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Conn. sues ACE unit, Marsh & McLennan over alleged payments

HARTFORD -- Connecticut Attorney General Richard Blumenthal yesterday sued insurance brokerage giant Marsh & McLennan Inc. and a unit of the Bermuda-based ACE Ltd. insurance company for alleged illegal commissions in connection with an $80 million state contract.

It was the latest in a series of actions that Blumenthal has taken since New York Attorney General Eliot Spitzer filed suit last October against Marsh & McLennan, which is headquartered in New York, for bid rigging, price fixing, and demanding incentive fees from insurance companies in exchange for sending more property and casualty business their way.

Blumenthal's civil lawsuit, filed in Hartford Superior Court, accuses Marsh & McLennan of illegally steering an $80 million state contract to ACE Financial Solutions Inc.

It alleges that ACE paid Marsh a $50,000 commission for a contract that managed 678 state worker's compensation cases.

The state Department of Administrative Services had chosen Marsh as its broker when it was seeking an insurance company to handle the cases in April 2001.

The lawsuit says Marsh violated Connecticut consumer protection laws by accepting a commission other than the $100,000 commission paid by the state.

Blumenthal said he was seeking actual and punitive damages as well as reimbursement for legal and investigative expenses.

Blumenthal also said he is investigating whether Marsh took additional commissions.

Spokesmen for both Marsh and ACE said their companies were cooperating with Blumenthal's investigation.

Marsh & McLennan shares fell 50 cents, or 1.6 percent, to close at $31.01 on the New York Stock Exchange. ACE's shares dropped 85 cents, or nearly 2 percent, to $42.83 on the Big Board.

Blumenthal said that his office has subpoenaed nearly 30 insurance companies and 15 brokers and that his investigators have come away with hundreds of boxes of documents, including e-mails.

Evidence for the Marsh-ACE case came from an e-mail in which a Marsh executive referred to ACE's "generous tendencies to pay us a contingency on the 'back end' of the deal, assuming they would like to see more of this business from us in the future," the attorney general said.

The complaint quotes an unidentified insurance executives as saying that Marsh demanded additional payments.

"As outrageous as this backdoor, back end payment was, it was part of a pattern and practice in this industry that victimized not only the state of Connecticut but many other customers and consumers across Connecticut and the nation," Blumenthal said.

He added that more lawsuits are likely.

In December, Blumenthal said that the insurance company Cigna Corp. agreed to pay the state more than $870,000 to settle allegations that it concealed improper insurance commissions to a broker.

Cigna, which is headquartered in Philadelphia, provides dental insurance to state employees and retirees.

It had been paying New Haven broker Carl Feen a commission since 1990, Blumenthal said.

Its dental contract with the state specifically prohibits the payment of fees to agents and brokers because the commissions are built into the premiums.

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