Marsh & McLennan CEO to step down, reports say

Fallout over broker fees likely to cost him his job

October 23, 2004|By BLOOMBERG NEWS

Board members of Marsh & McLennan Cos. Inc. reportedly are discussing a deal to assure the departure of chief executive Jeffrey W. Greenberg over allegations of widespread bid rigging and fraud by the nation's largest insurance brokerage.

The Financial Times and The Wall Street Journal, quoting people close to the talks, said Greenberg is expected to step down. Marsh & McLennan spokeswoman Barbara Perlmutter didn't return phone calls seeking comment on the newspaper reports.

Jules Kroll, founder of Kroll Inc., the investigations company that Marsh & McLennan bought this year, denied a Financial Times report that he will replace Greenberg on an interim basis.

"The board is working very intently," director Oscar Fanjul said yesterday when reached on his mobile phone. He declined to comment on details of board discussions.

Greenberg didn't return a phone message left at his New York home.

New York Attorney General Eliot Spitzer filed a civil suit Oct. 14 contending that Marsh & McLennan colluded with insurers to set prices. Marsh & McLennan also had an entire business unit dedicated to collecting fees from insurers that Spitzer said represented "payoffs" and were a conflict of interest with brokerage's duties to its clients. Marsh & McLennan last week eliminated the fees, which brought in $845 million in 2003.

Father, brother

Spitzer's lawsuit accused the insurance brokerage of colluding with American International Group Inc., which is run by Greenberg's father, Maurice R. "Hank" Greenberg; Ace Ltd., run by his younger brother, Evan Greenberg, and other insurers to rig bids and receive "payoffs." Spitzer also obtained three guilty pleas from executives at American International and Ace.

Spitzer's investigation has been the most damaging of several regulatory probes against the New York company over the past two years. Trading abuses at Marsh & McLennan's Putnam Investments forced out CEO Lawrence J. Lasser last year. The company's Mercer Inc. consulting unit is under investigation by the Securities and Exchange Commission for its relationships with investment managers and consultants.

"What occurred there was rampant," said James H. Huguet, who manages $1.4 billion at Great Companies LLC and is selling shares of Marsh & McLennan. "This happened on Jeff's watch. You've got to rework the culture of Marsh."

Jeffrey Greenberg started his insurance career as a Marsh & McLennan broker in 1976. He joined AIG two years later and spent 17 years there, rising to executive vice president. He joined Marsh & McLennan's investment arm in 1995 and has been CEO since 1999.

Doubled net income

As CEO, Greenberg doubled Marsh & McLennan's net income to $1.54 billion in 2003 from $726 million in 1999, while expanding revenue to $11.6 billion from $9.16 billion.

Separately yesterday, Marsh & McLennan was ordered to appear before New York state's insurance regulator Nov. 23 to respond to allegations that it "used fraudulent, coercive, and dishonest practices and demonstrated untrustworthiness under New York State insurance law." The department has the authority to revoke the company's licenses.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.