Marsh & McLennan’s

PUTNAM INVESTMENTS


 

Sightings from The Catbird Seat

~ o ~

February 1, 2007

Marsh & McLennan to sell
Putnam for $3.9 billion

NEW YORK (Reuters) – Insurance broker Marsh & McLennan Companies Inc. (NYSE: MMCnews) said on Thursday that it would sell its troubled money manager, Putnam Investments, to a unit of Canada’s Power Financial Corp. (Toronto: PWF.TOnews). for $3.9 billion.

The sale price was in line with recent press reports, but toward the lower end of initial estimates of how much the scandal-ridden asset manager would fetch when Marsh & McLennan said in September that it was considering a sale.

Montreal-based Power Financial, which controls insurer Great-West Lifeco Inc. (Toronto: GWO.TOnews) and IGM Financial Inc. (Toronto: IGM.TOnews), Canada’s largest mutual fund company, had said last month that it was in talks to acquire Putnam.

Analysts have said Power Financial would gain a key foothold in the U.S. money management business. For Marsh, the sale followed longtime pressure from investors to shed the underperforming unit.

Putnam has suffered from rising redemptions and poor performance by its top funds, that raised doubts among some analysts whether a deal would go through at all.

Both boards have approved the transaction, and they expect it to close in the middle of this year.

Putnam is one of Marsh & McLennan’s four major divisions. The others are the Marsh insurance brokerage unit, risk consulting unit Kroll Inc. and Mercer, which handles human resources and provides financial services to companies.

Putnam’s Boston neighbor, MFS Investment Management, was also put up for sale in September but its Canadian parent, Sun Life Financial Inc. (Toronto: SLF.TOnews), said just a month later that it had decided not to sell the unit after a strategic review.

Boston-based Financial Research Corp (FRC) said that Putnam again saw the heaviest redemptions in long-term stock and bond mutual funds, losing $1 billion in November. It lost $13.8 billion in assets in 2006 till end-November, FRC said.

Power Financial said its Great-West Lifeco Inc. unit would own the asset manager.

http://news.yahoo.com/s/nm/20070201/bs_nm/putnam_dc_5


 

January 3, 2006

SEC charges 6 ex-Putnam officers

Officers alleged to have partaken in a $4M fraud scheme;
company will not face SEC action.

WASHINGTON (Reuters) – Six former officers of Putnam Fiduciary Trust, a unit of mutual funds group Putnam Investments, have been charged by regulators over an alleged $4 million fraud scheme and attempted cover-up beginning in 2001, officials said Tuesday.

But the Securities and Exchange Commission said it would not bring an enforcement action against the company itself “because of its swift, extensive and extraordinary cooperation in the commission’s investigation.”

Putnam Fiduciary is a Boston-based transfer agent owned by Putnam Investments, the mutual funds family controlled by financial group Marsh & McLennan.

The SEC charges versus the ex-officers come as Putnam Investments, the nation’s tenth-largest mutual fund family, is recovering from trading scandals beginning in fall 2003 that hurt it and others in the $8.8 trillion mutual fund industry.

Putnam Investments Chief Executive Ed Haldeman said that when the problem at Putnam Fiduciary came to light in 2004, the parent company quickly reported it to regulators, auditors and trustees; repaid harmed clients roughly $4 million; terminated employees involved and disclosed the problem to clients.

In addition, he said in a statement, Putnam investigated on its own and made internal reforms.

The SEC alleged in U.S. District Court in Boston that Putnam Fiduciary in January 2001 was a day late in investing certain assets of health care services and products group Cardinal Health Inc., which was at the time a defined- contribution plan client of the company.

The delay cost Cardinal’s defined-contribution plan to miss out on nearly $4 million in market gains, the SEC said.

“Rather than inform Cardinal Health of the one-day delay or compensate their client for the missed trading gain, the defendants decided to improperly shift approximately $3 million of the costs of the delay to shareholders of certain Putnam mutual funds through deception, illegal trade reversals, and accounting machinations,” the SEC alleged in court.

The SEC said it charged the following former Putnam Fiduciary employees: operations chief Karnig Durgarian, global operations services head Donald McCracken, defined contribution servicing director Virginia Papa, managing directors Sandra Childs and Kevin Crain, and vice-president Ronald Hogan.

The SEC also charged that the defendants improperly allowed Cardinal’s plan to bear about $1 million of the loss without disclosing this to Cardinal, and that Durgarian, Papa, Childs, and Crain tried to cover up the wrongful conduct.

“Ms. Papa has not misled any client, manipulated any record, or covered up anything. She looks forward to vindication in court,” said Michael Connolly, Papa’s attorney.

Gary Matsko, McCracken’s attorney, said his client has cooperated fully with the SEC. “He intends to defend the charges. He maintains he hasn’t done anything wrong,” he said.

Anthony Mirenda, Crain’s attorney, said his client “will fight this to clear his name because he did not participate in any fraud.” Mirenda said Crain drew the attention of internal auditors to the problem and cooperated with authorities.

Attorneys for Durgarian and Hogan could not be reached for comment. John Sten, attorney for Childs, declined to comment.

In not charging Putnam Fiduciary, the SEC said it took into account the company’s prompt self-reporting, its internal probe and other steps like those outlined in the precedent-setting 2001 Seaboard case. That decision set standards for how to cooperate with the SEC and held out the possibility of leniency for companies that meet the standards.

In the Putnam Fiduciary case, “the commission has sent a strong signal that should make it easier for a company to decide whether to self-report misconduct,” said SEC Deputy Enforcement Director Walter Ricciardi in an interview.


 

November 20, 2003

The guy who blew the whistle on Putnam

By Jayne O’Donnell, USA Today

WEYMOUTH, Mass – When he started working at Putnam Investment’s Quincy, Mass. call center in March 2000, Peter Scannell had only a layman’s knowledge of how a mutual fund company works.

But he knew from his days working at a casino in Lake Tahoe how to tell the good guys from the bad. And it wasn’t long before Scannell decided the good guys weren’t necessarily the ones who signed his checks.

Scannell caught onto efforts by outside investors, first from an electrical trades union and later a boilermakers union, to make rapid trades in and out of Putnam (Parent MMC) funds – a practice known as market timing.

Alarmed, Scannell blew the whistle to the Securities and Exchange Commission, which didn’t act, and then to Massachusetts regulators, who did. What they heard led to state civil fraud charges against Putnam, the resignation of its CEO, Lawrence Lasser, and the withdrawal of more than $20 billion from its funds.

It also helped train a spotlight on market timing, which has ensnared eight of the USA’s mutual fund companies in probes and charges.

“This would not have started without him,” says Matthew Nestor, Massachusetts’ director of securities. “We owe him a debt of gratitude.”

In five hours of interviews over two days, Scannell, 47, said he turned in the big guys to help the little guys everywhere. Mutual fund and retirement plan participants who watched their holdings plummet while others got rich. In retaliation, he says, he was attacked by a brick-wielding assailant allegedly wearing a boilermakers union sweatshirt and is being trailed almost constantly….

The Massachusetts U.S. Attorney’s office is investigating possible criminal securities fraud violations at Putnam, relating to market-timed trades by its managers. Scannell met for two hours Tuesday with the office. The FBI is also investigating, say two people involved in the matter….

Last Jan. 30, Scannell says he told his bosses he would no longer accept transfers from known market timers. The next day, he took home the information he had compiled because he planned to alert securities regulators. “I drove home looking over my shoulder,” Scannell wrote in the report….

The guy who blew the whistle on Putnam

~ ~ ~

For more, GO TO > > > www.senate.gov/~govt-aff/_files/012704scannell.pdf


 

March 23, 2005

Citigroup, Putnam Pay SEC Fines Over Fund

Forbes

In three unrelated cases, federal regulators fined Citigroup Inc. and Putnam Investments $20 million and $40 million respectively and a smaller brokerage firm $100,000 to resolve allegations that they concealed from customers the fact that brokers were paid to recommend certain mutual funds, creating a conflict of interest.

The Securities and Exchange Commission announced the separate settlements Wednesday with Citigroup, the biggest U.S. financial institution; Putman, the seventh-largest mutual fund company, and brokerage Capital Analysts Inc.

Citigroup, Capital Analysts and Putnam, a unit of Marsh & McLennan Cos., neither admitted nor denied wrongdoing as part of the agreements….


 

November 1, 2004

The Secret World Of Marsh Mac

By Marcia Vickers, Business Week

CEO Jeff Greenberg presides over the arrogant and tight-lipped culture of Marsh & McLennan, where conflicts of interest abound. There’s more trouble coming for the world’s largest insurance broker.

When Jeffrey W. Greenberg took the helm of notoriously secretive Marsh & McLennan Cos. (MMC ), a $12 billion financial-services company, on Nov. 18, 1999, analysts were happily buzzing that Greenberg was a gregarious, outgoing executive. The word on Wall Street was that he would raise the profile of Marsh Mac with more public appearances and open communication than his tightlipped predecessor, A.J.C. “Ian” Smith.

They couldn’t have been more wrong. In the past four years, Greenberg sightings have been scarce. The company, true to its secretive history, became even more cloistered. But on Oct. 14, Marsh & McLennan was forced into a harsh public spotlight when New York Attorney General Eliot Spitzer charged its insurance brokerage with fraud. In a civil complaint filed in New York State Supreme Court, Spitzer alleges that the company engaged in bid-rigging, price-fixing, and accepting payoffs from insurance companies.

Marsh & McLennan, the world’s largest insurance broker, is paid millions annually to manage clients’ risks and crises. Now it’s having epic problems of the same nature itself.

In a three-month investigation, BusinessWeek spoke with some 50 former and current MMC employees, insurance industry executives, and investigators — and discovered that the firm’s problems may well go far beyond Spitzer’s initial charges.

BusinessWeek has learned that MMC and its executives could face a raft of further legal and regulatory problems. Spitzer’s office is mulling criminal charges against several execs connected with the insurance brokering scandal. It is also looking into whether Mercer, MMC’s pension-consulting arm, and Putnam Investments, MMC’s mutual-fund company, push clients into buying Marsh insurance products.

As part of an industry-wide sweep, the Securities & Exchange Commission is probing Mercer’s alleged “pay to play” practices of requiring payoffs from money managers who want it to recommend them to pension clients. At the same time regulators are examining payments Putnam and other mutual-fund outfits make to companies to ensure that their funds are featured in corporate 401(k) plans.

As if that’s not enough, several class actions have sprung up — at least one regarding the alleged fraud at Marsh Inc., as the insurance brokerage is known, and others involving Putnam.

Already, the legal onslaught is taking a toll. On Oct. 19, Moody’s Investors Service downgraded the firm’s debt, citing concerns about “financial consequences” arising from Spitzer’s lawsuit. And fear that some of MMC’s revenue streams could dry up has knocked down its share price. In the four trading days following Spitzer’s Oct. 14 announcement, the stock plummeted 48%, wiping out $11.5 billion in market cap.

At the center of the storm stands Jeff Greenberg, 53. If you ask almost anyone about him, you’ll hear that he is smart as a whip, incredibly knowledgeable about the insurance business, well-spoken, and polished. Much like his father, Maurice R. “Hank” Greenberg, 79, the legendarily hard-charging chairman and CEO of insurer American International Group Inc. (AIG ), he has a history of being opportunistic when it comes to scoring profits for his company. Even now, his defenders insist that he inherited serious problems, particularly in the brokerage and mutual funds businesses, when he moved into the top slot….

The firm’s obsessive focus on secrecy helps keep any misdeeds under wraps, say the sources. “Some companies have a culture based on kickbacks and undisclosed financial arrangements, and their people are forced to remain silent about wrongdoing,” says Edward A.H. Siedle, a former Putnam compliance director and SEC official who now heads the Center for Investment Management Investigations in Ocean Ridge, Fla., which looks into pension fraud….

The day after Spitzer announced his charges, MMC’s board expressed full confidence in the CEO. That’s no surprise: Greenberg chairs the board, which Nell Minow, editor and corporate governance expert at the Corporate Library, says is fiercely loyal and “rife with cronyism.” Six of its 16 members are directly involved in running Marsh Mac or one of its subsidiaries, says Glass Lewis & Co., a San Francisco proxy-research firm.

The board may be compelled to take action against top execs if enforcers now circling the company are able to force fundamental changes in the way it does business. Analysts and other experts say that could damage the company’s financial health.

“If you eliminate all the questionable payments at Marsh & McLennan, you eliminate half of their profits,” says a former executive. Spitzer’s complaint says contingent commissions — lucrative payments Marsh receives for steering unsuspecting clients to certain insurers — alone amount to $800 million a year, or about half the insurance brokers’ 2003 net income….

“Throwing the Quote”

Perhaps William Gilman, Marsh Global Broking’s executive director of marketing and a managing director, was doing the worrying. Gilman, in his 60s, is a larger-than-life character who some call Kill Bill, after the Quentin Tarantino movies. The nickname could also have something to do with an internal AIG memo about bidding for business that was an exhibit in the Spitzer case: “Per W. Gilman — get to right number [regarding a bid] or ‘we’ll kill you.”‘ Says a former colleague: “He’s the kind of guy who stubs a cigarette out in your coffee cup.”

Gilman, says Spitzer’s complaints, strictly enforced the system of rigged bids and payoffs from insurers. He also rated insurers by how much they paid Marsh in contingent commissions. A September, 2003, e-mail from his office released by Spitzer reads: “We need to place our business in 2004 with those that…pay us the most.”…

On Oct. 19, MMC suspended Gilman and four others.

Folks dealing with Marsh were supposed to abide by “Billy’s Rules” — a playbook Gilman devised for insurers, according to someone familiar with the company. The rules were: 1) No “no’s” (meaning Gilman should never be told “no” about any predetermined Marsh arrangement). 2) Don’t get stupid (never question Marsh’s schemes). 3) If you get stupid, we will broom your ass. 4) Never think you own your business, you only rent your business. Marsh owns your business. “Billy’s Rules,” emblazoned on an office plaque, hung in Gilman’s office.

Gilman, according to the complaint, oversaw Marsh’s “throwing-the-quote” scheme, whereby some insurers were told to quote artificially high bids for business. Several times, Gilman refused to allow AIG to relay competitive bids to clients, according to Spitzer’s complaint, warning AIG that “it would lose its entire book of business with Marsh” if it didn’t provide higher price quotes than the insurer Marsh favored…

The phony quotes were often referred to as “throwaway quotes,” “protective quotes,” “backup quotes,” or “B quotes,” says the complaint. In return, according to Spitzer, Marsh protected AIG and other firms that played ball when it was their turn to win. AIG declined to comment.

Gilman also staged what he called “drive-bys” — in which insurers were asked to attend presentations for prospective clients even when they knew they had no chance of snagging the deal, according to Spitzer. A regional manager for Munich-American RiskPartners, a division of American Reinsurance, who was so frustrated by constant requests from Marsh for “live bodies” to attend drive-bys that he wrote in an all-caps e-mail: “We don’t have the staff to attend meetings just for the sake of being a body. While you may need a live body, we need a live opportunity.”

Gilman may have enjoyed such power because Marsh already dominated insurance brokering. By the late ’90s, Marsh had cornered 40% of the global business thanks to aggressive acquisitions. Marsh’s grip tightened when it centralized control of broking activities in New York. Analysts say Marsh’s dominance allows it to control pricing, the way insurance products are structured, and how premiums and payouts are disbursed.

“They have both their clients and insurers by the cojones,” says a competitor.

But now it’s MMC’s top brass who are squirming. Being in the spotlight is highly uncomfortable for MMC — long known as a patrician, white-shoe firm with an air so understated and secretive that at least one former exec likened it to working at the CIA. Its ranks have included Ambassador L. Paul Bremer III, former Presidential Envoy to Iraq, who recently ran MMC’s crisis-consulting business; Stephen Friedman, President George W. Bush’s top economic adviser and former Goldman, Sachs & Co. (GS ) co-chairman, who was an MMC senior principal; Craig Stapleton, the husband of George W. Bush’s cousin Dorothy, who was an MMC president; and Lord Lang of Monkton, a former British Member of Parliament who still sits on the board….

“I’d Love to Talk…But”

MMC certainly goes to extraordinary lengths to ensure loyalty. A former Putnam executive recalls being grilled by a company psychiatrist in a hotel room for hours during a job interview. Says the former exec: “Everyone has a Dr. [James] Terry story. He would ask questions like: ‘What’s the worst thing that ever happened to you?’ ‘What are your views on religion?’ ‘Who do you vote for?’ They tell you they’re looking for any signs of malfeasance or criminality. But they’re also looking for people who will fit in, lockstep, at the company.” An MMC spokeswoman claims that using a psychiatrist for screening purposes is “industry practice.” Terry could not be reached for comment.

Once they’re in, most people who join MMC’s upper echelons must sign binding noncompete agreements, say both current and former employees. “Each time you exercise stock options, you have to sign a new one,” says one former exec. MMC calls this, “a generally accepted practice.” Employees who leave MMC and then disparage it in public risk losing any deferred compensation to which they are entitled.

One former MMC exec told BusinessWeek: “Gee, I’d love to talk to you. There’s a lot to say. But they’ve got my money.”

Since moving to rival broker Willis Group Holdings Ltd. (WSH ), a former Marsh exec says he has been spied on by a private investigator who he suspects was Kroll Inc., which MMC bought in July for $1.9 billion. He says he believes MMC wants to ensure that former employees are not using its proprietary information. MMC would not comment without specific details. Another former exec says MMC constantly monitored internal phone calls. MMC says it is unaware of this….

And despite the unfolding scandals, most industry players still seem to respect Greenberg. He certainly got high marks in his early days as MMC CEO for his handling of the aftermath of the September 11 World Trade Center attacks. Three years earlier, Marsh had leased floors 93 to 100 in Tower One, and 294 MMC employees — mostly salesmen, secretaries, and analysts in their 20s and 30s — lost their lives after the first airplane hit. At services, Greenberg spoke movingly about the makeshift memorial that had occupied an entire wall next to the cafeteria at MMC’s Sixth Avenue headquarters.

After Andrew

Still, just days after September 11, Greenberg and top MMC execs met to figure out how to profit from the disaster. They formed a subsidiary — Axis Specialty Ltd. to sell insurance to corporate customers at three or four times the rates before September 11...

For some industry players the move recalled what Greenberg did in 1992 after Hurricane Andrew slammed into South Florida and wiped out some $15 billion worth of property. Jeff, who was working for dad at AIG, sent out an internal memo stating: “This is an opportunity to get price increases now.

It was leaked to the press, which had a field day — with one newspaper branding him “a vulture.” The memo moved Ralph Nader to complain and Florida regulators to freeze rates….

When Jeff was working under his father in the early ’90s, heading up AIG’s domestic brokerage group, Marsh sources say Hank raked him over the coals at a meeting in front of top executives.

Hank, they say, had ordered Jeff to deal with a personnel issue, but Jeff had dragged his feet. Says one: “Hank started yelling at Jeff in front of everyone: ‘You either fix your management problem, or I’ll fix mine!”‘

But the coup de grace came in 1995 when Hank abruptly promoted Jeff’s younger, less experienced brother Evan, making them equals in AIG’s hierarchy. Two weeks later, Jeff left.

Evan, 49, is a college dropout and nonconformist who, by his own admission, had a bit of a troubled youth. But he had a knack for the insurance business and rose quickly at AIG. Unlike Jeff, Evan is one of the few people who stand up to his father. “Evan’s scrappy — a yeller,” says an insurance industry veteran….

But in 2000, Evan also resigned from AIG. He now heads Ace Ltd. (ACE), a Bermuda company named in Spitzer’s complaint — along with AIG — as one of those involved in Marsh’s alleged bid-rigging and price-fixing schemes.

Months after exiting AIG, Jeff landed at Marsh & McLennan, where he had worked as a broker in the mid-’70s. As a partner in MMC Capital, the firm’s risk-capital unit, he excelled at building MMC’s Trident Funds, which invested billions in various insurance entities and real estate, and hoisted himself onto the fast track. He was determined “to show up his dad and brother,” says a source familiar with the family.

At Marsh Mac, Jeff was able to take advantage of the Greenberg name: Then-CEO and Chairman Smith — an old acquaintance of Hank’s — was Jeff’s personal mentor. Jeff was named chairman and chief executive of MMC Capital in 1996. By the beginning of 1999, he had been promoted to president of Marsh & McClennan. And by the end of that year, he was CEO. He was elected chairman in May, 2000.

Even if Greenberg did inherit the Marsh Mac mess, he’s under fire for how he handled it. “Despite seeming like a hero for ousting [former Putnam CEO Lawrence J. ] Lasser and moving toward cleaning up Putnam, the truth is, Greenberg didn’t address things until he absolutely had to,” says a former colleague.

In November, 2003, after Putnam was slapped with a securities-fraud charge, longtime CEO Lasser, 61, was forced to resign. Regulators alleged that company brass had been aware of illegal trading in Putnam funds since 2000….

A Frustrating Process

In the past year, Putnam has lost some $70 billion in assets. Recently, several pension funds, including CalPERS, the California Public Employees’ Retirement System, agreed to let Putnam compete for its business, but with stipulations: Putnam must consider pruning executive pay and ramp up financial disclosure….

But governance gurus still aren’t happy with MMC or Greenberg. The Corporate Library says the company still awards its execs excessive compensation. In 2003 it paid an aggregate $60 million to its top five officers, vs. an average $21 million at other large financial companies, according to Glass Lewis.

MMC says: “Our independent directors and outside consultants set compensation.” This past year, several large pension funds joined forces to propel an independent director, Zachary W. Carter, a lawyer, onto the board.

Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County & Municipal Employees, says it was a slow-moving and frustrating process: “Jeff thought he knew what was right, and he wasn’t going to let anyone rock the boat.”…

Earlier this year Greenberg asked mentor Smith, 69, to come out of retirement to help him. Insiders say Greenberg was intimidated by Lasser and needed Smith to negotiate with the former Putnam CEO. Smith, who has an office close to Greenberg’s, was named chairman of Putnam. Greenberg also promoted Steven Spiegel, Lasser’s right-hand man, to vice-chairman of Putnam….

Some of the bad stuff may have had to do with Putnam funds being pushed by Mercer, Marsh Mac’s pension-consulting arm. Mercer was long considered a sleepy, less profitable outpost of the Marsh kingdom. Then, say insiders, in the mid-’90s it came under pressure to turn bigger profits. That’s when it started offering pricey conferences for money managers at $50,000 to $60,000 a pop.

“If you don’t attend those, it’s nearly impossible to get on Mercer’s list to manage pension money,” says Jack Silver, a former trustee at Chicago’s teachers’ pension fund. MMC denies this. The SEC is investigating these allegations. And Spitzer will likely look into whether Putnam pushes Marsh-brokered variable annuity products onto investors.

“There’s no disclosure about this conflict to Putnam clients,” says Selva Ozelli, a securities lawyer close to the investigation. There could also be an investigation into how Marsh, allegedly slow to pay out premiums, profits from the float.

That means deepening troubles for Greenberg, who some critics say has done far too little to shore up MMC’s reputation over the past year.

“Print it, post it, and pray — it seems as if that’s all Greenberg’s done when it comes to ethics,” says Patrick McGurn, special counsel at Institutional Shareholder Services Inc., a corporate governance consultant. Until now, say analysts, Greenberg’s main focus has been on acquiring more companies. Now he’s forced to deal with spreading legal woes and a public-relations nightmare.

Says David D. Brown IV, Spitzer’s investment protection chief: “We’re really just at the beginning here. We’re pursuing a number of leads and will follow them where they take us.”

In an Oct. 15 press release Greenberg announced that MMC was appointing a private investigator to look into the alleged insurance broker fraud. It’s a move some might have applauded, except for one thing: He gave the job to the head of MMC’s Kroll — who’s now the head of Marsh.

Business Week


 

July 6, 2004

SEC eyeing fund payments to 401(k)s

Regulators want to know if firms
pay for shelf space

By Kathie O’Donnell, CBS MarketWatch

BOSTON – The Securities and Exchange Commission Tuesday said it’s looking into payments that mutual funds make to 401(k) plans to determine what use is made of them.

Fidelity Investments, T. Rowe Price Group Inc., and Putnam Investments, a unit of Marsh & McLennan Cos. (MMC) were among firms that received questionnaires from the SEC which is examining payments that funds and their advisers make to 401(k) plans, consultants and plan platforms….

“We want to better understand the nature and purpose of these payments and their disclosure, including whether they’re reimbursements for plan expenses or payments for shelf space or some other purpose,” the agency said in a statement….

Putnam spokeswoman Nancy Fisher confirmed the company received a questionnaire regarding its defined contribution practices.

“We are cooperating fully,” she said….


 

What goes around comes around …

October 20, 2004

Investors Are Losing Ground as
Insurance Inquires Expand

By Gretchen Morgenson, The New York Times

The disastrous decline in Marsh & McLennan’s stock that has followed Eliot Spitzer’s lawsuit of last week has injured a broad array of institutional and individual investors. But the pain of losing almost 50 percent in share value is perhaps most excruciating to the thousands of Marsh & McLennan employees who have bought Marsh stock in the company’s employee stock purchase plan or in their retirement plans.

In the months after the market crash of 2000, the lesson of diversifying beyond one company’s stock was hammered home. But as the market recovered, many workers seemed to forget that important lesson. Marsh employees were among them; at the end of last year, one employee-benefit plan had $1.3 billion invested in Marsh & McLennan stock.

Now, of course, the risk in those holdings is all too apparent. But employee-benefit experts say that Marsh may be putting its 60,000 employees at additional risk, even as it enriches itself, by limiting the alternative investments to mutual funds that are for the most part managed by its Putnam Investments subsidiary.

“Fiduciaries of 401(k) plans are charged with making decisions that are in the best interests of the participants in the plan,” said Edward A. H. Siedle, a former Securities and Exchange Commission lawyer who is president of the Center for Investment Management Investigations, a unit of the Benchmark Companies in Ocean Ridge, Fla., that investigates money management abuses on behalf of pensions. “When they are also employees of a money management company that gets hired by the plan there is a conflict of interest. This is especially problematic when the money manager is a high-cost, poor performer.”…

Given that the company is in the financial services industry it is perhaps not surprising that workers at Marsh & McLennan and its subsidiaries have been given many opportunities to buy their company’s stock or its money management services. There is a pension plan, a stock purchase plan, 401(k) accounts, stock option grants and a cash bonus deferral plan to name a few. And in all cases, Marsh stock or Putnam funds dominate the offerings.

Sadly for these employees, Marsh shares have gone pretty much straight down since Mr. Spitzer filed his lawsuit against the company, contending that bid-rigging and other improprieties occurred in Marsh’s insurance brokerage unit.

Yesterday, Marsh stock fell another $1.47 a share, or 5.7 percent; it closed at $24.10 and has lost 48 percent since Mr. Spitzer filed the suit.

Workers who have participated in the Marsh stock purchase plan have taken perhaps the biggest brunt of this slide. Last year, 3.8 million shares were bought in the stock plan, well above the 2.85 million Marsh shares purchased in the plan in 2001. And employees working in the company’s international division, which is broken out separately, bought 1.2 million shares in 2003, far more that the 717,000 shares they purchased during the previous year.

Taken together, the shares bought by employees in the Marsh stock purchase plan amounted to five million shares, or almost 1 percent of the 533 million shares outstanding at the company at the end of last year.

Marsh employees have also bought their company’s stock aggressively in various 401(k) plans, a decision they now almost certainly rue. According to Marsh filings, at the end of last year, a defined-contribution plan for Marsh & McLennan employees has assets of $2.4 billion.

Almost 60 percent of the plan’s assets were in Marsh stock – $1.3 billion worth.

Another $938 million in the plan was in funds managed by, you guessed it, Putnam Investments. Of the 17 fund choices on the plan’s menu, 10 are Putnam Funds….

At Putnam Investments, employees have their own 401(k), with assets of $441 million at the end of last year. As is typical in such accounts, Putnam employees can invest their contributions, and any that are matched by the company, in a variety of investment options.

One of those options is Marsh stock and as of December 2003, Putnam employees held 344,000 shares with a value of $16.5 million, or $47.96 a share. Those shares, if they are still in the plan, have been cut in half….

Most peculiar, the Putnam 401(k) plan offers no low-cost index funds intended to mimic the performance of a broad market average, like the Standard & Poor’s 500 index. Such funds are usually ubiquitous in 401(k) plans. Mr. Siedle said such an omission at any plan was “an invitatation to litigation.”…

Trustees of the 401(k) plan for Putnam employees are Francis N. Bonsignore, senior vice president for executive resources and development at Marsh & McLennan, and Sandra S. Wijnberg, the company’s chief financial officer. They have a fiduciary duty to plan participants to provide the best array of investment options. But as Marsh executives, they may be tempted to benefit their company by propelling their workers into Putnam funds. The Marsh spokeswoman declined to comment of the trustees.

About the only Marsh employee plan not holding Marsh stock is the defined-benefit pension plan, which had $2.4 billion in assets as of last December. Employees in this plan do not choose the investments; money managers oversee the money.

But it is in the selection of those money managers that Marsh may be putting its interests ahead of its employees. Of the $2.4 billion under management, $1.8 billion is overseen by Putnam. And, adding to the potential for conflicts, the pension plan employs as an investment consultant Mercer Inc., the Marsh subsidiary that helps pension funds decide which money managers to hire.

Given Mercer’s role as a consultant, it is troubling but perhaps surprising that so much of the Marsh pension plan would be managed by Putnam.

www.nytimes.com/2004/10/20/business/20place.html

– For more on pension plan fraud, GO TO > > > The Great Nest Egg Robberies.

$ $ $

June 29, 2004

Marsh & McLennan Creates Outsourcing Unit

NEW YORK (AP) – Marsh & McLennan Cos, a professional services firm, combined the defined contribution administration business of Putnam Investments and Mercer HR Outsourcing to offer global human resources outsourcing services, the company said.

The combined unit, Mercer Human Resource Consulting, will oversee the organization, and the U.S. arm of the business will be led by Dave Carlson, Mercer’s national practice leader for human resources outsourcing, the company said….


 

May 19, 2004

Marsh & McLennan to buy Kroll

By Eric Dash, The New York Times

Marsh & McLennan, the giant insurance and financial services company, has agreed to pay $1.9 billion in cash for Kroll, a leading corporate security business.

The transaction, announced Tuesday, will broaden Marsh’s reach into data recovery and corporate detective work at a time when the New York company’s three main businesses face separate regulatory investigations.

Jeffrey Greenberg, chairman and chief executive of Marsh, declined to discuss the effect of those investigations. He preferred to highlight the “strategic fit” between New York-based Kroll, which helped find the hidden assets of Saddam Hussein in the early 1990s, and his own company, which provides insurance brokerage services to corporate clients through Marsh Inc., money management through Putnam Inc., and consulting through Mercer Inc.

“We see this transaction as being able to help us serve clients more effectively with complementary services,” Greenberg said, noting Kroll’s expertise in employee background checks, data recovery and global restructuring advice, in addition to its traditional investigative work….

Given the growth potential and cost savings, Greenberg said that he expected the transaction to add to earnings in 2005. Still, some analysts expressed concern that the price was steep and noted the difficulty of cross-selling services.

Marsh now derives a little less that 10 percent of its $11 billion in revenues from risk-related consulting and processing services. But Greenberg said that heightened global security concerns and more stringent corporate compliance requirements had led to double-digit growth in the area.

Greenberg said he had approached Jules Kroll, whom he has known for about a dozen years, in February about a potential acquisition of the company that he founded….

Upon the deal’s completion, Kroll will become part of the risk and insurance subsidiary of Marsh.

Michael Cherasky, Kroll’s chief executive, will run the new unit and Jules Kroll will serve as vice chairman….

For more, GO TO > > > Kroll, The Conspirator


 

November 8, 2003

State pension board fires Putnam Investments

By Deborah Adamson, Honolulu Advertiser

The state Employees’ Retirement System voted yesterday to fire Putnam Investments and pull back the $440 million managed by the firm after it was charged with securities fraud.

Hawai’i joined a growing number of states whose public employee pension plans have fired Boston-based Putnam, the fifth-largest mutual fund firm in the country. In the past two weeks, states have taken away $6 billion from Putnam as confidence eroded in the scandal-tainted company.

The ERS board said its action against Putnam, which managed 5.5 percent of ERS assets, was based on a lack of trust, not performance.

“We have to hold ourselves as board members to the highest standards and we have to hold the people who work for us to the highest standards,” said Rick Humphreys, vice chairman of the state pension fund board of trustees.

The decision to fire Putnam will not result in any losses to 93,000 public employees and pensioners covered by the plan. The pension plan’s costs will be limited to some trading expenses as it switches from one money management firm to another.

The money managed by Putnam will be put in an index fund that tracks the S&P 500 until the board chooses another manager, which could come as soon as Nov. 21.

Regulators have charged that two of Putnam’s money managers engaged in market timing. In market timing, fund shares are rapidly traded. Such activity boosts trading costs and volatility in the fund to the detriment of long-term investors. While not illegal, market timing is prohibited by Putnam’s policy.

Putnam fired the two managers. One of them, Justin Scott, had oversight over large-cap growth stock investments in which the state pension plan had money, said ERS consultant Callan Associates.

When the market timing activities were discovered, Putnam told the managers to “cut it out” but didn’t go much further, Ron Peyton, president of San Francisco-based Callan, told the state pension board. The response later “created controversy and outcry over corporate governance issues in Putnam.”

“The action and inaction of management has been a troubling point,” added Kimo Blaisdell, the state ERS chief investment officer.

Putnam’s firing is a warning to other managers, Humphreys said.

“We will do that to any manager that we find are unethical in their dealings,” he said.

The ERS board also voted to send inquiry letters to two other investment firms, Invesco and Jennison, an indirect subsidiary of Prudential, which are under investigation for conducting trading activities that favored some investors to the detriment of others.

Invesco handles $260 million in real-estate assets for the state pension plan while Jennison manages $207 million in small-cap stocks. The board is seeking more information about any investigations.

The state pension plan also reported yesterday that its investments grew by 2.89 percent in the quarter ended Sept. 30, compared to the quarter before that. The median growth in the quarter for large public funds tracked by Callan Associates was 3.05 percent. Over the past 12 months, ERS has returned 16.95 percent vs. 17.65 percent for large public funds.

The board also took action on underperforming managers. It left Bank of Hawai’i, Schroder Capital and Capital International on its watch list and took off Pacific Income Advisors because of improved performance. The pension added Bank of Ireland and Bradford & Marzec to the watch list; it also decided to send warning letters to T. Rowe Price and Independence Investment Associates for underperformance.


 

December 8, 2003

Funds Want Marsh & McLennan Board Changes

By Associated Press

NEW YORK — Four big public pension funds plan to sponsor a shareholder resolution to change the board of Marsh & McLennan Cos., the parent of Putnam Investments, in response to the company’s role in the widening mutual-fund probe.

The pension funds will seek access to Marsh & McLennan’s proxy to nominate and elect independent directors, pending approval by the Securities and Exchange Commission of a new rule governing shareholder access to corporate proxies.

The pension funds involved are the California Public Employees’ Retirement System; the California State Teachers’ Retirement System; the New York State Common Fund; and the AFSCME Employees Pension Plan, a union pension fund.

In a news release issued Monday, chiefs of the pension funds sharply criticized Marsh & McLennan and Putnam, even going so far as to compare the companies to Enron Corp., the former energy giant.

They singled out Lawrence Lasser, former Putnam CEO, for criticism related to what they called his “excessive compensation.”

“Marsh & McLennan deserves to be the first company in U.S. history to face a binding proxy access proposal because of its gross failure to have proper controls that could have prevented the Putnam disaster,” AFSCME pension Chairman Gerald W. McEntee said in the release….

In October, public pension funds began firing Putnam as a manager of their retirement assets after the firm was charged in an industrywide probe of mutual fund trading practices.

Launched in September by New York Attorney General Eliot Spitzer, the investigation is looking into rapid-fire and after hours trading of mutual funds by favored investors.

Some 11 states, including Vermont, Massachusetts and Rhode Island, ended up pulling out of Putnam, citing concerns related to the probe.

“Investors have pulled more than $32 billion in assets out of Marsh’s Putnam subsidiary due to its involvement in this terrible mutual fund scandal, and Marsh’s stock price is down about 10 percent,” New York State Comptroller Alan Hevesi said in the news release.

“I can’t think of a stronger case worthy of shareholder involvement, and I have no doubt that given the chance, shareholders will respond favorably to our initiative.”


 

November 1, 2003

More Clients Dump Putnam in Scandal

Company’s future potentially on the line over trading issues

By Justin Pope, Associated Press

BOSTON – Pension funds in Pennsylvania, Iowa and Rhode Island fired Putnam Investments yesterday, joining a growing exodus of customers abandoning the embattled fund company.

They joined Massachusetts, New York and Vermont pension officials, as well as some universities, who are taking their business away from Putnam following accusations by regulators that four of its fund managers engaged in personal short-term investing at clients’ expense.

In just two days, public pension funds have announced plans to pull at least $4.4 billion out of the company, which lists $272 billion in assets under management. New England Pension Consultants, a firm that advises 190 pension plans with $150 billion in assets, has recommended clients get out of Putnam international stock funds….

Putnam, a unit of Marsh & McLennan, had no immediate comment yesterday on the latest departures of clients….


 

October 29, 2003

Putnam, 2 ex-officers
face fraud charges

By Justin Pope, Associated Press

BOSTON – State and federal regulators accused Putnam Investments and two of its former investment officers of fraud yesterday, the first formal allegations of wrongdoing by a mutual fund company in what is becoming a scandal for a once pristine industry.

The filings by the Securities and Exchange Commission and the Massachusetts Securities Division allege that Boston-based Putnam improperly allowed six employees, including four fund managers, to make market-timing trades using funds they oversaw and information not available to the public.

The civil actions against Putnam mark the first time a fund company has been accused of breaking the law, although New York authorities have accused three other individuals and a hedge fund of fund-related wrongdoing.

Several dozen fund companies have been subpoenaed in the investigation. The situation has become a black mark on the $7 trillion mutual fund industry, which had prided itself on steering clear of the corporate scandals of recent years. Yesterday, authorities indicated more fallout is ahead.

“This should send a clear message to everyone in the fund business they should examine their books, because we will be examining them,” Massachusetts Secretary of State William Galvin said.

The complaints filed yesterday named two of the managers: Omid Kamshad and Justin Scott, identified as managing directors and chief investment officers of Putnam’s International Core Equity Group and International Equities Group respectively. Authorities said further action still might be taken against the four other Putnam employees alleged to have participated in the trading.

The SEC cited Putnam for failing to deter short-term trading and for fraud in connection with the sale of the funds.

Putnam is also accused of defrauding customers by allowing members of a New York union retirement plan to engage in market-timing of certain funds even though those funds prohibited the practice…

Market-timing is not illegal, but many funds discourage the process because it hurts long-term shareholders. Market timers jump in and out of mutual funds, trying to take advantage of late information that may affect the price of a fund before that fund’s daily price can be set. Indirectly, profits won by market timers skim money from others who own shares.

The Massachusetts complaint claims Putnam ordered Kamshad and Scott to stop market-timing in 2000 but did not punish them or require them to return the profits.


 

<<< FLASHBACKS <<<

SEC Info: Putnam Convertible Opportunities & Income Trust (just one of Putnam’s many funds) – On 6/26/95:

Trustees and Officers

George Putnam. Mr. Putnam, age 68, is the Chairman and President of the Fund and of the other Putnam funds. He is the Chairman and a director of Putnam and Putnam Mutual Funds Corp and a director of Marsh & McLennan Companies, Inc, their parent company. Mr. Putnam is the son of the founder of the Putnam funds . . . Mr. Putnam currently also serves as the Director of the Boston Company, Inc, Boston Safe Deposit and Trust Company, Freeport-McMoRan, Inc., a mining and natural resources company, General Mills, Inc. . . . Houghton Mifflin Co, a major publishing company, and Rockefeller Group, Inc., a real estate manager….

George Putnam III. Mr. Putnam, age 43, is the President of New Generation Research, Inc., a publisher of financial advisory and other research services relating to bankrupt and distressed companies, and New Generation Advisers, Inc., a registered investment adviser which provides advice to private funds specializing in investments in such companies….

Eli Shapiro. Dr. Shapiro, age 78, is the Alfred P. Sloan Professor of Management, Emeritus at the Alfred P. Sloan School of Management . . . Dr. Shapiro currently serves as a Director of Nomura Dividend Income Fund, Inc, a privately-held registered investment company managed by Putnam. He is also a past Director of many companies, including . . . Connecticut Bank and Trust Co, the Federal Home Loan Bank of Boston . . . Travelers’ Corporation, an insurance company….

A.J.C. Smith. Mr. Smith, age 60, is the Chairman and CEO of Marsh & McLennan Companies, Inc. . . . Mr. Smith is a Director of the Trident Corp, and also serves as a Trustee of the Carnegie Hall Society, the Central Park Conservancy and The American Institute for Chartered Property Underwriters (CPU)….

* * *

Marsh & McLennan Shares Fall Amid Concerns About Putnam

New York, March 22 , 2001 (Bloomberg) — Marsh & McLennan Cos. Inc. shares fell to a 52-week low amid concerns that falling equity markets will cut into earnings at its Putnam Investments unit.

Shares of the world’s biggest insurance broker fell $1.30 to $88.10, after earlier dropping to a low of $85.26.

”We’re trying to avoid the stock,” said Paul Raman, an analyst at Glenmede Trust Co., which has sold all its Marsh & McLennan shares. ”Its earnings have been driven by Putnam Investments for the last five or six years. That engine has run out of gas,” Raman said.

Marsh & McLennan is expected to earn $4.62 a share in 2001, according to a survey of 10 analysts by First Call/Thomson Financial. A month ago, it was expected to earn $4.70 a share, according to First Call.

Putnam’s assets under management were $344 billion at the end of February, compared with $370 billion at the end of 2000 and $406 billion at the end of the third quarter.

Putnam, the fourth largest U.S. fund company, reported operating profit of $245 million in the fourth quarter, up from $209 million a year earlier.

A number of Wall Street analysts, including Alice Schroeder of Morgan Stanley Dean Witter & Co. and Jay Cohen of Merrill Lynch & Co. have recently lowered earnings estimates for Marsh & McLennan because of concerns about earnings at Putnam.


 

Putnam Investment’s Former Vice President Convicted of Fraud

Boston, March 26, 2001 (Bloomberg) — A former Putman Investments Inc. vice president was convicted of conspiracy for plotting to illegally transfer $78,909 of Putnam funds.

Paul Murphy, 39, who served as vice president of the company’s control division, was convicted on one count of conspiracy and faces up to five years in prison and a fine of $250,000, U.S. Attorney Donald Stern said. He will be sentenced June 20.

Murphy and former Putnam employee Robin Kelly transferred the money from a miscellaneous account in October 1999 into a Vanguard Group account that Kelly shared with her mother, the government said. Kelly, a former assistant vice president, pled guilty in federal court July 7.

Putnam said at the time of Murphy’s indictment that no customer accounts were affected by the illegal transfer. Putnam, a unit of New York-based Marsh & McLennan Cos., manages more than $400 billion for 12 million individual shareholder accounts and 1,000 institutional clients.

* * *

Putnam’s Lasser Paid $35 MILLION in 2000;
Gets Contract Extension

New York, March 29, 2001 (Bloomberg) — Putnam Investments’ Chief Executive Lawrence Lasser received $35 million in compensation last year, a 30 percent raise, and a contract extension through 2005, according to a Securities and Exchange Commission filing.

As head of the fourth-biggest U.S. mutual fund company, Lasser received a salary of $1 million, a bonus of $33 million and other compensation of $1 million, the filing said. In 1999, he earned $27 million, including a bonus of $26 million.

Putnam’s operating income rose 23 percent to $1 billion last year. Its mutual fund assets fell 19 percent to $343.5 billion at the end of February from $422.2 billion last March, according to Boston-based research firm Financial Research Corp.

New York-based Marsh & McLennan Cos., Putnam’s parent, said in the filing that under the contract extension Lasser will receive options for 50,000 shares of Marsh & McLennan stock, 100,000 restricted stock units of Putnam and options to acquire 50,000 class B shares of Putnam.

Lasser also was granted a deferred special payment equal to the value of 150,000 shares of Marsh & McLennan, the biggest insurance broker, as of Feb. 15, 2001, worth about $16.7 million.

Options

He also is entitled to receive an additional award of options on 50,000 shares of Marsh & McLennan in March of 2002, 2003 and 2004, as well as an additional award of 50,000 class B shares of Putnam in March 2002.

Jeffrey W. Greenberg, Marsh & McLennan’s chairman and chief executive, received $7.2 million in cash compensation in 2000, 45 percent more than in 1999….

Marsh & McLennan said it also gave Greenberg 200,000 10-year stock options that could be worth $32.9 million….

Marsh & McLennan shares, which gained 22 percent in 2000, have lost almost 22 percent of their value this year.


 

Putnam’s Jennifer Leichter Resigns
From $1.4 Billion Junk Fund

Boston, April 2, 2001 (Bloomberg) — Jennifer Leichter, who managed the $1.4 billion Putnam High Yield Trust II, resigned to pursue ”other interests,” said Putnam spokesman Matthew Keenan.

The fund returned 4.1 percent in the first quarter, after declining 8.5 percent last year.

Leichter, who joined Boston-based Putnam in 1987 as a high yield bond analyst, quit on Friday. She was previously a high yield bond analyst for Kidder Peabody.

Putnam, the No. 4 mutual fund company, manages $8.4 billion in high yield bond funds….

* * *

Some interesting incestuous relationships (circa 2001)…

        Citigroup is the 3rd largest institutional investor in Marsh & McLennan.

        Citigroup is the 3rd largest institutional investor in Chubb Group (Federal Insurance Co. et al)

        Citigroup is the 10th largest institutional investor in American International Group.

        Citigroup is the 6th largest institutional investor in L-3 Communications.

        Putnam is the largest institutional investor in L-3 Communications.

        Putnam is the 2nd largest institutional investor in Chubb Group.

        Putnam is the 6th largest institutional investor in Citigroup.

        Putnam is the 5th largest institutional investor in AXA Financial.

        Putnam is the 3rd largest institutional investor in Starwood Hotels.

        Goldman Sachs is the 10th largest institutional investor in Starwood Hotels.

        Wellington Management Co. is the 9th largest institutional investor in Starwood Hotels.

        Wellington Management Co. is the #1 institutional investor in Marsh & McLennan.

        Putnam is the #1 institutional investor in Harrah’s Enterprises.

        Putnam is the 6th largest institutional investor in Isle of Capri Casinos.

        Goldman Sachs is the 3rd largest institutional investor in Isle of Capri Casinos.

        etc., etc., etc.

For more on Chubb Group, GO TO > > > The Chubb Group

For more on Citigroup, GO TO > > > Vampires in the City

For more on Goldman Sachs, GO TO > > > Dirty Gold in Goldman Sachs

For more on L-3 Communications, GO TO > > > Tracking the Titan

For more on pension plan fraud, GO TO > > > The Great Nest Egg Robberies


 

<<< FLASHBACK <<<

October 25, 2001

Statement of John T. Sinnott, Chairman and CEO, Marsh, Inc. Before the House Financial Services Committee “Protecting Policyholders from Terrorism:
Private Sector Solutions”

Mr. Chairman and members of the Subcommittee, I am John T. Sinnott, Chairman and CEO of Marsh, Inc, headquartered in New York City.

Marsh is the world’s largest risk management and insurance brokerage firm. We have 35,000 employees and serve clients in over 100 countries around the world. We also serve virtually all of the major insurance firms with reinsurance broking and related services through our Guy Carpenter unit. My testimony is on behalf of my firm as well as the member firms of the Council of Insurance Agents and Brokers.

I’d like to thank you, Mr. Chairman, for giving me this opportunity to testify today on the topic of private sector solutions to the burgeoning terror insurance availability crisis in the wake of the September 11 attacks….

The events of that day were singularly devastating on one industry – the financial services industry – not only in business terms, but also in human terms.

The World Trade Center housed several companies from the banking, securities and insurance industries that must now deal not only with the new business challenges facing them as a result of the attacks but also with the loss of colleagues and employees. Within the insurance industry, the brokerage community was hit particularly hard. Marsh maintained offices in both of the World Trade Center towers and the space that we occupied in the north tower comprised the floors directly struck by the first aircraft. No one in those offices at the time escaped.

In fact, of the 1900 members of the Marsh & McLennan Companies working in both towers (or who were visiting that day) 294 were lost. Another colleague was a passenger aboard one of the aircraft….

The events of September 11 have changed the landscape of commercial insurance in a way that I have not seen in my 36 years in the business. To be sure, there have been trying times in the past – the liability crisis in the mid-1980s, the property catastrophe coverage problems in the early 1990s following Hurricane Andrew, to name a couple.

Marsh rose to the occasion during both those crises to help our clients secure the coverage that they needed to adequately protect their businesses. This is a function that is quite common in the brokerage community – not merely selling insurance products, but identifying client needs and developing new and innovative products or programs to address coverage shortfalls and to make our clients more successful.

In response to the mid-1980s liability crisis, Marsh played a leading role in the creation of the insurance and reinsurance companies ACE Limited in 1985 and XL Capital in 1986. These companies were formed to provide excess liability and directors’ and officers’ liability coverages at a time when the market could not provide the necessary capacity. These companies were very successful in providing much-needed market capacity and eventually were spun off from Marsh. They exist as major insurers today.

Similarly, Marsh played a role in the creation of Mid Ocean Limited during the property catastrophe reinsurance crisis following Hurricane Andrew in 1992. This company has also done very well in meeting the needs voiced by our clients.

It was in this same spirit of responding to customer needs that MMC Capital, our sister company, recently announced the formation of AXIS Specialty Limited, a new insurance and reinsurance company formed to provide capacity needed in the wake of the September 11 attacks. AXIS has an initial capitalization in excess of $1 billion, and will begin underwriting later on this quarter….

But I must tell you in all candor that what your committee heard has been hearing over the past three weeks is true – there is an immediate crisis that demands your attention. In the current unique, and hopefully short-term, environment of uncertainty, the private sector alone will not be able to provide the insurance capacity America’s businesses need to conduct their operations.

Government involvement is needed until the environment becomes secure and returns to a state of more normalcy….

May I close by saying that my firm has been severely affected by the events of September 11.

The first aircraft directly struck our offices in the World Trade Center and we lost 295 members of our corporate family. That was the real tragedy and is still with us in our offices and hallways. We also incurred huge losses of property and equipment.

So I speak here today from painful personal experience – and perhaps with a deeper understanding of what our clients face as they look to an uncertain future. Mr. Chairman, let me restate that we are on the brink of an availability/affordability crisis insurance caused by the terrorist events….

I commend you for holding this hearing, for your efforts to create a solution that restores and strengthens the private marketplace, and I urge you to work with your colleagues in Congress and the Administration and within our industry to find workable answers….

See also: John Sinnott

For later news on the 9-11 tragedy and coverup, GO TO > > > The Eagle Hooded


 

January 7, 2002

Turning to sleepy insurance
to jazz up portfolios

By Beth Healy, Boston Globe

Forget tech. The hot new deals for deep-pocketed private equity firms are in the least sexy business on the planet: insurance.

In the wake of Sept. 11, a host of new insurers and reinsurers are opening their doors, with billions of dollars in backing from existing insurers and big-name buyout firms, including Boston’s Thomas H. Lee Co. Lee recently has bet $475 million on three Bermuda insurance deals, after a year in which it made only one investment (in phone book publisher TRW) from its massive $6.1 billion fund.

Other investors leaping into the sector include Blackstone Group; Goldman, Sachs & Co.; and Warburg Pincus, all based in New York. Marsh & McLennan, the New York insurance brokerage (and parent of Boston fund manager Putnam Investments) is backing a start-up, as is Chicago’s Aon Corp….

This is opportunism at its best. The last time new insurers launched was after Hurricane Andrew struck in 1992. Rates on property-casualty insurance policies soared following that natural disaster, much as they’ve skyrocketed since the terrorist attacks.

Some customers are seeing renewal rates jump 300 percent and 400 percent.

And they’re faced with having to buy more coverage, as their sense of risk has increased and as acts of terror are struck from typical policies. New kinds of special coverage will be required to guard against losses from terrorism and acts of war.

All this adds up to big new potential revenue streams for at least six —— and possibly as many as a dozen —— new insurers and reinsurers (firms that pick up excess liability from other insurers) and their investors. The start-ups are virtually all based in Bermuda, not for the golf, but for its tax-haven status.

And they are filling a need, industry experts say, with losses sustained by current insurance players estimated conservatively at $40 billion. The new entrants figure they can jump in and be competitive because they aren’t grappling with losses from the latest catastrophe.

“A lot of capital went out of the business with the catastrophe and has to be replaced,” said Lanny Thorndike, managing director at Century Capital, a Boston-based insurance investor.

Because of Sept. 11, he said, “there’s a higher appreciation for risk, and with that comes higher returns for those who assume the risk.”…

 


 

 

And now for a closer look at some of the Marsh Birds
that nest at Putnam Investment Management

/

 


 

A. J. C. Smith – Chairman of the Board and CEO of Marsh & McLennan Companies since 1992. Mr. Smith is a trustee of the various mutual funds managed by Putnam Investment Management, Inc., a subsidiary of MMC. He is also a member of the Board of Overseers of the Joan and Sanford I. Weill Graduate School of Medical Sciences of Cornell University.

In 1998, A.J.C. Smith raked in $6.5 million in salary, bonus and other compensation from Marsh & McLennan Companies. Add to that $11.3 million in stock option grants, and Mr. Smith goes to Washington with a total of $17.9 million. He also has $25.2 million in unexercised stock options from previous years.

On Nov 18, 1999, the Board of Directors of Marsh & McLennan Companies elected Jeffrey W. Greenberg as CEO to succeed A.J.C. Smith, age 65, who will remain chairman of the board until he retires from the company at its 2000 annual meeting. It was announced that Mr. Smith will continue as a member of the company’s board….


 

Conseco, Inc. – Indiana-based insurance company.

August 14, 2002

Putnam may suffer as
Conseco’s troubles mount

By Svea Herbst-Bayliss

BOSTON, Aug 14 (Reuters) – Mutual fund firm Putnam Investments, already facing declines in money management fees, may suffer another blow this quarter as a stake in insurer Conseco Inc is likely to shave millions off its pre-tax income.

In a regulatory filing, Putnam’s parent, No.1 insurance broker Marsh & McLennan Co., said owning a stake in the ailing Carmel, Indiana-based insurer and financial company could cost the Boston-based money manager up to $15 million….

Conseco last week missed a bond interest payment and said it plans to extend three more bond interest payments due later this month as it begins work on restructuring its huge debts.

Putnam is entangled in the Conseco saga because it owns an equity interest in Boston-based buyout firm Thomas H. Lee Partners, L.P. whose Thomas H. Lee Equity Fund IV L.P. owns a chunk of Conseco’s public stock.

“The significant capital restructuring that may result from the actions announced by Conseco may adversely impact the value of Fund IV’s investment in Conseco, and consequently the value of Putnam’s investments related to Fund IV,” Marsh said in the filing….

The news comes at a critical time for Putnam as America’s fourth-biggest fund firm’s portfolios take a battering in the stock market’s relentless declines.

The firm drew heavy criticism for its decision to stop naming individual fund managers of its funds, a step that some firms had hoped would keep them out of the limelight when managers quit or are fired.

Amid investor complaints, Putnam quietly reversed itself and went back to naming fund managers earlier this summer.

Putnam’s woes have already hampered Marsh & McLennan’s earnings in the second quarter when money management fees fell even though insurance-related revenues offset the drop….

In the second quarter, investment management revenue at Putnam fell to $581 million from $696 million a year ago while average assets under management, used to calculate fees for managing money, slumped 11 percent to $301 million.

Putnam’s growth funds, once a main money maker, have been a particular trouble spot as assets under management there tumbled to $39 billion from $76 billion over the year. Putnam has also laid off scores of employees to help trim costs.

Conseco’s troubles have also deepened in the last weeks and on Monday the New York Stock Exchange moved to kick it off the exchange after it suspended trading its stock which was last quoted at 34 cents a share. REUTERS

* * *

September 11, 2001 <<< (Note the date!)

Conseco Sues Six D&O Insurers Over Litigation Coverage

Conseco Inc. is suing six of its own insurers, claiming they are attempting to dodge legitimate potential claims on directors and officers policies bought by the Indianapolis-based insurer.

In its annual 10-Q filing with the U.S. Securities and Exchange Commission, Conseco said it “maintained certain directors’ and officers’ liability insurance that was in force at the time the Indiana securities and derivative litigation was commenced and, in our view, applies to the claims asserted in that litigation,” according to BestWire.

The Indiana litigation involves 45 lawsuits filed against Conseco in U.S. District Court for the Southern District of Indiana. Conseco said 19 of those cases were putative class actions on behalf of people or entities that purchased the company’s common stock during alleged class periods that generally run from April 1999 through April 2000.

In those cases, plaintiffs allege that the company and individual directors and officers violated federal securities laws by, among other things, making false and misleading statements about the then-current state and future prospects of Conseco Finance – particularly with respect to performance of certain loan portfolios of Conseco Finance – which allegedly rendered the company’s financial statements false and misleading.

Because it had directors and officers coverage, Conseco didn’t establish any reserves for possible losses with respect to those claims, the company said in its 10-Q. “The insurers have denied coverage for those claims, so we commenced a lawsuit against them on June 13, 2001, in Marion County Circuit Court in Indianapolis,” Conseco said.

Named as defendants are National Union Fire Insurance Company of Pittsburgh, a subsidiary of American International Group Inc., Royal Insurance Company of America, a unit of Royal & Sun Alliance; Westchester Fire Insurance Co., a unit of Ace Ltd.; RLI Insurance; Greenwich Insurance Co., a unit of XL Capital Ltd., and HSBC Insurance Brokers Ltd.

Morgan Stanley analyst Alice Schroeder, in an Aug. 31 property/casualty insurance briefing, wrote that she doesn’t believe an unfavorable outcome for the defendants would have a material impact on the earnings of AIG, XL or Ace.

Schroeder said in her report that AIG’s National Union Fire “was apparently the primary carrier issuing the policy, which carries limits of $10 million.”

“With jury awards rising at a rapid pace, insurers are getting tougher to protect against larger losses–whether they succeed remains to be seen,” Schroeder said in her report. “This event also confirms our view that the D&O market remains difficult, and prices must continue to rise.”…

For much more on Conseco, GO TO >>> Birds in the Trailer Park


 

Craig StapletonPresident of Marsh & McLennan Real Estate Advisors, Inc.

From Identities of George Bush’s 115 Pioneers

Each ‘Pioneer’ has raised at least $100,000 for Bush’s Presidential Campaign…

Craig & Dorothy Stapleton, Greenwich, CT – Executive, Marsh & McLennan Companies – Contributions to Bush’s Gov. Races: $10,000.

* * *

April 6, 2001

Bush Nominates Ambassador
to the Czech Republic

WASHINGTON (AP) – President Bush on Friday nominated Craig Stapleton as ambassador to the Czech Republic. . . .

Stapleton, of Greenwich, Conn. served on the Peace Corps board of directors under Bush’s father when he was president.

Stapleton is president of Marsh and McLennan Real Estate Advisors, Inc.

A Democrat, Stapleton said in an interview he was a partner with Bush in the Texas Rangers baseball team.

His wife, Dorothy, is a first cousin of Bush’s father, he said.

$ $ $

October 14, 2004

White House For Sale

CONTRIBUTORS AND PAYBACKS

www.whitehouseforsale.org

PIONEER PROFILE:

Craig Stapleton worked in the White House of the first President Bush (who appointed him to the Peace Corps board) and married the second President Bush’s cousin, Dorothy.

From 1982 until President George W. Bush nominated him as U.S. Ambassador to the Czech Republic in 2001, Stapleton was president of Marsh & McLennan Real Estate Advisors, the leasing unit of Marsh & McLennan Companies. Stapleton also invested with Bush in the Texas Rangers ball team that made Bush a millionaire 15 times over.

Bush’s profits got a boost from the other partners, who gifted him extra equity in the deal, and by local taxpayers, who paid $135 million for the team’s new stadium.

When the hospitality division of the Blackstone Group investment bank merged with CUC International in 1997, CUC designated Stapleton as one of its directors on the board of the new Cendant Corp. The following year, Cendant slashed its reported earnings over the past three years by $650 million due to massive accounting fraud at CUC.

With Stapleton, ex-Defense Secretary William Cohen and ex-Canadian Prime Minister Brian Mulroney on its board, Cendant then settled investor lawsuits for a record $3.1 billion.

That same year, Stapleton organized a 1998 Bush fundraiser that netted $250,000.

As the No. 1 stockholder in Vacu-dry Co., Stapleton joined other board members in June 1999 in a sudden decision to abandon its apple-drying business. The decision wiped out 276 plant jobs and blindsided Sonoma County apple growers….

Stapleton’s longtime employer owns Marsh Mercer Consulting Group and Putnam Investments. After Massachusetts regulators issued subpoenas in 2003 to probe allegations that Putnam gave special privileges to elite mutual fund investors, the company fired 15 employees for personally profiting from rapid-fire, “market-timing” trades in Putnam mutual funds and then fired Putnam CEO Lawrence Lasser.

In 2004, research firm Morningstar, Inc. ranked a college savings plan that Putnam administers in Ohio as one of the five worst in the nation due to the excessive fees that it reaps from these educational accounts.

Marsh & McLennan had almost $2.5 million in federal contracts in fiscal 2002, mostly with the Treasury Department.


 

Gwendolyn S. King – A director of Marsh & McLennan Companies since 1998 and member of President Bush’s Commission to Strengthen Social Security.

From MMC’s web site:

Director of Marsh & McLennan Companies since 1998. Ms. King, age 60, is president of Podium Prose in Washington, D.C. She was senior vice president, corporate and public affairs at Peco Energy from 1992 until 1998. From 1989 to 1992, she served as commissioner of the Social Security Administration in the U.S. Department of Health and Human Services. Ms. King is a director of Lockheed Martin Corporation, Monsanto Company, Pharmacia Corporation and the National Association of Corporate Directors and a member of the George Washington University Council on American Politics.




 

Jeffrey W. Greenberg – From Business Wire – 11/18/99 – The Board of Directors of Marsh & McLennan Companies (MMC) today elected Jeffrey W. Greenberg CEO of the company.

Mr. Greenberg who continues as president of MMC, succeeds A.J.C. Smith, age 65, who will remain chairman of the board until he retires from the company at its 2000 annual meeting. Mr. Smith will continue as a member of the company’s board.

Mr. Greenberg, age 48, was elected president of MMC in January 1999, at the same time his planned succession to the CEO position was announced….

Mr. Greenberg began his professional career in 1976 at MMC, where he managed the commercial aviation/aerospace insurance group. He then worked for 17 years at American International Group . . . He rejoined MMC in 1995 and was named chairman and chief executive officer of Marsh & McLennan Capital in 1996….

Jeffrey Greenberg is the son of American International Group head Maurice (Hank) Greenberg….

$ $ $

October 15, 2004

NY Insurance Probe Casts Light
On Greenberg Family

By Joseph A. Giannone, Reuters

NEW YORK – New York Attorney General Eliot Spitzer’s far-reaching probe into price-fixing and kickbacks in the insurance industry has cast a spotlight on three members of one family who control almost a trillion dollars in assets.

Spitzer, who prompted reforms in stock research and mutual funds, announced a lawsuit on Thursday against Marsh & McLennan Cos. The Boston-based company, led by Chairman and Chief Executive Jeffrey Greenberg, were accused of price-fixing and misleading clients by accepting payments to steer business to certain providers.

Among the insurers implicated in the suit were American International Group Inc (AIG), the global insurance giant and largest U.S. insurer led by Maurice “Hank” Greenberg, Jeffrey’s father, and ACE Ltd., the big Bermuda-based insurer led by Jeffrey’s brother Evan Greenberg….

An investigator in Spitzer’s office told Reuters that the presence of three Greenbergs in the probe, while “interesting and piquant”, is purely coincidental.

Still, the fact that three Greenbergs run insurance companies controlling more than $700 billion in assets can be traced back to Hank Greenberg and his unshakable place at the top of the industry.

People who have dealt with the 79-year-old have said he can be intimidating. Only the second man to run the 85-year-old company founded in China, Greenberg is famous for keeping tight control over every aspect of the far-flung operation….

Through the 1990s, analysts and investors expected Hank to turn the reins over to his oldest son Jeffrey, now 53. But in the space of five years both Jeffrey and Evan quit AIG to join rival insurance companies.

Jeffrey landed at Marsh & McLennan in 1995, ready to start an independent career after 17 years in Hank’s shadow. His rise to the top of a company had been smooth until the past two years, when Marsh & McLennan’s three divisions – Putnam Investments, Mercer Inc. and now insurance broker Marsh – all came under fire from Spitzer.

Five years later Evan, now 49, also quit AIG as president and chief operating officer even after his father publicly affirmed him as the heir apparent. Evan set up shop at rival Ace to start his own legacy. In March this year he was named chief executive.

But now the family will need to brace itself for dealing with Spitzer, who on Thursday vowed to pursue the investigation beyond Marsh & McLennan to other companies and across the entire insurance industry.

Spitzer also made it clear he wants changes inside Marsh & McLennan’s executive suites.

In a press conference on Thursday, Spitzer directed this comment to Marsh’s board of directors:

“I would suggest that you should think long and hard – think very long and very hard – about the leadership of your company.”

* * *

[A Catbird Note: It was during Greenberg’s tenure with American International Group (AIG) that Bill Clinton’s “personal piggybank,” Arkansas Development & Finance Authority, did millions of dollars in questionable deals with AIG, including helping finance the formation of Coral Reinsurance Company in Barbados.]

* * *

For more, GO TO >>> The Un-American Insurance Company


 

John Sinnott – Chairman and CEO of Marsh, Inc.

October 1, 2002

Marsh Chairman & CEO to Step Down in 2003

Marsh & McLennan Companies, Inc. (MMC) announced that John Sinnott, chairman and CEO of Marsh Inc., the company’s risk and insurance services business, will retire from the firm in July 2003.

Ray Groves, president and COO of Marsh Inc., will succeed Sinnott as CEO in January and as chairman in July 2003.

Jeffrey Greenberg, chairman of MMC, noted, “Jack Sinnott’s leadership of Marsh has been extraordinary. He guided the firm through the difficult operating environment in the 1990s, the successful consolidation of two large mergers, the September 11 attacks and their aftermath, and the changing marketplace for commercial insurance. I’m pleased that Jack will continue as a special advisor to MMC after he retires in July.”

Sinnott joined Marsh & McLennan in 1963 and has held various executive positions with the company during his career….

For more, GO TO > > > Harmon’s Claim Letter to John Sinnott; Claims By Harmon



 

Lawrence Lasser – Putnam Investments’ ousted CEO.

November 5, 2003

Ousted CEO May Get Millions

Putnam’s former leader could receive more than
$32.7 million under an employment agreement

By Aaron Pressman, Bloomberg News

Putnam Investments’ former chief executive officer, Lawrence Lasser, who was the second-highest-paid executive at a publicly traded mutual-fund company, may be owed more than $32.7 million after Monday’s ouster amid fraud charges against the company he ran for 18 years.

Lasser, who was paid $163 million over the last six years, signed an employment agreement with Putnam in 1997 that included $15 million due when he retired, according to filings with the Securities and Exchange Commission. An amendment to the plan signed in 2000 created an additional $16.7 million payout due when the agreement expired at the end of 2005.

Lasser, 61, was forced out in the industry-wide probe of improper trading. The SEC and Massachusetts regulators have alleged that Putnam failed to prevent two former money managers from taking advantage of inside knowledge about the international funds they oversaw to generate quick profits for themselves at the expense of clients.

Marsh & McLennan spokeswoman Barbara Perlmutter said the company, Putnam’s parent, was reviewing Lasser’s contract to determine what was owed.

Lasser earned about five times the amount paid to his boss, Jeffrey Greenberg, the chairman and CEO of Marsh & McLennan, during the last six years. Lasser declined to comment, according to Putnam spokeswoman Nancy Fisher.

Lasser has been replaced by Charles Haldeman Jr., 55, of Haverford, Pa., Putnam’s co-head of investments.


 

June 11, 2004

Lasser: Settles For $80M From Putnam

By Sophia Banay, Forbes

Lawrence Lasser, an ex-chief executive at Putnam Investments, settled with his former employer for almost $80 million as arbitration proceedings come to a close.

After heading up the mutual fund company for 18 years, Lasser lost his job last November in the wake of an improper fund trading scandal which resulted in the departure of several other executives.

The $80 million figure was $25 million less than the compensation package Lasser had hoped for.

The sum was disclosed by Marsh & McLennan, Putnam’s parent company, in a regulatory filing on Thursday, in which the company claimed the payout would not have “a significant impact” on earnings.



 

Ray J. Groves – Incoming chairman and CEO of Marsh, Inc.; director of American Water Works Company, Inc., Boston Scientific Corp and Gillette Co.; former director of Allegheny Technologies, Inc.

October 2, 2002

MARSH CHAIRMAN & CEO JOHN T. SINNOTT
TO RETIRE IN 2003

Marsh & McLennan Companies, Inc. (MMC) announced today that John T. Sinnott, chairman and chief executive officer of Marsh Inc., the company’s risk and insurance services business, will retire from the firm in July 2003.

Ray J. Groves, president and chief operating officer of Marsh Inc., will succeed Mr. Sinnott as chief executive officer in January and as chairman in July 2003….

Commenting on Mr. Groves’ appointment, Mr. (Jeffrey) Greenberg said, “Marsh has a deep bench of management talent, and the firm is especially fortunate to have an executive as skilled and experienced as Ray Groves to succeed Jack. Ray has a longstanding relationship with MMC and a profound understanding of professional services.”

Mr. Groves has been a member of MMC’s Board of Directors since 1994, when he retired from Ernst & Young after serving 17 years as chairman and chief executive officer. He joined MMC’s management team as a senior advisor in August 2001 and was appointed president and chief operating officer of Marsh Inc. in October 2001….

Source: Marsh & McLennan Companies, Website: www.marshmac.com

For more on American Water Works, GO TO > > > Blue Gold

For more on Ernst & Young, GO TO > > > P-s-s-t, wanna buy a good audit?



 

Seabury & Smith – The manager for Marsh Affinity Group Services.

From www.seaburychicago.com:

About Us

We work hand-in-hand with our client organizations to create solutions to meet their members’ specific insurance needs. You know your members and, with a 50-year-plus history in the insurance management industry, we know how to best support them. Marsh Affinity Group Services specializes in the design, administration and marketing of custom insurance programs and financial planning services for client organizations and their members.

Through our family ties with Marsh & McLennan Companies, our history goes back to 1871:

In 1905, Burrows, Marsh and McLennan was formed in Chicago.

The name was changed to Marsh & McLennan in 1906 after founders Henry W. Marsh and Donald R. McLennan.

In 1949 the Seabury & Smith organization was formed. It was named after two former Marsh & McLennan chairmen, Charles W. Seabury and Hermon D. Smith.

Albert H. Wohlers was founded in 1949 to specialize in the direct response/mass marketing group insurance and their members. It was acquired by Seabury & Smith, Inc. in 1997.

In 1949, Maginnis & Associates was formed and committed its efforts to marketing insurance plans through association sponsorships in the health care industry. It was acquired by Seabury & Smith, Inc. in 1998.

Headquartered in NYC, we have recently expanded our sales and service offices to Chicago and Park Ridge, Illinois through our acquisitions of Maginnis & Associates and Albert H. Wohlers.

These are in addition to our offices in Alexandria, Virginia; Brookfield, Wisconsin; Columbia, South Carolina; Dallas, Texas; Des Moines, Iowa; Ft. Washington, Pennsylvania; Honolulu, Hawaii; Minneapolis, Minnesota; Perry, Iowa; Phoenix, Arizona; St. Louis, Missouri; San Francisco, California; Seattle, Washington and Washington, DC.

* * *

Welcome to The State Bar of California Approved Lawyers Professional Liability Insurance Program

www.kvi-calbar.com

It has never been easier to apply!

With our new, simplified application … most applicants can complete the process in less than five minutes and get an actual quote, not just an estimate.

Marsh Affinity Group Services
Program Administrator
160 Spear Street, 15th Floor
San Francisco, CA 94105

A service of Seabury & Smith, Inc., an MMC company.

~ ~ ~

For more, GO TO > > > Claims By Harmon


 

Stephen Friedman – a senior principal of Marsh & McLennan Capital, Inc.

In 1994, Mr. Friedman retired as chairman of Goldman, Sachs & Co. He was co-chairman or sole chairman from 1990-1994, and from 1987-1990 he served as co-chief operating officer. He joined Goldman, Sachs in 1966 having previously held a position as a law clerk to a federal district court judge and as an attorney in New York City (1963-1966).

Mr. Friedman holds a B.A. from Cornell University (1959) and an LL.B. (Law Review) from Columbia Law School (1962). He is a Trustee of Columbia University (Chairman, Board of Trustees); Chairman of the Executive Committee of The Brookings Institution; Trustee of Memorial Sloan-Kettering Cancer Center and member of the Executive Committee.

He serves as a director of: Fannie Mae, Wal-Mart Stores, Inc., the National Bureau of Economic Research and the Concord Coalition.

Mr. Friedman is also a member of the President’s Foreign Intelligence Advisory Board and a director of In-Q-Tel, Inc. He is a former member of the Aspin/Brown Commission on the Roles and Capabilities of the U.S. Intelligence Community and the Jeremiah Panel on the National Reconnaissance Office.

* * *

STATEMENT BY WARREN B. RUDMAN,

CHAIRMAN OF THE PRESIDENT’S

FOREIGN INTELLIGENCE ADVISORY BOARD (PFIAB)

In response to the President’s request for the PFIAB to undertake a review of the security and counterintelligence threat to the Department of Energy’s weapons labs, I am pleased to announce that I have asked PFIAB Members Ms. Ann Caracristi and Dr. Sidney Drell to join me on a special panel of the Board to conduct this inquiry. In addition, the President (Clinton) recently has announced his intent to appoint Mr. Stephen Friedman to the PFIAB, and I intend to ask Mr. Friedman to become a panel member immediately upon his appointment.

Ms. Caracristi, as esteemed intelligence veteran, was Deputy Director of the National Security Agency (NSA) from 1980 to 1982. . . . She currently serves on the Board of Visitors of the Joint Military Intelligence College ans as a Consultant to the NSA Scientific Board. Ms. Caracristi also sits on the Intelligence Oversight Board, a standing committee of the PFIAB that advised the President on the legality of US foreign intelligence activities.

Dr. Drell, a world-renowned physicist and arms control specialist, is Professor Emeritus of Theoretical Physics at the Stanford University Linear Accelerator Center and a Senior Fellow at the Hoover Institute, Stanford University….

Mr. Friedman, a highly-respected and successful businessman, was for years a General Partner of Goldman, Sachs & Co., and retired as its Chairman in 1994. He is Chairman of the Board of Trustees of Columbia University, Chairman of the Executive Committee of the Brookings Institution, and a member of the Executive Committee of the Memorial Sloan-Kettering Cancer Center.

Mr. Friedman served on the Commission of the Roles and Capabilities of the US Intelligence Community and on the Jeremiah Panel, which reviewed the National Reconnaissance Office. He currently is a Senior Principal of Marsh & McLennan Capital, Inc. . . .

– For more on the ‘highly-respected’ Mr. Friedman, GO TO > > > The Stephen Friedman Flock; Dirty Gold in Goldman Sachs?; The Secret Nests; WHO’s Guarding the Hen House???


 

Wayne Berman – A high-flying lobbyist.

From The Money Men: . . . You’ve probably never heard of Wayne Berman, Peter Terpeluk, Beth Dozoretz, or Alan Solomont. But you should. Certainly anyone who wants to be president or a member of Congress has. They are among the key people to see in the powerful world of political solicitors. . . . Whoever these people blessed were the candidates who had the best chances to become our next president. The ones they rejected didn’t have any chance at all….

~ ~ ~

The wall of fund-raiser Wayne Berman’s office was papered with photos of himself glad-handing with virtually all of the big-name Republicans of the past two decades. As a longtime lobbyist, Berman knew— and was liked and trusted by— everyone from Ronald Reagan to Newt Gingrich and from George Bush to George W. Bush. They respected him both for his political savvy and for his ability to raise money— as much or more money, in fact, than almost anyone else in town.

It was no surprise, then, that a colleague of his, Scott Reed, interrupted my interview with Berman one day to ask for a favor. Reed was a Washington player in his own right; he had served as campaign manager for the 1996 Dole for President campaign. But Berman had the access that Reed lacked. Reed was pushing a “technical” amendment for a client that needed to be affixed to an appropriations bill that was on the verge of completion in the Senate.

So Berman picked up the telephone and called the chairman of the Senate Appropriations Committee, Ted Stevens of Alaska … A half hour or so later, Stevens called back. I didn’t hear everything that was said, but it was obvious that Berman’s reminder was all that was needed to insert the amendment into the bill….

* * *

From Journal Inquirer, 3/6/00, by Don Michak:

Treasurer Scandal’s Tentacles
Reach Texas

SOME KEY PLAYERS in Connecticut’s Paul Silvester scandal also are embroiled in a controversy over conflicts of interest and political favoritism in Texas under the governorship of Republican presidential candidate George W. Bush.

At the center of the controversy are hundreds of millions of dollars of investments by the University of Texas Investment Management Co., or UTIMCO, a tax-exempt, quasi-public corporation said to be the brainchild of former University of Texas regent Thomas O. Hicks, the Dallas merchant banker who served as UTIMCO’S first chairman….

In Texas, Donald I. Evans, finance chairman of the Bush presidential campaign, is a Bush-appointed university regent, as is Tom Loeffler, a San Antonio lawyer and former congressman. Evans is now chairman of the regents, who approved the creation of UTIMCO in 1996.

Loeffler, one of Bush’s biggest financial backers in his 1988 gubernatorial race, also has been a registered lobbyist for Hicks, Muse, Tate & Furst, and he joined Hicks on the UTIMCO board in 1996.

Loeffler and several others involved in the UTIMCO controversy also are among the people Bush calls his “pioneers,” supporters who each helped him raise at least $100,000 in presidential campaign contributions.

The group includes R. Steven Hicks, the brother of Thomas Hicks; three people whose investment partnerships had received UTIMCO funds; two partners in the law firm that counsels UTIMCO; and Wayne L Berman, a Washington lobbyist…

Last fall … Berman, who is finance chairman of the national Republican Governors Association, “voluntarily” suspended his activities on behalf of the Bush campaign, pending the results of the continuing federal investigation of Silvester’s crimes in Connecticut. . . .

Berman is a central figure in the Silvester scandal, having apparently “bundled” campaign cash to Silvester, including a contribution from another big Republican fundraiser and his co-chairman of the governors association’s Finance Committee, Washington lobbyist Peter Terpeluk.

Three of Berman’s colleagues, among Bush’s “pioneers” — corporate chieftains Maurice R. Greenberg of American International Group, Herbert Collins of Boston Capital Partners, and Thomas Foley of … NTC Group— also helped bankroll Silvester’s failed election bid.

And Berman hired both the former treasurer and his closest aide soon after Silvester’s narrow 1998 election defeat. A survey of the treasury’s business partners last fall also showed Berman to have collected $1.5 million in “finder’s fees” on two pension fund deals he helped broker with Silvester….

The bulk of Berman’s fees— $1 million … came from The Carlyle Group, a Washington merchant bank run by several prominent Republicans in the Reagan and Bush administrations, including former Secretary of Defense and CIA Deputy Director Frank Calucci, Secretary of State James A. Baker, and Office of Management and Budget Director Richard G. Darmon.

Former President Bush also advises one of Carlyle’s investment partnerships, and the firm reportedly has paid him for speeches…

The UTIMCO controversy and the Silvester scandal also are both marked by the involvement of corporate and legal elites whose Republican pedigrees trace back to the Nixon administration.

The most obvious link is Thayer Capital Partners, an investment group headed by Frederic V. Matek, the former head of personnel in the Nixon White House, deputy director of Nixon’s Committee for the Re-election of the President, and president of Marriott Hotels, Northwest Airlines, and Coldwell Banker Commercial Group. . . .

Silvester invested $75 million with Thayer, and UTIMCO initially approved a $20 million commitment, but the Texans backed out of their deal…

In Connecticut the Carlyle payment to Berman amounted to 1 percent of Silvester’s $100 million investment in Carlyle European Partners. Thayer Equity Advisor IV LP, to which Connecticut committed $75 million, arranged to pay Merrill Lynch & Co. $2 million and North Cove Ventures, a company organized by former House Majority Leader William DiBella, a Democratic power broker and confidant of Silvester’s, $374,500….

Meanwhile, Silvester, who last September pleaded guilty to racketeering and money laundering as the key figure in the kickback scheme involving such fees, faces a federal prison term of as much as six years.

The U.S. Securities and Exchange Commission also has launched a broad investigation of the financial transactions that Silvester authorized during his 17-month tenure as treasurer. Two months ago it sought records concerning his private-equity investments as well as his hiring of investment managers and bond underwriters….

* * *

From The Governor’s Gusher: The Bush Profiteers – 100 Donors Who Enjoy Hands-Off, Handout Government

42. Wayne Berman (Washington, DC): $16,000

Berman is a lobbyist and ex-GHWB assistant secretary of commerce. An ex-Connecticut state treasurer recently pled guilty to corruption charges involving politicians and lobbyists who took “finder’s fees” from firms to which he gave contracts to manage state pension funds. Berman reportedly landed a $900,000 fee and hired the corrupt ex-treasurer as a lobbyist.

After reports of this scandal, Berman has reportedly suspended Pioneer fundraising, but the GWB campaign has not returned the $100,000 or more he raised….

For more, GO TO > > > A Connecticut Yankee in King Kamehameha’s Court; Aloha, Harken Energy!; Birds in the Lobby

 

# # #

 


 

FOR MORE MARSH BIRDS

GO TO

/

A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT

ACE UP THE SLEEVE

ALOHA HARKEN ENERGY

ALLIED WORLD ASSURANCE

APOLLO ADVISORS

CONSECO: BIRDS IN THE TRAILER PARK

THE CARLYLE GROUP: BIRDS THAT DRINK FROM CESSPOOLS

THE BANKRUPTCY BUZZARDS

THE BLACKSTONE GROUP

BLUE GOLD

BUZZARDS IN THE BANK OF HAWAII

BUZZARDS OF PARADISE

CLAIMS BY HARMON

DIRTY GOLD IN GOLDMAN SACHS

DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE

HARMON’S CLAIM LETTER TO JOHN SINNOTT

HARMON’S LETTERS TO INSURANCE COMMISSIONERS

INVESTIGATING INVESCO

INVESTIGATING INVESTCORP

KROLL, THE CONSPIRATOR

MARSH & McLENNAN: THE MARSH BIRDS

MARSH & McLENNAN’S TRIDENT FUNDS

OFFICE OF THE U.S. TRUSTEE vs HARMON

PARADISE PAVED

RICO IN PARADISE

THE CHUBB GROUP

THE DISSECTION OF FRISTY

THE GREAT NEST EGG ROBBERIES

THE HARMON ARBITRATION

THE PRUDENTIAL: A NEST ON SHAKY GROUND

THE STEPHEN FRIEDMAN FLOCK

THE STORY OF ENRON

THE EAGLE HOODED

THE POOP ON AON

THE ROYAL & SUN ALLIANCE

THE SECRET NESTS

THE WILLIS GROUP

TRACKING THE TITAN

TRANSYLVANIA TRAVELERS IN ST. PAUL

VAMPIRES IN THE CITY

ZEROING IN ON ZURICH FINANCIAL SERVICES

 


 

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Last Update February 2, 2007, by The Catbird

 

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