Chief of insurance broker Marsh & McLennan resigns amid bid-rigging probe
Tuesday, October 26th 2004, 9:11 am
By: News On 6
NEW YORK (AP) _ The embattled head of Marsh & McLennan Companies Inc., the nation's largest insurance broker, has resigned after New York's attorney general claimed authorities were being ``misled at the very highest levels of that company.''
The resignation of Jeffrey W. Greenberg, who had followed his father into the highest ranks of the insurance industry, was accepted Monday at an emergency board meeting at the company's New York headquarters.
New York Attorney General Eliot Spitzer had said he wouldn't negotiate with the Marsh & McLennan management team under Greenberg. After Marsh & McLennan announced Greenberg's resignation, Spitzer said the leadership changes and the reforms announced make ``corporate criminal prosecution unnecessary.''
The board also said that on Tuesday it will announce ``significant reforms'' in the way its Marsh Inc. subsidiary does business. The reforms, the board said, ``will be rooted in transparency'' and ensure that ``Marsh will receive compensation for its services from only one party _ its clients.''
Spitzer filed a civil suit against Marsh & McLennan on Oct. 14, charging the brokerage was rigging bids and fixing prices in the sale of property and casualty insurance to businesses. Spitzer also charged that the company's commission system _ which included payments from insurance companies in exchange for more deals _ was the equivalent of accepting payoffs.
Shortly after the resignation was announced, New York Attorney General Eliot Spitzer said the board's action ``permits Marsh and this office to move forward toward a civil resolution of our lawsuit.'' Spitzer added that any criminal action would be against individuals, not the firm.
The board said that Greenberg _ Marsh's chairman and CEO _ will be replaced by Michael Cherkasky, 54, who just last week was named head of Marsh Inc., the company's insurance brokerage unit.
Before that, Cherkasky had been chief executive of Marsh Kroll, the Marsh & McLennan risk consulting subsidiary.
Cherkasky joined Kroll in 1994 after 16 years in the criminal justice system, some of them as Spitzer's boss in the New York district attorney's office. Kroll was purchased by Marsh & McLennan in July 2004.
``It is a new day in general in corporate governance,'' Cherkasky told The Associated Press.
He declined to say what specific changes he expected Marsh & McLennan would make, but added: ``We're going to make the changes that we need ... not people changes, but process changes.''
The company already has said it will stop accepting contingent commissions, which are fees paid by insurance companies to brokers in exchange for more business. The company collected some $1.2 billion in these commissions over the last 18 months.