Marsh & McLennan ready to pay $1bn to settle Spitzer lawsuit

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The Independent Online

Marsh & McLennan is in the final stages of hammering out an agreement with US regulators which could see the world's largest insurance broker hand over about $1bn in fines and compensation to settle charges that it defrauded clients.

An announcement of the settlement is expected within the next few weeks.

Marsh was rocked and its shares slumped by more than 40 per cent when New York's attorney general, Eliot Spitzer, launched a civil lawsuit in October, alleging that the broker orchestrated an elaborate scheme of bid rigging and improper commissions.

Marsh avoided a criminal case against the whole company by swiftly firing its chief executive, Jeffrey Greenberg - with whom Mr Spitzer said he would not negotiate - and its most senior lawyer, William Rosoff.

Mr Greenberg's replacement, Michael Cherkasky, said before Christmas he wanted to reach a settlement with Mr Spitzer as soon as possible so that Marsh could concentrate on trying to revive its reputation and revitalising its business.

However, the terms of the settlement will be scrutinised by the British government and regulators in the UK and Europe, who are still waiting to be satisfied that Marsh has completely stamped out the illegal practices.

Mr Cherkasky, a former government lawyer who used to be Mr Spitzer's boss, has stressed the alleged criminal activity was limited to a very small number of people. Robert Stearns, a managing director at Marsh, is so far its only employee to have pleaded guilty to criminal charges, though the company has made a number of others redundant.

While Marsh in the UK was cleared of taking part in the illegal bid rigging by an external investigation by the law firm Freshfields, Britain's Financial Services Authority is being particularly vigilant because the broker plays a major role in the London insurance market.

The FSA, which on Friday will take on responsibility for regulating insurance brokers, could force Marsh in Britain to take further action to improve the transparency of its business if it is not satisfied with the measures taken by Marsh in New York. Bruce Carnegie-Brown, head of the broker in the UK, has already agreed to improve corporate governance by adding a non-executive to the board of Marsh executives who report to its headquarters in New York.

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