Jeff explained his departure as a chance to set off on his own—something that clearly rang true in light of the ‘21’ Club fiasco. “You know, after that, their relationship could not bounce back from that incident,” says a former AIG executive. “It obviously had been building for some time.” Hank, for his part, released a statement saying he was “personally saddened” by the departure, though he has never been one to let personal feelings get in the way of running AIG. Board members whom Hank talked to immediately following the resignation recall no discernible emotion in his voice.
Many within the company have speculated that Jeff was irked by Evan’s rapid ascent through the AIG ranks. Finke, whose marriage with Jeff had long since ended, remembers calling to congratulate him on having the gumption to walk away from his father. When Jeff returned the call, they began talking about the brothers’ relationship, and Jeff expressed disbelief about Evan’s rise to his own level within the company. “To the world, they were trying to present a united front, that it had nothing to do with Evan,” says Finke. “But I got the distinct impression—of course it had something to do with Evan.” Likewise, Finke recalls a conversation she had with Evan a year and a half later, in which she jokingly asked, “So, Jeff was scared of you, huh?” It became clear from the banter that followed that Evan was relishing his brother’s change of fortune. “Not only was he not upset that Jeff had left the company, he was triumphant about it. He made some comment like, ‘It’s going to make family dinners a little awkward.’ ”
Evan eventually left AIG, too, one of the many executives who defected to ACE, a big Bermuda-based firm. These defections gnawed at Hank, according to one insurance analyst who’s followed AIG for years. Says the analyst, “I know that [Hank] Greenberg would—nothing would make him happier than to see ACE go down the tubes.”
After leaving AIG, Jeff became a “hot commodity” in the insurance industry, as one Marsh & McLennan executive put it to the Wall Street Journal. His marketability was partly a function of the Greenberg name, which, thanks to Hank, had achieved a mythical status in the insurance industry. And it was partly a result of Jeff’s strong reputation within AIG, a company thought to possess the most elite managerial talent in the industry. Jeff joined Marsh & McLennan as a partner in a subsidiary called MMC Capital, a private-equity group focused on the insurance industry, in October 1995. He wound up on the company’s fast track, becoming CEO of MMC Capital the following year, then winning a seat on the Marsh & McLennan board two months later. In 1999, largely on the strength of his impressive performance at MMC Capital, where he’d made a name for himself presiding over high returns on investments in insurance companies and real estate at the unit’s Trident Funds, the Marsh & McLennan board named Jeff CEO and designated him the company’s future chairman.
By this point, many of the improprieties Spitzer alleges in his complaint had long since been under way. “My involvement with [Marsh & McLennan] was fifteen years ago. It was going on then. And it was going on long before I got there,” says one former Marsh & McLennan executive. “I think that Marsh and its operating companies operate in industries that have substantial corruption. But they’re a leader in it.” According to this executive, the business model at Marsh & McLennan has for decades involved using the company’s leverage in the marketplace to generate profits or win business it probably couldn’t have won on the merits. To take one example, the Marsh & McLennan–owned mutual fund called Putnam is currently under investigation for paying companies to include it in employee 401(k) plans. “Putnam paid financial intermediaries to get them in the door,” the executive continues. “Their performance in relation to cost made it obvious they were never hired on the merits. Look at their investment return, cost structure. These funds were mediocre performers at best.”
If Spitzer’s most recent allegations are accurate, then a similar logic applied to insurance brokering, Marsh & McLennan’s core business. Over the years, Marsh & McLennan is alleged to have generated a substantial portion of its profits from what are known as contingency agreements, in which insurance companies offered Marsh & McLennan kickbacks for sending business their way. Marsh & McLennan would send business to the insurance company offering the most generous kickback rather than the insurance company submitting the lowest bid.
According to industry sources, such contingency agreements had been common in the industry since the seventies. But in the nineties, a Marsh & McLennan employee named William Gilman, who is identified in Spitzer’s complaint, stumbled on a way to make them even more profitable by basing them solely on the volume of business an insurance company received from Marsh & McLennan. (The more business Marsh & McLennan sent it, the larger Marsh & McLennan’s cut in percentage terms.) By the latter part of the decade, Marsh & McLennan had centralized this process in its Global Broking Unit, a move that allowed it to exert even more leverage over insurance companies, and to generate even larger contingency fees. Eventually, the firm’s brokers allegedly became so brazen that they began fixing bids outright. In a 2001 e-mail uncovered by Spitzer, one Marsh & McLennan executive advised an insurance company to send a “live body” to a meeting to create the appearance of competition, even though the outcome of the bidding process had already been determined. “Anyone from New York office would do. Given recent activities, perhaps you can send someone from your janitorial staff—preferably a recent hire from the U.S. Postal Service,” the Marsh & McLennan executive joked. In a June 2003 e-mail exchange, an insurance-company executive chafes at being ordered by Marsh & McLennan to come in higher than $850,000 on a bid with the container company Brambles USA, so as not to undercut AIG. “Doherty gave me song & dance that game plan is for AIG at $850,000 and to not commit our ability in writing,” the rival executive wrote of a Marsh & McLennan broker. “This is another AIG protection job.”