Marsh Can Do $600 Million, But Apologize?
Marsh & McLennan Cos. has offered to pay $600 million to settle insurance bid-rigging allegations leveled by New York state's attorney general, Eliot Spitzer, but his office has sought $750 million and a public statement of contrition as part of a pact that is expected to be made final this month, people familiar with the matter say.
Negotiations between state officials and representatives of the New York financial-services company have moved forward quickly in recent days and a pact could be struck as soon as next week. It was previously known that a settlement could be more than $500 million. But the people privy to the talks say Marsh & McLennan has bristled at the potential statement of contrition for alleged wrongdoings at Marsh Inc., the company's insurance-brokerage unit and the world's biggest middleman between insurers and corporate buyers. Marsh contends such a statement could leave individuals or the company vulnerable in expected litigation from shareholders and other states' regulators.
The talks are expected to resume in earnest next week, the people said. Mr. Spitzer and Marsh Chief Executive Michael G. Cherkasky, formerly head of Marsh Kroll, the firm's investigative unit, and Mr. Spitzer's boss in the Manhattan district attorney's office at one time, both are expected to return from business trips today.
Mr. Cherkasky had pushed for a quick settlement last year and now is eager to put the matter to bed by month's end. He has visited and called the attorney general's offices several times to help speed the process.
The 134-year-old firm has been reeling since Mr. Spitzer on Oct. 14 filed his civil fraud lawsuit, alleging that the Marsh brokerage firm cheated corporate clients by rigging bids for insurance contracts and steering business to insurers who paid Marsh hundreds of millions annually in "contingent commissions." Mr. Spitzer likened these commissions, which totaled $845 million of Marsh's total 2003 revenue of $11.6 billion, to kickbacks.
Since the lawsuit was filed, Marsh has replaced nearly all of its senior management, sworn off the lucrative contingent commissions, pared all but one management representative from its board and laid off 3,000 employees. Its shares, which fell more than 40% immediately after the filing, remain down 34% on the New York Stock Exchange.
Beyond monetary restitution, Mr. Spitzer wants the pact to include the formalization of various reforms of Marsh's business practices, many of them already put in place by Mr. Cherkasky, according to the people. Those include the hiring of the firm's first chief compliance officer. One concern for Marsh on this front is whether the codification is so rigid it would leave Marsh at a competitive disadvantage.
Marsh has been girding for a steep settlement, with hundreds of millions of dollars of cash on hand and $232 million specially set aside late last year to help cover costs. Still, Marsh has indicated in negotiations that the larger a settlement, the greater the likelihood of more staff cuts, and that it potentially faces settlements with other states' regulators.
Settling on the pact's dollar figure also is complicated by the difficulty of discerning whether or by how much a client overpaid. Their insurance packages are often so complex that comparisons of legitimate bids are difficult to start with.
RISKY BUSINESS
? Read the complaint filed against Marsh & McLennan. (Adobe Acrobat required.)
? See a reader's guide breaking down the allegations and insurance-industry lingo being tossed around in Spitzer's case.
Public apologies have been included in past settlements inked by Mr. Spitzer. Last May, for instance, Richard Strong, then-head of Strong mutual funds, issued a two-paragraph statement telling shareholders he was "deeply sorry" for his behavior tied to improper trading by him personally in the funds.
Mr. Spitzer and his staff have been methodically drafting the Marsh settlement because it likely will become a template for settlements with other firms in his broadening probe of the insurance industry, according to the people familiar with the matter. They also have continued to sift through mounds of material subpoenaed from insurers and insurance brokers to ensure they have identified all the wrongdoing there was to be found.
Marsh has suspended or dismissed at least nine employees and mostly is done with its own investigation. Last week, Robert Stearns , a veteran Marsh broker, became the first Marsh employee to plead guilty to criminal charges for his role in the alleged scheme. Five other individuals, all former employees of insurers, have pleaded guilty to criminal charges and are cooperating with Mr. Spitzer's probe.
As of late October, Marsh had about $700 million in cash in hand, and in December, it signed pacts with 22 banks for $3 billion in financing. While rival brokerage firms have lured some top producers from Marsh, recent surveys by industry and Wall Street analysts indicate that the majority of Marsh clients are taking a wait-and-see attitude before pulling any business.
But in negotiations, Marsh has raised concerns about the loss of revenue the firm is facing and the potential for client and broker defections. The firm hopes to recoup some of the foregone contingent commissions with a still-undisclosed new "business model."
Meanwhile, the firm has a 43-year streak of consecutive annual dividend increases on the line, among the longest on record. Marsh's board has deferred a decision on the firm's first-quarter dividend. The status of the dividend, the outline of the new business model and potential layoff decisions are expected to be influenced by the size and timing of a settlement with Mr. Spitzer.
Marsh与斯皮策的和解谈判取得进展
Marsh & McLennan Cos. (MMC)同意支付6亿美元，以便和纽约州司法部长斯皮策(Eliot Spitzer)达成和解。此前，斯皮策指控包括Marsh在内的多家保险公司涉嫌参与操纵投标。但据知情人士透露，斯皮策则要求Marsh & McLennan支付7.5亿美元的和解金并公开道歉。预计双方将在本月达成最终协议。
近几天来，州官员和Marsh & McLennan代表进行的谈判取得了重大进展，双方最快有望于下周达成和解协议。先前就有消息称和解协议的金额可能超过5亿美元。但了解谈判内幕的人士称，Marsh & McLennan对还可能就Marsh Inc.的错误行为公开道歉感到十分恼火。Marsh Inc.是Marsh & McLennan的保险经纪子公司，也是全球最大的保险经纪公司。Marsh & McLennan认为，预计公司股东和其他州的监管部门也将提起诉讼，公开道歉的做法可能导致一些人士以及整个公司因此而受到牵连。
该知情人士称，预计双方将于下周重新回到谈判桌前。预计斯皮策和Marsh & McLennan的首席执行长麦克尔?切卡斯基(Michael Cherkasky)今天都将出差归来。
去年就想尽快了结此事的切卡斯基现在希望能在本月底之前结束纠纷。为了加快谈判进程，他曾多次致电和亲自登门拜访斯皮策办公室。
自从去年10月14日斯皮策对Marsh & McLennan提起民事欺诈诉讼以来，这家已有134年历史的公司就麻烦不断。斯皮策指控Marsh Inc.欺骗企业客户，具体做法是操纵保险合同投标，并把业务介绍给每年向其支付数亿美元或有佣金的保险商。在斯皮策看来，这些佣金就是回扣。在2003年116亿美元的公司总收入中，或有佣金占到8.45亿美元。
斯皮策提起诉讼后，Marsh几乎更换了所有的高级管理人员，也放弃了收取或有佣金的做法，并裁员3,000人。其股价因这起诉讼而在短期内下跌了40%以上，现在该股股价的跌幅仍有34%之多。
据上文提到的那位知情人士说，除了支付和解金之外，斯皮策还要求Marsh将业务整改列入明文规定，其中的许多改革在切卡斯基上任后已经得到实施。例如，招聘公司历史上首位首席督察长。但Marsh担心这条严格的规定将有损其竞争力。
Marsh一直准备付出高昂的和解费用，该公司手头拥有数亿美元现金，去年底还特别拨出了2.32亿美元用于支付和解成本。但Marsh已在谈判中表示，和解的数额越大，裁减更多人员的可能性就越大，而且公司可能还得同其他州监管机构达成和解。
和解协议的具体数额由于难以确定客户是否多付款，以及多付款的金额而变得格外复杂。他们的保险方案一般都非常复杂，以致于很难与合法投标进行比较。
斯皮策过去签署的几宗和解协议中都包括了公开道歉。比如，去年5月，Strong共同基金当时的负责人理查德?斯特朗(Richard Strong)就发布了一个两段的声明，向股东表示他对他个人参与该基金不当交易行为的做法“深表歉意”。
知情人士透露，斯皮策及其职员一直在系统全面地起草Marsh的和解协议，因为这可能成为与其他企业和解协议的样板。目前他正在对保险行业进行大规模的调查。他们还在继续从堆积如山的来自保险商和保险经纪人的材料中进行筛选，以确保他们能将现所有的违法行为一网打尽。
至少有9名员工已经被Marsh暂停工作或解雇，这大多与该公司自己的调查有关。上周，Marsh的资深经纪人罗伯特?斯特恩斯(Robert Stearns)成为第一个对刑事指控认罪的Marsh员工。还有5名保险公司的前员工也都对刑事指控认罪，并正在配合斯皮策的调查。
截至2004年10月底，Marsh共有约7亿美元的现金，12月份，该公司同22家银行签订了20亿美元的融资协议。监管竞争对手从Marsh那里挖走了部分大企业客户，但最近的行业调查和对华尔街分析师的调查显示，Marsh的大多数客户仍对是否取消同该公司的业务往来持观望态度。
但在谈判过程中，Marsh已经对该公司面临的收入下降和客户及经纪商可能流失的情况表示了担忧。公司希望用尚未公布的新“商业模式”来弥补停止收取或有佣金带来的部分损失。
与此同时，该公司有著连续43年增加年度派息的历史，是连续增加派息年数最多的公司之一。Marsh的董事会已决定推迟公布第一季度的派息情况。预计派息情况、新商业模式的大体方案和可能裁员的决定都将受到何时同斯皮策达成和解协议以及支付多少和解金的影响。
