Marsh & McLennan Companies, Inc. Securities Litigation
On December 23, 2009, the Honorable Colleen McMahon of the United States District Court for the Southern District of New York granted final approval to a $400 million settlement in In re Marsh & McLennan Cos., Inc. Securities Litigation, No. 04-CV-8144 (CM) (S.D.N.Y.). The case arose from the New York Attorney General’s investigation into world’s largest insurance broker, Marsh & McLennan Cos., Inc.’s (“MMC”) illicit practice of steering its clients to insurance companies that agreed to pay it billions of dollars in contingent commissions. Defendants in the action are MMC, Marsh Inc. (“Marsh”) (a wholly-owned subsidiary of MMC), and certain of MMC’s officers and directors.
The Court appointed the State of New Jersey, Department of Treasury, Division of Investment and the Public Employees Retirement System of Ohio, the State Teachers Retirement System of Ohio, the Ohio Bureau of Workers’ Compensation as Co-Lead Plaintiffs in the action, and appointed Bernstein Liebhard LLP and Grant & Eisenhofer, P.C. as Co-Lead Counsel.
Lead Plaintiffs alleged that during the period of October 15, 1999 through October 14, 2004, Marsh routinely steered clients to those insurers with whom it had entered into favorable contingent commission agreements. As alleged in the Second Amended Consolidated Complaint, Marsh’s primary concern in structuring its clients’ risk transfer and placement was the maximization of contingent commission revenue, irrespective of the risk profiles, requirements, and preferences of its clients. Thus, Marsh is alleged to have engaged in bid-rigging to ensure that policies were placed with insurance companies that had entered into contingent commission agreements with Marsh. Further Lead Plaintiffs alleged that Marsh provided no legitimate market services in exchange for its receipt of contingent commissions, which were, in reality, nothing more than kick-backs for the placement of business. In addition, far from making complete and accurate disclosure of its receipt of contingent commissions in compliance with various regulatory and industry agreements governing disclosure, Lead Plaintiffs alleged that Marsh utilized a protocol designed to mislead clients about the contingent commissions it received in connection with the clients’ placement of insurance. In connection with the proceedings initiated by the New York State Attorney General, Marsh agreed to pay $850 million in restitution to its clients – the insurance purchasers – who were victimized in this scheme. No part of this fund however, was to be used to compensate the purchasers of Marsh securities who purchased their shares at artificially inflated prices due to defendants’ wrongful conduct.
The case settled after more than four years of litigation, resulting in a $400 million recovery for Marsh shareholders.
For more information about the settlement, please visit www.mmcsecuritieslitigation.com.