New York attorney general Eliot Spitzer is suing insurance broker Marsh over its practice of charging insurers placement service agreements (PSAs), also known as contingent commissions or market service agreements, in return for placing business with them. The broker's share price dropped by 17% following the news.
Marsh is also accused of soliciting fictitious bids for contracts aimed at deceiving clients into believing that competition to underwrite contracts had taken place. Several insurers that benefited from the practice have also been named in the lawsuit. These include American International Group (AIG) and Ace, the chief executives of which are the father and brother respectively of Marsh & McLennan's CEO Jeffrey Greenberg.
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Now, I happen to have a source (sound like Josh Marshall, don't I) in the insurance industry and the word is that this is a family feud between the Spitzers and the Greenbergs and Eliot's doing this to tweak their testicles. But Spitzer wouldn't be seeking indictments if he wasn't sure of himself. Greenberg has some serious resources. Besides, you know these two copped a plea for a reduced sentence provided they spill their guts:
The two AIG employees who have pleaded guilty to participating in the practice are Karen Radke, senior vice-president of excess casualty at American Home, a unit of AIG, and Jean Baptiste Tateossian, manager of the national accounts unit at American Home.
According to a spokeswoman at the New York attorney general's office, both have been charged with fraud and face up to four years in prison.
Sorry, Gord, there are too many crooks in NY to let Eliot go to Washington.