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Is front-running for the new bullion fund pushing up gold''s price?
"Conspiracies rarely exist."
-- Dennis Gartman
in The Gartman Letter,
September 14, 2004
* * *
Zurich Financial Underwriters
Plead Guilty in Probe
By Philipp Goellner and Eric Moskowitz
Bloomberg News Service
Tuesday, November 16, 2004
Two underwriters at Zurich Financial Services AG,
the third-biggest U.S. commercial insurer, pleaded
guilty to charges they helped rig bids to help an
insurance broker give business to favored clients.
The two men, John Keenan and Edward Coughlin,
worked exclusively with Marsh & McLennan Cos.,
according to plea agreements at their arraignment
today in New York State Supreme Court. The pleas
bring to five the number of people who have admitted
roles in the illegal business practices under
investigation by New York Attorney General Eliot Spitzer.
"The investigation is proceeding carefully and
methodically," Spitzer said in a statement. "Our goal is
to determine the full extent of wrongdoing in the industry
and its effect on consumers."
More than 17 people, including Marsh Chief Executive
Jeffrey Greenberg, have been fired or suspended since
Spitzer sued Marsh, the world's largest insurance
broker, on Oct. 14. Spitzer and the U.S. Securities and
Exchange Commission, expanding the probe beyond
bid rigging, this week sent new subpoenas to insurers
such as St. Paul Travelers Cos., seeking to determine
whether they are selling policies to help companies
Keenan and Coughlin each pleaded guilty to a
misdemeanor under New York State's Donnelly Act,
which bars agreements in restraint of trade. They face
a maximum sentence of one year in state prison.
The two employees no longer work at the company, said
Zurich spokesman Keith Owens. Keenan and Coughlin
were part of an unspecified number of employees in the
excess-casualty unit suspended last week, Owens said.
Keenan and Coughlin, who worked exclusively with Marsh
Global Broking between 2002 and 2004, are expected to
testify in future cases, Spitzer's office said. Supreme
Court Judge James Yates set a trial date for Keenan and
Coughlin of Jan. 27, 2005.
"I don't think the attorney general's office is going to bring
any of these cases to trial," said Lewis Weiner, an attorney
for Coughlin. "They're squeezing these low-level people and
that's not right."
Marsh spokeswoman Barbara Perlmutter declined to
comment on today's plea agreements. Zurich said it's being
helped in its investigation by the New York-based law firm
LeBoeuf, Lamb, Greene & MacRae LLP. LeBoeuf
spokesman Stephen DiCarmine declined to comment.
In his complaint against Marsh, Spitzer said insurers
inflated quotes as part of a phony bidding system Marsh
designed to steer business to the insurers that paid it the
highest fees. Two executives from American International
Group Inc. and one from Ace Ltd. pleaded guilty last month
in connection with the Marsh accusations.
Zurich won a contract two years ago to insure an $800
million school project in Greenville, South Carolina,
according to the Marsh suit. Marsh, which brokered the
deal, gave the contract to Zurich because it expected the
insurer to pay a lucrative fee, Spitzer's complaint said.
Zurich wasn't named as a defendant in the suit.
Spitzer filed his second complaint in the probe last week,
suing Universal Life Resources Inc., a closely held broker
based in San Diego. That suit linked UnumProvident Corp.,
MetLife Inc., and Prudential Financial Inc. to price fixing
and payoffs, bringing the total number of companies
identified in the collusion to nine.
The subpoena sent to St. Paul is part of a wider
investigation into non-traditional, or loss-mitigation,
insurance products. Ace received similar subpoenas
yesterday. A federal grand jury is probing a policy that
American International sold to Indianapolis cell-phone
distributor Brightpoint Inc. that the SEC said allowed
the company to mask losses.
Regulators are studying whether some policies can
provide financing like a loan while being accounted for
Spitzer and other state officials told a U.S. Senate panel
today that alleged abuses they found in the insurance
industry indicate the need for more federal oversight,
including tougher antitrust rules.
Industry groups told the same panel that fees that form
the core of Spitzer's suit against Marsh are part of
standard business practices.
"It's an incentive to bring in good business," said Ernst
Csiszar, president of the Property Casualty Insurers
Association of America. "The idea is we need better
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