Three AGs engineer settlement worth millions
HARTFORD, Conn. - Another company has settled bid-rigging allegations brought by Connecticut, New York and Illinois, and will pay $115 million in doing so.
The Hartford Financial Services Group, Inc., will also pay $26 million in penalties to three states -- $3 million apiece to Connecticut and Illinois and $20 million to New York.
Attorneys general Andrew Cuomo of New York, Lisa Madigan of Illinois and Richard Blumenthal of Connecticut alleged The Hartford gave insurance broker Marsh &McLennan intentionally inflated throwaway bids that helped Marsh charge higher insurance prices.
"The Hartford failed to act swiftly and strongly to stop and disclose market timing despite its duty to do so," Blumenthal said. "It failed to do enough soon enough to prevent this pernicious practice.
"The Hartford never encouraged or invited these illegal practices. It knew the harm and was lax and late in halting it."
Bid-rigging suits became popular with former New York Attorney General Eliot Spitzer, who engineered a $850 million settlement with Marsh & McLennan in 2005. Zurich American also paid millions in a settlement, with $92 million going to 16 attorneys general for attorneys fees. The settlements in which Zurich entered called for $210 million in restitution.
The Hartford will establish an $84 million fund to compensate affected investors.
Blumenthal said Wall Street traders practice market timing by buying mutual fund shares after important events or market changes, but before the share price changes at the end of the trading day. This practice harms long-term mutual fund investors by increasing the fees and costs they pay and potentially decrease the value of mutual fund shares, Blumenthal added.
Also, The Hartford will create a $5 million fund for policyholders harmed by improper insurance practices.
"Our investigation revealed that The Hartford provided false and fictitious insurance quotes to several Marsh offices and made hidden payments and steering for medium commercial property and casualty lines," Blumenthal said. "The Hartford provided Marsh with intentionally high and non-competitive bids, knowing Marsh could deceptively create the mirage of a competitive market with the understanding that it could win other desirable future business from Marsh."
Ohio is still conducting its own investigation of Marsh & McLennan.
The Hartford said it is happy to move on.
"We have worked assiduously to strengthen and improve our business practices and will continue to do so," chairman and chief executive Ramani Ayer said.
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