Spitzer’s Progress
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
New York’s attorney general, Eliot Spitzer, is getting there. Yesterday’s $850 million agreement with the Marsh & McClennan Companies Inc. avoids two of the flaws for which we have criticized his earlier settlement agreements. In too many of the earlier settlements, the companies Mr. Spitzer went after were allowed to settle by paying sums of money without admitting any wrongdoing, leaving justice unserved. Yesterday’s agreement, on the other hand, includes a statement by Marsh apologizing for “unlawful” and “shameful” conduct.
In too many of the earlier settlements, the financial penalties paid by the firms Mr. Spitzer went after went into the state’s general fund or were used to fund the attorney general’s handpicked pet charities, rather than repay those who had actually been hurt by the activities Mr. Spitzer found objectionable. But under the terms of yesterday’s settlement, the $850 million will be used to provide restitution for policyholders, rather than pork for Mr. Spitzer to distribute for political gain.
The approach exhibited by Mr. Spitzer’s settlement yesterday also has advantages over other enforcement approaches against businesses. After the Enron scandal, overreaching federal prosecutors indicted Arthur Andersen as a firm and essentially put it out of business as an auditor of public companies. That reduced competition in the accounting business and put lots of innocent people out of work. Mr. Spitzer’s approach with Marsh, however, seems as if it will leave the company, a significant New York employer, in business.
Attempts to deal with these sorts of issues through private litigation leave huge sums – often as much as a third of the settlement – in the hands of trial lawyers. Yesterday’s settlement between Marsh and Spitzer makes clear that “in no event shall any of the funds in the Fund be used to pay attorney fees.” Mr. Spitzer, Marsh’s chief executive, Michael Cherkasky, and Marsh’s lawyers at Davis Polk, led by Robert Fiske Jr., deserve congratulations for reaching this settlement. It’d be a healthy thing for the economy if other allegations of bid-rigging in the insurance industry, should they be found to be factual, are dealt with on a similar basis.
