A federal judge ruled last week in a shareholder's suit against Marsh & McLennan and executives of the company that while the company's exposure is limited, there is enough there to continue the case against the firm and two former top executives.
U.S. District Court Judge Shirley Wohl Kram, in Manhattan, ruled Wednesday that a number of allegations against New York-based professional services firm MMC, its subsidiary, insurance broker Marsh, and company executives should be dropped, but she denied a motion for summary dismissal.
However, Judge Kram ruled that there remained enough evidence in part to allow portions of the suit to proceed against MMC, Marsh, Jeffrey Greenberg, the former chief executive officer and chairman of MMC, and Roger E. Egan, former president and chief operating officer of Marsh.
According to the complaint, a variety of improper activities by company officials reduced the market capitalization of the company by billions.
The suit was brought by a group of pension funds represented by the law firms Grant & Eisenhofer P.A., based in Wilmington, Del., and New York-based Bernstein Liebhard & Lifshitz, LLP.
The funds sued in the wake of civil and criminal actions brought against MMC and Marsh by New York State Attorney General Eliot Spitzer.
Mr. Spitzer charged that executives at Marsh's Global Broking Unit were manipulating the placement of insurance contracts in return for illegal kickbacks in the form of volume-based contingent commissions. MMC, as part of a settlement with the attorney general, agreed it would no longer accept contingent commissions and pay $850 million in restitution to policyholders who were harmed.
The members of the class action, which include the state of New Jersey--Department of Treasury--Division of Investment; Public Employees' Retirement System of Ohio; State Teacher's Retirement System of Ohio; Ohio Bureau of Workers' Compensation; and others, claim the scandal cost nearly $12 billion in market capitalization.
The original suit named 20 individual defendants. The judge dismissed claims against all of the individual defendants except Mr. Greenberg and Mr. Egan, saying there was enough evidence presented in the plaintiff's filing to indicate the two may have withheld information from investors.
Judge Kram also ruled the suit and settlement agreement with Mr. Spitzer are evidence of responsibility on the part of MMC and Marsh. She also upheld the claim that MMC allegedly made misleading statements.
"Marsh & McLennan's market position was built on deception and improper conduct," said Jay Eisenhofer, an attorney at Grant & Eisenhofer, in a statement. "Judge Kram's decision will allow investors to pursue recovery for the substantial losses caused by Marsh's manipulations and illegal bid-rigging."
Robin Liebowitz, a spokeswoman for MMC, said she could not comment extensively on the ruling due to ongoing litigation, but said "in granting the motion to dismiss in part, the court has really narrowed the case."
Mr. Egan did not return a request for comment. Mr. Greenberg could not be reached for comment.
Ms. Kram gave the plaintiffs until Aug. 18 to file an amended complaint.
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