Citigroup memo reveals plan to rig euro bond market, destroy small traders


"Conspiracies rarely exist."

-- Dennis Gartman in The Gartman Letter, Sept. 14, 2004

* * *

Marsh & McLennan Will Pay $850 Million
to Settle N.Y. Bid Rigging and Kickbacks

By David Plumb
Bloomberg News Service
Monday, January 31, 2005

NEW YORK -- Marsh & McLennan Cos., the world's largest insurance
brokerage, agreed to pay $850 million to settle New York Attorney
General Eliot Spitzer's accusations that it rigged bids and took
kickbacks from insurers.

The funds will go to reimburse brokerage commissions to clients and
be paid over four years, Spitzer said in a statement. The settlement
is larger than any he obtained during his investigations of the
securities and mutual-fund industries. Marsh neither admitted nor
denied the allegations.

Chief Executive Officer Michael Cherkasky is relying on the
agreement to help hold onto clients and employees after Spitzer
accused the broker on Oct. 14 of staging sham bids and steering
clients to insurers that paid hidden fees. More than 20 employees
have defected to competitor Willis Group Holdings Ltd. and shares
have fallen 33 percent since the suit.

"The settlement gives investors some certainty" about Marsh's
future, said Jack Lake, an analyst who helps manage $51 billion at
Victory Capital Management Inc. in Cleveland, before the
announcement. "The problem is, it's a settlement with just one

Victory holds shares of Aon Corp., Marsh's biggest competitor.

Cherkasky, who replaced ousted CEO Jeffrey Greenberg 11 days after
the complaint was filed, still faces investigations from dozens of
state prosecutors as well as shareholder lawsuits. The company also
banned fees that brought in $845 million in annual revenue from

Spitzer, 45, plans to continue prosecuting Marsh employees. Former
Marsh managing director Robert Stearns pleaded guilty on Jan. 6 to
Spitzer's bid-rigging charges.

Spitzer's clout has grown after he wrested $4.4 billion in fines
from Wall Street banks for tainted research and from mutual funds
for bilking small investors. The investigations are helping to
propel his candidacy for New York governor in 2006.

The accord, which exceeds Bank of America Corp.'s $675 million
settlement over improper mutual-fund trading, may be the first of
many in the $2.4 trillion insurance industry.

Spitzer is investigating Marsh's biggest competitors, Aon and
Willis, as well as insurers that his suit mentions as participants
in the fraud, including American International Group Inc., Ace Ltd.,
and Hartford Financial Services Group Inc. None of the other
companies have been sued. Spitzer said in December that he was
negotiating with Aon.

Five executives from AIG, Ace, and Zurich Financial Services AG have
pleaded guilty to Spitzer's bid-rigging charges and are now
cooperating with the investigation. The plea agreements describe how
Marsh conspired with insurers to provide clients with fake quotes to
simulate competition.

The bid rigging allowed Marsh to choose which insurers would get
their clients' business and raised the cost of policies, according
to the suit. Insurance companies participated to maintain their
relationship with a broker that controlled 31 percent of the market,
Standard & Poor's said in a report.

Cherkasky, 54, was Spitzer's boss at the Manhattan district
attorney's office in the early 1990s and joined Marsh last year when
it bought Kroll Inc., the investigative firm he led.

The former prosecutor has cut 3,000 jobs, created a new compliance
unit to monitor phone calls and e-mails from Marsh's main brokerage
unit, and asked two senior brokerage executives, Roger Egan, 54, and
Christopher Treanor, 38, to resign. William Rosoff, 58, also stepped
down as general counsel.

Of the 200 customers Cherkasky has spoken to since the suit, only
two have left, he said in a Jan. 23 interview. The brokerage, which
has roughly 1,100 managing directors, lost about nine to competitors
in the past nine months, he said. It typically has a turnover rate
of about five or six.

The full impact of executive departures may not by felt for a year
or two as non-compete clauses expire, said Legg Mason Wood Walker
analyst Matthew Roswell, who has a "sell" rating on Marsh's stock.

The settlement "goes a long way toward getting them back on track,"
John Buckingham, president of Al Frank Asset Management in Laguna
Beach, California, which manages $600 million and doesn't own Marsh
shares, said before the announcement.

The removal of 53-year-old Greenberg, prompted by Spitzer's refusal
to negotiate with him, roiled the most powerful family in U.S.
insurance. His father, Maurice "Hank" Greenberg, is the 79- year-old
CEO and chairman of AIG, and his brother Evan Greenberg, 50, runs


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