Marsh & McLennan Employees Now Suffering Major Losses
New York Attorney General Eliot Spitzer launched a probe into the insurance industry's sales practices, with Marsh & McLennan Companies Inc., the central subject of the investigation. Spitzer has accused Marsh & McLennan of bid rigging and using incentive fees to manipulate the sales of corporate property and casualty policies, thus allowing businesses to pay more than necessary for their coverage.
In the past week, shares of Marsh & McLennan have dropped 50 percent. For the 60,000 employees that may have bought Marsh stock in the company's employee stock purchase plan or in their retirement plans, the loss in share value to the company has had a tremendous effect on personal holdings
Besides the risk of losses already assumed, employee-benefit experts are now saying Marsh has put its employees at an even greater risk by limiting the alternative investments to mutual funds that are mostly managed by its subsidiary Putnam Investments. A conflict of interest exists if the fiduciaries of 401(k) plans are also employees of a money management company that gets hired by the plan when decisions are supposed to be made in the best interests of the participants in the plan.
The employees of Marsh & McLennan and its subsidiaries have many opportunities to buy their company's stock or its money management services that includes a pension plan, a stock purchase plan, 401(k) accounts, stock option grants and a cash bonus deferral plan to name a few. In every instance, Marsh stock or Putnam funds dominate the offerings, which after the Eliot Spitzer lawsuit has caused the shares to plunge down.
Considering 3.8 million shares in 2003 were bought in the stock plan by Marsh workers, an increase from 2.85 million purchased in 2001, workers participating in the Marsh stock purchase plan may have taken the greatest hit from the stock slide. The Marsh international division employees bought 1.2 million shares in 2003, an increase from the 717,000 purchased the previous year. In total, Marsh employees bought five million shares of the stock purchase plan, or nearly one percent of the 533 million shares at the close of 2003.
Marsh employs choosing to defer their 2003 cash bonuses were put into Putnam Funds, according to company filings. One of limited non-holding Marsh employee plans, the defined benefit pension plan had $2.4 billon in assets as of December 2003. Under this plan, money managers oversee the money, and Putnam is in charge of $1.8 billion of it. The pension plan also employs as an investment consultant Mercer Inc., the Marsh subsidiary that helps pension funds decide which money managers to hire.
Mercer & McLennan appears to be operating under potential for conflicts that are unlikely to coincidentally be in the best investment option interests for its employee retirement plans. If you have suffered losses because you have taken part of Marsh & McLennan's stock or money management services, please contact our consumer fraud lawyers.
