UPDATE:USI Holdings Unit To Pay $470,000 In Pact With Conn AG
March 04 2009 - 3:48PM
Dow Jones News
A unit of USI Holdings Corp. (USIH) has agreed to pay $470,000
and change its business practices to resolve allegations it
received undisclosed payments from insurers in exchange for access
to pension-plan business, Connecticut Attorney General Richard
Blumenthal said.
In a statement Wednesday, Blumenthal said USI Consulting Group,
an employee-benefit consulting and outsourcing firm, has agreed to
no longer accept or request contingent compensation related to
single premium group annuity insurance contracts and will disclose
all quotes and indications sought and received in connection with
an SPGA placement.
"More than the money, this settlement provides business reforms
that prevent artificially inflated pension plan costs for private
and public companies, nonprofits and others," Blumenthal said.
"Today's settlement stops secret payments to pension plan brokers,
ensuring transparency and integrity for certain investments."
Blumenthal had alleged USI Consulting, since at least 1998, had
received undisclosed payments from insurers in connection with some
single premium group annuity insurance contracts, including
payments from units of Hartford Financial Services Group (HIG),
Principal Financial Group (PFG) and Mutual of Omaha Insurance Co.
All three insurers have previously settled with Blumenthal.
In exchange for the hidden payments, the insurers received
competitive information and "last look" bidding opportunities not
provided to carriers that declined to pay the secret compensation,
Blumenthal said.
The undisclosed agreements increased USI Consulting's overall
compensation on those SPGA placements by as much as 33% to 50%,
Blumenthal said.
The attorney general had alleged that USI Consulting's practices
- including misrepresentations to plan sponsors and conspiring with
carriers in a scheme to deceive its clients - violated
Connecticut's unfair trade practice laws.
Blumenthal noted USI Consulting cooperated early in the probe
and his investigation is continuing.
"There were other brokers involved in these schemes, and my
investigation into pay-to-play in the SPGA market will continue,"
Blumenthal said.
In a statement, USI Consulting said the payments made to the
company by insurers "were part of the prevailing compensation
structure in the marketplace, represent a very small percentage of
the amounts under investigation and were a very small fraction of
USICG's total revenue during the relevant period."
The company said it denied and continues to deny the attorney
general's assertions, but it does fully endorse the attorney
general's goal of promoting greater transparency in the insurance
industry.
"I am glad that we are able to resolve this matter amicably,"
said Jim Kinney, USI Consulting's president and chief executive.
"We have cooperated fully with the attorney general throughout this
investigation and have consistently denied any wrongdoing. Our
singular motivation for this settlement is to eliminate any further
distractions and continue our practice of serving the best
interests of our clients."
Under the agreement, USI Consulting will pay $375,000 - the
compensation it received over a five-year period under the
arrangements that were the subject of the investigation - and a
$95,000 monetary penalty, the company said.
-By Chad Bray, Dow Jones Newswires; 212-227-2017;
chad.bray@dowjones.com