent Aetna from getting the contract because the broker didn't have a kickback deal with the insurer.
ULR's list of corporate clients include
Intel
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,
Eastman Kodak
(EK)
,
Marriott International
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and
Dell
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. The lawsuit also names ULR's president, Douglas Cox, as a defendant.
Last month, Lerach Coughlin Stoia Geller Rudman & Robbins, a California securities law firm, filed a private lawsuit against ULR, raising many of the same allegations in Spitzer's complaint.
