Marsh & McLennan agreed to pay $400 million to settle a federal class-action lawsuit filed in 2004 alleging the firm violated securities law surrounding MMC’s practice of charging contingent commissions.
State pension funds in Ohio and New Jersey served as lead plaintiffs in the suit.
MMC did not admit any wrongdoing in reaching the settlement; $205 million of the settlement should be covered by insurance, MMC said in a news release.
In a separate statement, Ohio Attorney General Richard Cordray insisted the agreement “holds Marsh accountable for its wrongdoing and requires Marsh to compensate investors for their injuries.”
According to the Ohio news release, the $58.2 billion Ohio Public Employees Retirement System, $62.9 billion Ohio State Teachers Retirement System, $17.3 billion Ohio Bureau of Workers’ Compensation and $71.8 billion Division of Investments of the State of New Jersey Department of Treasury, served “as lead plaintiffs representing shareholders in the case.”
The suit filed in U.S. District Court in New York claimed that MMC’s failure to reveal the “huge role contingent commissions played in the company’s earnings” left them exposed to losses when MMC’s stock lost $9 billion in market capitalization, after then-New York Attorney General Eliot Spitzer filed charges against the company over that practice in October 2004. Total losses for the plans could not be learned by press time.
MMC also announced it would pay $35 million to settle a separate ERISA class-action lawsuit filed in 2004 by employees participating in the company’s 401(k) plan, who likewise suffered losses when MMC’s stock price plunged.