Exonerated Ex-Marsh Broker Sues Former Employer

A former Marsh Inc. broker is suing the company for malicious prosecution and breach of contract in connection with the former New York Attorney General Eliot Spitzer's investigation into bid rigging among brokers.

According to the lawsuit, William L. McBurnie, who worked for Marsh from 1997 to 2005, said he was scapegoated by Marsh. He was one of Marsh's employees to be indicted and accused of misconduct in connection with Spitzer's bid rigging and contingent fee investigation. The charges against McBurnie were dismissed on Nov. 19, 2009.

"The decision to prosecute William McBurnie was made by the former New York attorney general and a grand jury of the state of New York -- not by Marsh," Marsh said in a statement. "The company met its obligations to Mr. McBurnie by paying him benefits under its severance pay plan and approximately $5.4 million in legal expenses for the costs of his defense in his criminal case. These defense costs, which were paid notwithstanding that Mr. McBurnie never went to trial, were acknowledged by his defense counsel to constitute 'fair consideration' and the 'maximum reasonable amount' of fees and expenses for which Mr. McBurnie could possibly be entitled to be reimbursed."

"Marsh long ago addressed and moved beyond the issues that were the subject of the 2004 investigation. The company intends to vigorously defend against this lawsuit," Marsh said in a statement.

Even with the charges dismissed, McBurnie suffered "serious consequences," including losing his job with Marsh and damage to his reputation that left him unemployable in the insurance industry, according to the lawsuit. Because Marsh was slow to pay McBurnie's defense costs, he was forced to "virtually empty his lifetime savings, including requiring early withdrawal of his retirement funds."

The New York Attorney General's office "would not have sought the indictment of Mr. McBurnie without being convinced and persuaded to do so by Marsh, who was trying to protect itself and designated senior employees from criminal prosecution," according to the lawsuit.

McBurnie suffered "damages including lost compensation, substantial penalties and fees for early withdrawals from his retirement plan, interest costs on hundreds of thousands of dollars of debt he incurred to support himself and his family during his long period of unemployment, emotional distress, damage to his reputation, and loss of time and severe inconvenience" to defend himself against the indictment.

Marsh also violated his employment contract by not using its directors & officers policy to pay for McBurnie's defense in a timely manner, according to the lawsuit, which seeks more than $150,000 in damages.

The lawsuit was filed in U.S. District Court for New Jersey in Trenton.

Spitzer filed a civil lawsuit in 2004 against Marsh and its corporate parent, Marsh & McLennan Cos. (NYSE: MMC) accusing the broker of misconduct ranging from bid rigging to a conflict of interest by taking contingent commissions from clients. In January 2005, Marsh settled the civil charges, agreeing to establish an $850 million restitution fund. The settlement included an apology from Marsh but no admission of legal wrongdoing (Best's News Service, Jan. 31, 2005).

Spitzer pursued individual criminal actions against a number of brokers and industry officials, but none ended up sticking.

In 2009, Joseph Peiser, former head of Marsh's global excess casualty unit, and Greg J. Doherty and Kathleen M. Drake, two local brokerage executives, were found not guilty by New York State Supreme Court Justice James A. Yates (Best's News Service, Oct. 27, 2009).

Earlier, William Gilman and Edward J. McNenney, were each convicted on a charge of restraint of trade (Best's News Service, Feb. 25, 2008). But those convictions were later thrown out by Yates, who ruled that prosecutors withheld evidence. Gilman, who had been executive marketing director and managing director, and McNenney, who was global placement director and managing director, had already been acquitted of multiple other charges (Best's News Service, July 7, 2010).

Marsh & McLennan Cos. (NYSE: MMC) is the largest global insurance broker, as ranked by Best's Review magazine. During afternoon trading on Dec. 12, the company's shares were selling at $30.55, down 1.64% from the previous close.

(By Meg Green, senior associate editor, BestWeek: [email protected])