State Supreme Court Justice James Yates in Manhattan threw out the convictions of William Gilman and Edward McNenney, former Marsh managing directors, in a July 2 decision. The pair was accused of fixing prices to steer business to insurers that paid Marsh hidden fees from November 1998 to September 2004.
New York Attorney General Cuomo filed papers Dec. 14 withdrawing his July 12 appeal in a state appeals court in New York City.
“This result was almost inevitable,” Robert J. Cleary, who represents Gilman, said today in a phone interview. “Numerous documents that were not provided to us should have been and would have been invaluable, as Yates stated, to our efforts to challenge the prosecution case.”
The attorney general’s office probed anti-competitive sales practices in the insurance industry for six years. The case was begun under Cuomo’s predecessor, Eliot Spitzer, and was tried under Cuomo.
“Given the six-year history of this litigation and while we may disagree with some of the court’s findings, this office did what was clearly appropriate under all the circumstances,” Richard Bamberger, a spokesman for Cuomo, said in an e-mail.
New Evidence
Failures by prosecutors, including “newly discovered contradictory evidence, undermines the court’s confidence in the verdict,” Yates wrote in his decision.
Yates found the two men guilty in February 2008 of a single count of restraint of trade under New York’s antitrust statutes after a 10-month trial.
Of 37 counts in the indictment, 36 were dismissed before the trial or resulted in acquittals, Cleary said.
The state alleged that McNenney, Gilman and six other Marsh Global Broking Inc. brokers took part in a conspiracy to fraudulently obtain millions of dollars for Marsh and its accomplice companies by rigging the market for excess casualty insurance, according to a redacted copy of the 25-page decision.
Gilman, formerly Marsh’s executive marketing director and managing director, and McNenney, the former global placement director and managing director, worked in the Excess Casualty Unit of Marsh Global Broking, a Marsh Inc. unit.
Greenberg Ouster
Marsh, based in New York, the world’s second-biggest insurance broker, lost almost half its market value, ousted former Chief Executive Officer Jeffrey Greenberg and settled a related civil lawsuit filed by Spitzer in 2005, paying $850 million to resolve accusations that it rigged bids and took kickbacks from insurers.
Gilman and McNenney, who asked Yates to throw out their convictions, claim that in May 2009, during a trial of three other defendants, they discovered the attorney general’s office failed to produce evidence in their favor.
The exculpatory material included 700,000 pages of documents from Liberty International Insurance Co. that allegedly belies the prosecution’s theory that Liberty and other insurance companies joined a conspiracy to fix prices, rig bids and allocate customers, Yates said in the decision.
The defense said cooperators got hidden promises of leniency beyond those in their written agreements, according to the ruling.
‘Off-Record’ Offer
Todd Murphy, a Marsh Global Broking coordinator, said at the trial in September 2007 that his only expectation from Cuomo’s office for his testimony was related to his sentence, according to the judge. In June 2008, Murphy twice testified that Cuomo’s office made an “off the record” offer to reduce the charges for people who cooperated.
Yates said that while such an inducement was a serious claim, Cuomo’s office denied any side deal with Murphy and said the claim was too vague to be credited.
The convictions rested on testimony from six witnesses who all had “very favorable cooperation agreements,” the judge said. Before, during and after the trial, those witness also gave sworn testimony “discrediting, even contradicting, their trial testimony,” Yates said.
In October 2009, Yates acquitted the three other former Marsh executives on charges of bid-rigging and price-fixing after an 11-month trial. Former managing directors Joseph Peiser and Kathleen Drake and former Senior Vice President Greg Doherty were found not guilty of scheming to defraud and of antitrust violations under the general business law.
Charges Dismissed
In November 2009, the judge dismissed charges against former Marsh executives William McBurnie and Thomas Green and former Zurich Financial Services AG executive Geri Mandel at the request of Cuomo, who after the earlier acquittal said the prosecution was costing too much.
In January, Yates allowed ex-Marsh employees Robert Stearns and Kathryn Winter and a former Zurich Financial employee, James Spiegel, to withdraw pleas of guilty to felony charges of participating in a scheme to defraud. The judge agreed to reduce the charges to misdemeanors and said he would dismiss the charges if the three abided by plea agreements.
Yates also dismissed charges against six people who pleaded guilty to misdemeanor charges related to alleged bid-rigging.