New York Attorney General Eliot Spitzer has filed suit against insurance brokerage firm Acordia Inc. in Chicago and its parent company, Wells Fargo Bank, for allegedly steering customers to insurance companies that paid kickbacks for the business.
According to the lawsuit, the practice of steering business represented a significant conflict of interest, placing Acordia's own financial interests ahead of the well-being of its clients, Mr. Spitzer's office said in a statement.
On its Web site, Acordia describes itself as doing "what is ethical and what is right for the customer" and claims that it makes "insurance placements in the best interest of our customers," the statement continued.
The attorney general said the lawsuit details how Acordia allegedly conspired with several insurance companies, known as Acordia's "Millennium Partners," to steer customers to them in exchange for secret payments.
Acordia's top management, including its then-CEO Robert Nevins, is alleged to have actively participated in the Millennium Partners scheme.
When insurance companies refused to make the improper payments, according to the lawsuit, Acordia's management punished them by steering customers away from them and toward insurers who did pay kickbacks.
Wells Fargo, based in San Francisco, participated directly in Acordia's fraud, the statement continued. In one scheme, Wells Fargo agreed to "funnel" its own retail banking clients to Acordia for advice about insurance coverage. Wells Fargo did so with the understanding that Acordia, in turn, would steer this additional business to The Hartford, an insurance company that paid Acordia for such steering.
The lawsuit, filed yesterday in State Supreme Court in Manhattan, a county-level jurisdiction, seeks restitution for the companies' customers, disgorgement of illegal profits and penalties.
The attorneys general of Connecticut and Illinois filed parallel lawsuits yesterday.
In a statement posted on the Wells Fargo Web site, Dave Zuercher, president of Acordia, said the firm plans to vigorously defend itself against the allegations brought by the attorneys general. He said the company discloses its compensation in accordance with guidelines set out by the National Association of Insurance Commissioners.
"Contingent compensation agreements have been a long-standing and well-known practice in the insurance industry, and these commissions continue to be paid by insurers to hundreds of insurance agents and brokers throughout the country, including New York," said Mr. Zuercher in a statement. "These agreements have been held by courts to be legal and enforceable."
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