NEW YORK (Reuters) - A New York judge has thrown out the convictions of two former Marsh & McLennan Cos executives for their roles in an insurance bid-rigging scheme that led to an $850 million settlement with the state.
The defendants William Gilman and Edward McNenney had each been found guilty in February 2008 on one count of restraining trade, a felony antitrust charge, after a 10-month bench trial before New York State Supreme Court Justice James Yates. The other 36 charges were dismissed or ended in acquittal.
But in a July 2 decision, Yates reversed the conviction, citing newly discovered contradictory statements made by witnesses who cooperated with prosecutors, and the suppression of documents that would have been “invaluable” to the defense.
“The case was, from the outset, a circumstantial case,” Yates wrote in a 25-page ruling. The additional evidence, he said, “undermines the court’s confidence in the verdict.”
Gilman had been an executive marketing director in the Marsh Inc brokerage unit who negotiated revenue-sharing agreements with insurance carriers, while McNenney was a Marsh global placement director.
Yates sentenced each to 16 weekends in prison, but neither served time pending the appeal of their convictions.
The judge’s latest decision is a setback for New York Attorney General Andrew Cuomo, whose predecessor Eliot Spitzer in 2004 began an industrywide probe into the alleged steering of clients to favored insurers in exchange for kickbacks.
Gilman and McNenney were among eight insurance executives, including seven from Marsh and one from a unit of Zurich Financial Services AG, indicted in September 2005.
Last October, Yates acquitted three of the other Marsh executives after an 11-month trial. The next month, Cuomo dismissed the cases against the remaining defendants, citing the potential costs of another long trial.
A Cuomo spokesman said the attorney general’s office is reviewing Yates’ decision and contemplating an appeal.
Bob Cleary, a partner at Proskauer Rose LLP who represented Gilman, said: “We are very pleased with Justice Yates’ decision. This amounts to a total vindication for Bill Gilman.”
A lawyer for McNenney did not immediately return a call seeking comment.
Spitzer accused the indicted executives of colluding with American International Group Inc, units of Ace Ltd and Zurich, Liberty International Insurance Co and others to rig the excess casualty insurance market from November 1998 to September 2004.
Marsh & McLennan agreed in January 2005 to pay $850 million to settle related civil charges by Spitzer and to end improper bid-rigging, three months after the New York-based company ousted Chief Executive Jeffrey Greenberg.
Twenty-one executives from Marsh and insurance carriers have pleaded guilty to various charges in the probe and agreed to cooperate with investigators, Yates said.
Cuomo, a Democrat, is the front-runner to become New York’s next governor when an election is held in November.
At mid-afternoon, Marsh shares were up 53 cents, or 2.4 percent, at $22.69 on the New York Stock Exchange. They traded at $46.13 before Spitzer publicly revealed his probe in October 2004.
The case is: New York v. Gilman et al, New York State Supreme Court, County of New York, No. 04800-2009.
Reporting by Jonathan Stempel, Joan Gralla, Karina Ioffee and Grand McCool; Editing by Gerald E. McCormick and Richard Chang