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Tuesday, October 19, 2004


As with his Wall Street settlement, Eliot Spitzer's recently announced insurance industry lawsuit will likely do little for the organizations and individuals already hurt by corporate corruption.

Last week, New York Attorney General Eliot Spitzer brought a suit against the nation's leading insurance firm alleging that it steered unsuspecting clients to insurers with whom it had lucrative payoff agreements. I couldn't help but see the similarities between this new Spitzer reform effort and his oft-celebrated Wall Street crusade.

There is no doubt that his $1.4 billion Wall Street settlement had some effect on the way financial firms do business. But there is also no doubt that, despite $400 million being earmarked for investors, not one penny of that money has gone to those harmed by Wall Street misdeeds. Stay tuned, but it looks like more of the same is on the horizon with the insurance settlement; those harmed may have to settle for a moral victory knowing that the insurance wrongdoers had to pay money to someone, somewhere.

I attended the conference where Mr. Spitzer announced the suit, and it is not what he said, but what he did not say that leads to my less than optimistic conclusion:

  • Although Mr. Spitzer seemingly asserted that Marsh & McLennan is a "corrupt" organization that violated antitrust and fraud laws, he failed to announce a criminal indictment against the firm;
  • At the press conference Mr. Spitzer declined to answer my question about a possible restitution fund to compensate the victims of the fraud and antitrust violations by M&M and the insurance companies.
The ambiguous and vague nature of his announcement leads me to believe that the victims in this case are not likely to recoup any losses. There is no doubt that Mr. Spitzer's reform efforts will change the way offending firms will operate in the future. But his reforms should have a provision to create change in the pockets of those who lost out financially. After all, a large part of justice is about restitution for victims.

Policy holders who wish to contact Attorney General Spitzer regarding the insurance fraud case should call (212) 416-8060.


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