Vampires in
The Hartford
Sightings from The Catbird Seat
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July 23, 2007
The Hartford Settles
Trading Allegations
Forbes, Associated Press
HARTFORD, Conn. - The Hartford Financial Services Group Inc. paid $115 million to settle allegations it allowed illegal trading in some mutual funds, the company and state Attorney General Richard Blumenthal announced Monday.
Blumenthal said The Hartford paid so-called contingent commissions to insurance brokers and agents, accusing it of steering business in exchange for secret commissions.
The Hartford said the staff of the U.S. Securities and Exchange Commission has concluded its investigation into allegations of market timing - the rapid and frequent trading in mutual funds that can benefit some investors at the expense of others - and the SEC would recommend against any action.
A spokesman for the SEC would not comment.
The Hartford took a charge of $66 million, or 22 cents a share, in 2005 to establish a reserve for federal and state investigations related to market timing.
Blumenthal said The Hartford "failed to act swiftly and strongly to stop and disclose market timing despite its duty to do so."
The Hartford did not encourage or invite the illegal practices, but it "knew the harm and was lax and late in halting it," he said.
Ramani Ayer, chairman and chief executive of The Hartford, said company officials are "pleased to have these matters behind us."...
The Hartford will establish a $5 million fund for policyholders harmed by improper insurance practices and pay $3 million each to Connecticut and Illinois and $20 million to New York.
It also will establish an $84 million fund to compensate market timing investor victims. The company did not admit or deny any violation of federal or state law as a result of the settlement. But it said authorities found that some employees of The Hartford engaged in "improper underwriting" by providing quotes for commercial insurance that were not based on an adequate assessment of the risk.
"These activities were not in keeping with The Hartford's standards," the company said in a statement.
The Hartford agreed in May 2006 to pay $20 million to settle an investigation into claims of fraudulent sales practices in retirement products, the attorneys general of Connecticut and New York said Wednesday.
The Hartford agreed to return $16.1 million in profit from the sales that Blumenthal and then-Attorney General Eliot Spitzer of New York said were arranged in concealed financial agreements with brokers.
Shares of The Hartford rose 53 cents to close at $96.21.
Copyright 2007 Associated Press. All rights reserved.
May 10, 2006
Hartford pays $20M to end
annuity fraud probe
Insurer paid secret kickbacks to brokers,
Spitzer, Connecticut Attorney General claim
By Alister Barr, Marketwatch
SAN FRANCISCO (MarketWatch) -- Hartford Financial Services said on Wednesday that it agreed to pay $20 million to end fraud investigations by New York Attorney General Eliot Spitzer and Connecticut's Attorney General into the insurer's sales of group annuities.
Hartford said it will pay $16.1 million to affected customers, which included General Electric (GE) Consumer Finance, Tenet Healthcare (THC), and PricewaterhouseCoopers, the world's largest accounting firm. The remaining $3.9 million are fines that will be paid to New York and Connecticut, the company added.
The cost of the settlement has already been accounted for with reserves previously established. As part of the pact, Hartford said it accepted a three-year ban on the sales practices in question.
Hartford’s scheme involved secretly paying brokers in exchange for them persuading pension plans to buy Hartford annuities. The brokers also provided the insurer with inside information on competitive bidding, the Connecticut Attorney General's office claimed in a statement on Wednesday.
The illegal scheme helped Hartford generate roughly $800 million worth of business, reaping millions more in investment profits. Brokers received close to $4 million in concealed payments that were unknowingly subsidized by their pension plan clients, Connecticut added.
"The Hartford was at the hub of a series of secret conspiracies that enriched both the brokers and The Hartford as the expense of their customers," Connecticut Attorney General Richard Blumenthal, said. "Our evidence shows a shocking systematic scheme that betrayed their moral and legal duties."
The scheme, which ran from 1998 through 2004, included brokers Dietrich & Associates, Inc., Brentwood Asset Advisors, USI Consulting Group, and BCG Terminal Funding, Spitzer and Blumenthal's offices said.
Instead of acting on their customers' behalf, the brokers became, in effect, paid representatives of Hartford, Spitzer's office explained.
Hartford tried to conceal the payments, which helped them sell over-priced products, Spitzer's office claimed.
Spitzer's office quoted a Hartford employee explaining in an email that the payments should be kept quiet: "If there is anyone we feel could leak, then we shouldn't have this setup with them. I think that is the whole point, if they talk, the deal is terminated. We just have to reiterate that over and over to the selected brokers..."
Spitzer also cited an email by a Hartford executive admitting that "Our prices are not competitive in open bidding situations."
Hartford shares climbed 26 cents to $92.16 during afternoon trading on Wednesday.
March 8, 2006
IN THE SUPREME COURT OF THE STATE OF DELAWARE
WAL-MART STORES, INC., a Delaware corporation, and WACHOVIA BANK OF GEORGIA, N.A., in its capacity as Trustee of the WAL-MART STORES, INC. CORPORATION GRANTOR TRUST,
Plaintiffs Below,
Appellants,
v.
AIG LIFE INSURANCE COMPANY, a Delaware corporation; HARTFORD LIFE INSURANCE COMPANY, a Connecticut corporation; WESTPORT MANAGEMENT SERVICES, INC., a Delaware corporation; INTERNATIONAL CORPORATE MARKETING GROUP, LLC, a Delaware limited liability company; NATIONAL BENEFITS GROUPS, INC., dba MARSH FINANCIAL SERVICES, a Minnesota corporation; SEABURY & SMITH, INC., a Delaware corporation; MARSH, INC., a Delaware corporation; and MARSH & McLENNAN NATIONAL MARKETING CORPORATION, now known as J&H MARSH & McLENNAN PRIVATE CLIENT SERVICES, INC., a Delaware corporation,
Defendants Below,
Appellees.
No. 172, 2005
Court Below; Court of Chancery of the State of Delaware in and for New Castle County C.A. No 19875
Submitted: March 8, 2006
Decided: June 6, 2006
See: Wal-Mart vs. AIG, Marsh & McLennan, et al
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Also see: Marsh & McLennan: The Marsh Birds; RICO in Paradise; The Great Nest Egg Robberies
December 6, 2004
Spitzer probes American Fin'l, Hartford
NY's top cop investigating legal malpractice insurance
By Alistair Barr, CBS MarketWatch
SAN FRANCISCO (CBS.MW) -- American Financial Group and Hartford Financial said Monday that New York Attorney General Eliot Spitzer is probing how the companies write legal malpractice insurance.
Great American Insurance, the property and casualty unit of American Financial (AFG), is the target of Spitzer’s latest line of inquiry, the company said in a statement.
The Hartford Financial Services Group (HIG) disclosed in a statement after the bell Monday that it is also being investigated.
Arch Capital Group (ACGL), a Bermuda-based insurance and reinsurance firm, said Friday that it got a similar request from Spitzer...
Spitzer sued Marsh & McLennan (MMC), the world’s largest broker on Oct. 14 for allegedly rigging bids and accepting disputed commissions in return for steering business to favored insurers.
While much of the complaint focused on Marsh’s excess casualty division, Spitzer’s inquires have since broadened to include employment benefits, “finite” insurance and now legal malpractice insurance.
Great American said it began an internal investigation after getting inquiries from state insurance regulators following Spitzer’s suit against Marsh. That investigation is ongoing, the company added....
Legal associations sometimes endorse insurers, helping them to sell policies to their members. In return they get a fee for the endorsement, said Andy Barile, an insurance consultant with 40 years of experience in the industry.
Spitzer may be investigating whether these fees raised the cost of insurance for lawyers and if the payments were properly disclosed, Barile said....
August 8, 2004
Isle lawyer group against
insurance disclosure plan
By Rob Perez, Honolulu Star-Bulletin
Hawaii's main lawyer group is opposing a national industry proposal that is designed to help potential clients become better informed when hiring attorneys.
A committee of the American Bar Association, the national trade group, is proposing that the organization adopt a model rule that would require lawyers to disclose whether they have malpractice insurance.
Such information, which clients typically don't ask about, would be helpful when someone is choosing a lawyer, the committee says. Insurance protects clients if their lawyers commit malpractice.
The bar associations from New Mexico, Virginia, Washington, Illinois, Delaware and Ohio are among those supporting the controversial rule, which, if adopted, would serve as a guideline that states would be free to adopt.
But the Hawaii State Bar Association recently voted to oppose the proposal. Hawaii will voice its opposition when ABA delegates consider the model rule at a meeting this week in Atlanta.
Supporters of the proposed rule say many clients assume their lawyers have insurance, don't think to ask about it or are reluctant to ask, creating the need for an independent source of such information.
"Because of (ethics) abuses that have occurred here and the failure of the system to protect the public from unscrupulous attorneys, something like this would be very beneficial to the public," Honolulu attorney Madalyn Purcell said of the proposed ABA rule.
But Dale Lee, president of the state bar, said the board, while applauding the intent of the proposal, had concerns about practical aspects of it.
A system that discloses only whether an attorney has coverage without specifying details, such as policy limits, may give a client a false sense of security, particularly if the coverage doesn't apply to the client's situation, Lee said.
"It creates a problem that maybe is not anticipated and defeats the laudatory purpose that they're trying to accomplish," he said.
Supporters say that while the proposal has its shortcomings, it is better than having no mandatory disclosure at all, which is the case in most states, including Hawaii.
"In our view, clients already have a false sense of security" because they usually assume their lawyer has coverage, said Robert Welden, a Seattle attorney who chairs the ABA's committee on client protection, which drafted the proposal.
Asked if the Hawaii bar would support a tougher rule requiring details of a lawyer's coverage to be disclosed, Lee said the board didn't address that question, only the ABA proposal. He noted that the ABA committee on lawyers' professional liability has opposed the rule.
Attorneys who work at large firms generally are covered by insurance policies obtained by their firms. But solo practitioners and lawyers who work in small firms sometimes opt to go without coverage. Lawyers in Hawaii and most other states are not required to get malpractice insurance, though clients who hire attorneys without coverage take a big risk.
If malpractice occurs and there's no insurance, the client generally has no recourse, attorneys say. They say the client could sue the lawyer, but if the lawyer's assets are sheltered, little likely can be recovered.
For a disclosure requirement to take effect in Hawaii, the state's high court would have to revise its rules governing the legal profession. Many states follow ABA guidelines. If the ABA disclosure rule is passed and Hawaii adopts it, lawyers would have to disclose whether they are insured when they register annually with the state bar. They also would have to provide notification if their coverage lapses or ends during the year.
Anyone could then contact the Hawaii bar to check whether a lawyer has coverage.
As an example of what can happen when a lawyer is not covered, Purcell cited the case of one of her clients who last year successfully sued an attorney for malpractice.
Rieko Tanaka has a roughly $184,000 judgment pending against attorney Richard Y.S. Lee, a former state judge. But Tanaka has had difficulty collecting the money because Richard Lee doesn't have malpractice insurance, according to Purcell.
She also said Richard Lee has sheltered his assets, making collection all the more difficult.
In a written response, Richard Lee said attorney corporations for years didn't have limited liability when they incorporated, so for purposes of estate and asset planning it made sense to "structure one's holdings." Despite the jury verdict against him in the Tanaka case, he denied committing malpractice. He said he didn't care if insurance disclosure became mandatory.
In nine states, lawyers are required to disclose -- either directly to their clients or on annual registration statements -- whether they have malpractice insurance. Only Oregon requires lawyers to obtain insurance.
Several local lawyers said the Hawaii bar's opposition to the proposed ABA rule was not surprising considering the organization also opposed a recent change that made the secretive lawyer disciplinary system here more public. That change was likewise designed to help the public, but many lawyers believed it wasn't warranted.
American Bar Association
www.abanet.org
Hawaii State Bar Association
www.hsba.org
http://starbulletin.com/2004/08/08/news/story6.html
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For more, GO TO > > > Confessions of a Whistleblower; The Silence of the Whistleblowers
# # #
MORE TO COME
For now, here are some more “birds of a feather” that
you’ll also find building nests in this tree...
AIG: THE UN-AMERICAN INSURANCE GROUP
AMERICAN SAVINGS BANK: BEHIND THE BLINDS
CITIGROUP: VAMPIRES IN THE CITY
CONFESSIONS OF A WHISTLEBLOWER
A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
FIRST INSURANCE COMPANY OF HAWAII
THE KAMEHAMEHA SCHOOLS PENSION PLAN
MARSH & McLENNAN: THE MARSH BIRDS
MARSH & McLENNAN’S GUY CARPENTER
THE PRUDENTIAL: A NEST ON SHAKY GROUND
THE SILENCE OF THE WHISTLEBLOWERS
TRANSYLVANIA TRAVELERS IN ST. PAUL
CITIGROUP: VAMPIRES IN THE CITY
VAMPIRES IN THE VESTA INSURANCE GROUP
ZEROING IN ON ZURICH FINANCIAL SERVICES
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MORE OF THE CATBIRD’S FAVORITE LINKS
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Last Update June 8, 2008, by The Catbird