Two employees from Zurich American Insurance Company have pleaded guilty to criminal charges in connection with a bid rigging scheme, New York Attorney General Eliot Spitzer announced. The employees both were senior underwriters at Zurich.
The action is part of Spitzer's ongoing investigation of fraud and anti-competitive practices in the insurance industry. Five executives at three major insurance companies have now pleaded guilty to criminal charges in the probe. Last month, two executives at AIG and one at ACE pleaded guilty to similar charges.
"The investigation is proceeding carefully and methodically," Spitzer said. "Our goal is to determine the full extent of wrongdoing in the industry and its effect on consumers, to punish those involved in misconduct, and to implement appropriate corrective measures."
In their guilty pleas, the underwriters admitted to following and executing the directions from a supposedly neutral broker to submit bids designed to lose, thus awarding the business to the designated "winner."
According to the complaints, from August 2002 through September 2004, both defendants worked in a section of the Specialties Excess Casualty Unit at Zurich, and dealt exclusively with executives at Marsh Global Broking, a subsidiary of Marsh & McLennan Companies.
Each defendant pled guilty to a misdemeanor under New York State's Donnelly Act, which prohibits agreements in unreasonable restraint of trade and competition. They face a maximum sentence of one year in state prison.
The two Zurich underwriters, as well as the three other insurance company employees who previously entered criminal pleas, are expected to testify in future cases.
