Hartford Financial will pay $20m to settle kickback case
NEW YORK -- Hartford Financial Services Group Inc., the biggest US seller of variable annuities, will pay $20 million to settle allegations it paid kickbacks to brokers who pushed its products on pension plan managers.
The settlement, with attorneys general Eliot Spitzer of New York and Richard Blumenthal of Connecticut, includes fines and restitution to the pension plans, Spitzer said yesterday. The Hartford company said the payments in question totaled $4 million over seven years. ''We have apologized to plan sponsors for not having provided full disclosure of the compensation paid," chief executive Ramani Ayer said.
Hartford secretly paid brokers to steer plan managers to its group annuities, the attorneys general said. The payments, disguised as ''expense reimbursement agreements," increased premiums for customers, including auditor PricewaterhouseCoopers LLP and Mount Sinai Medical Center in Florida, Spitzer said. The agreement marks the latest leg of Spitzer's two-year probe of collusion in the insurance industry. He has wrested $3 billion in settlements from insurers and brokers.
Every year, pension plan sponsors put more than $1 billion of retirement plan assets in single-premium group annuities, fixed-income investments often purchased for participants who are leaving their plan and want to receive their benefits monthly. The competition is fierce, Spitzer said, and many plan sponsors turn to brokers to help them select the annuity because of the complexities.
Hartford was able to collect $800 million in premiums on more than 100 contracts even though competitors offered lower prices, Spitzer said.
He said four brokers, Dietrich & Associates, Brentwood Asset Advisors, BCG Terminal Funding, and USI Consulting Group, entered into the ''sham" agreements.
BCG, of Braintree, Mass., never received any undisclosed payments, despite signing an agreement, said Michael Devlin, a principal at the firm. Calls to Dietrich, Brentwood and USI weren't immediately returned.
