Marsh Executives' Convictions Tossed in Bid-Rig Case
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A New York judge threw out the criminal convictions against two former Marsh & McLennan Cos. executives whom he found guilty of restraint of trade in 2008.
State Supreme Court Justice James Yates in Manhattan tossed the convictions against William Gilman and Edward McNenney, former managing directors at Marsh, in a July 2 written decision. The pair were accused of fixing prices to steer business to insurers that paid Marsh hidden fees between November 1998 and September 2004.
The decision was the latest loss for the New York Attorney General’s office in its six-year probe of anti-competitive sales practices in the insurance industry. The case, begun under former state Attorney General Eliot Spitzer, was tried under his successor, Andrew Cuomo.
Failures by prosecutors, including “newly discovered contradictory evidence, undermines the court’s confidence in the verdict,” Yates wrote in his decision.
Yates found the two men guilty in February 2008 of a single count of restraint of trade under New York’s antitrust statutes after a 10-month trial.
Of 37 original counts in the indictment, 36 resulted in either dismissal or acquittal, said Richard Spinogatti, an attorney at Proskauer Rose LLP, the firm that represents Gilman.
“This really is a full and complete vindication,” Proskauer partner Robert Cleary, who represented Gilman, said of the decision in a telephone interview. “There was a lot of evidence that was suppressed.”
Scott Devereaux, an attorney for McNenney, didn’t immediately return a call for comment.
“We are reviewing the decision and contemplating an appeal,” Richard Bamberger, a spokesman for Cuomo, said in an e-mailed statement.
The attorney general’s office, following a 2004 probe, alleged that McNenney, Gilman and six other Marsh Global Broking Inc. brokers took part in a conspiracy to fraudulently obtain millions of dollars for Marsh and its accomplice companies by rigging the market for excess casualty insurance, according to a redacted copy of the 25-page decision.
Gilman, formerly Marsh’s executive marketing director and managing director, and McNenney, the former global placement director and managing director, worked in the Excess Casualty Unit of Marsh Global Broking, a Marsh Inc. unit.
New York-based Marsh, the world’s second biggest insurance broker, lost almost half its market value, ousted former Chief Executive Officer Jeffrey Greenberg and settled a related civil lawsuit filed by Spitzer in 2005, paying $850 million to resolve accusations that it rigged bids and took kickbacks from insurers.
Christine Walton, a Marsh spokeswoman, declined to comment.
In April 2008, Yates sentenced Gilman and McNenney to 16 weekends in jail, 250 hours of community service and probation. They didn’t have to serve the sentences while they appealed to the Appellate Division, Spinogatti said. That appeal is still pending, according to Yates’ decision.
Gilman and McNenney, who also asked Yates to toss their convictions, claim that in May 2009, during a trial of three other defendants, they discovered the New York Attorney General’s office failed to produce exculpatory and impeaching evidence.
The undisclosed material includes 700,000 pages of documents from Liberty International Insurance Co. that allegedly belies the prosecution’s theory that Liberty and other insurance companies joined a conspiracy to fix prices, rig bids and allocate customers, Yates said in the decision.
The defense said cooperators also got hidden promises of leniency beyond those in their written agreements, according to the ruling.
Todd Murphy, a Marsh Global Broking coordinator, said at the trial in September 2007 that his only expectation from Cuomo’s office for his testimony was related to his sentence, according to the judge. In June 2008, Murphy twice testified that Cuomo’s office made an “off the record” offer to reduce the charges for people who cooperated from misdemeanors to violations.
Yates said that while such an inducement was a serious claim, Cuomo’s office denied any side deal with Murphy and said the claim was too vague to be credited.
The two men’s convictions rested on testimony from six witnesses who all had “very favorable cooperation agreements,” the judge said. Before, during and after the trial, those witness also gave sworn testimony “discrediting, even contradicting, their trial testimony,” Yates said.
In October, Yates acquitted the three other former Marsh executives on charges of bid-rigging and price-fixing after an 11-month trial. Former managing directors Joseph Peiser and Kathleen Drake and former Senior Vice President Greg Doherty were found not guilty by Yates of scheming to defraud and antitrust under the general business law.
In November, Yates dismissed charges against former Marsh executives William McBurnie and Thomas Green and former Zurich executive Geri Mandel at the request of Cuomo, who after the earlier acquittal said the prosecution was costing too much.
In January, Yates allowed former Marsh employees Robert Stearns and Kathryn Winter and former Zurich Financial Services AG employee James Spiegel to withdraw their guilty pleas to felony charges of participating in a scheme to defraud. The judge agreed to reduce the charges to misdemeanors and said he would dismiss the charges if the three abided by plea agreements.
Yates also dismissed charges against six people who previously pleaded guilty to misdemeanor charges related to alleged bid-rigging.
The case is People of the State of New York v. Doherty, 04800-2005, New York State Supreme Court, County of New York (Manhattan).
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