January 7, 2005
New York Attorney General Eliot Spitzer's latest targets include General Re Corporation, a subsidiary of Warren Buffett's Berkshire Hathaway Inc. Meanwhile, Spitzer collected another scalp when a senior executive of Marsh, Inc. pleaded guilty to criminal charges in connection with Spitzer's investigation of fraud and bid rigging in the insurance industry.
In the General Re case, Spitzer has subpoenaed what are described as documents and information relating to non-traditional or loss mitigation insurance products. The Securities and Exchange Commission requested similar documents last month.
Berkshire Hathaway and General Re said they will cooperate fully with the requests. Berkshire Hathaway and its subsidiaries are active in a variety of businesses, including property and casualty insurance on both a direct and reinsurance basis.
Iin the Marsh investigation, Robert Stearns admitted that during a period from 2002 to 2004, he instructed insurance companies to submit noncompetitive bids for insurance business, and conveyed these bids to Marsh clients under false and fraudulent pretenses, Spitzer said in a statement.
These noncompetitive bids allowed Marsh to control the market, to protect incumbent insurance carriers when their business was up for renewal, and to maximize Marsh's profits.
Stearns faces a maximum sentence of 1 1/3 to 4 years in state prison.
Six executives at four companies in the insurance industry have now pleaded guilty to criminal charges in the probe. Two executives at AIG, two from Zurich American Insurance Company, and one from ACE previously entered pleas to similar charges. They are all expected to testify for the prosecution in future cases.
