Alan Reynolds

New York Attorney General Eliot Spitzer launched a complaint against the insurance brokerage arm of Marsh & McClellan last November with his usual flamboyant press release accusations of "widespread corruption." Unsurprisingly, Marsh recently settled in the usual way -- by writing a big check and doing whatever Spitzer asked. That included replacing the CEO with an old friend of Spitzer's, Michael Cherkasky.

 There was no trial, of course. Writing in Slate, Daniel Gross noted that "Spitzer doesn't like taking cases to trial. Instead, he has developed a more powerful tactic: He exploits the threat of stock declines and business losses to force industries to change. ... He didn't simply indict. He issued press releases."

 Trial-by-press-release circumvents truth and justice. No judge ever separates "findings of fact" from fictional prosecutorial accusations. The accused never have an opportunity to face their accusers (usually competitors). And no jury is ever asked whether or not Spitzer's complaints have been proven beyond reasonable doubt.

 In the Marsh & McLellan case, there is ample room for reasonable doubt, regardless of the settlement. There is, first of all, the sheer implausibility of Spitzer's claim that sophisticated purchasing agents at the nation's largest corporations could be routinely overcharged by one of many insurance brokers without competing brokers spilling the beans and without corporate buyers either catching on, shopping around or simply bypassing the middleman (as many do).

 More to the point, the evidence in Spitzer's formal complaint indicates that many seemingly incriminating statements were taken out of context, as they were in the Merrill Lynch case (as I proved in "Spitzer's Shakedown," archived at

  Paragraph 55 of Spitzer's complaint, for example, claims, "Marsh asked ACE to refrain from submitting a competitive bid because Marsh wanted the incumbent, AIG, to keep the business." This was followed by a quote that seems to suggest that ACE "could get to $850,000 if needed" -- the same bid as AIG. Yet the next sentence of that letter from an ACE executive was suspiciously omitted. What it said was, "Apparently both Marsh Atlanta and Client are extremely unhappy with AIG, and if we can put offer on table at $800,000 we'll get it."

Alan Reynolds

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