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October 2005 State: New York Area of Interest: Insurance Execs Indicted For Bid Rigging, Fraud 37-Count Indictment Names Eight Former Managers Attorney General Eliot Spitzer and State Insurance Superintendent Howard Mills announced the indictment of eight former executives of the nation's leading insurance brokerage firm for their roles in a massive bid rigging scheme that defrauded clients of millions of dollars. The former managers of Marsh Inc., a subsidiary of Marsh and McLennan, Inc., "Marsh" are accused of colluding with executives at leading insurance companies to arrange noncompetitive bids and conveying these bids to Marsh clients under false pretenses. The indictments come after 17 individuals at five companies, including eight former Marsh employees, previously pleaded guilty to criminal charges in the ongoing insurance industry investigation that began a year ago. The indictment charges that from November 1998 to September 2004, the defendants colluded with executives at American International Group "AIG", Zurich American Insurance Company "Zurich", ACE USA "ACE", Liberty International Insurance Company "Liberty" and other companies to rig the market for excess casualty insurance. According to the indictment, defendants and other Marsh employees told their excess casualty clients that they obtained bids for their business from insurance companies in an open and competitive bidding process. In fact, defendants had rigged the process in the following ways: First, before any bids were submitted, the defendants determined which insurance company would win the business. Second, they set a "target" for the winner to submit as its bid. Third, they obtained losing bids, which they called "B quotes," from other participating insurance companies. By misleading customers into believing that the customers' interests came first, the conspirators fraudulently obtained millions of dollars in commissions and fees for Marsh and millions of dollars in premiums for the insurance companies. The victim companies ranged from high technology firms to a fruit cannery to a cosmetics manufacturer. Agreements have not yet been reached with ACE, AIG, Zurich or Liberty. Source: State of New York State: California Area of Interest: Former San Francisco Insurance Agent Arraigned for Embezzling More Than $8 Million in Insurance Premiums A former insurance agent was arraigned today in the United States District Court in San Francisco after being indicted by a federal grand jury on 10 counts—including insurance fraud, wire fraud and money laundering. The California Department of Insurance (CDI) Investigation Division indictment alleges that Mary Anne Locke, a/k/a Mary Ann Diaz, 57, misappropriated and embezzled more than $8 million in insurance premiums between 1997 and 2000. Locke was illegally working in the insurance industry after being prohibited from doing so as the result of a prior felony conviction in 1992. According to investigators, Locke was an employee and co-owner of the Ray Wersching Insurance Agency in Redwood City, from March 1995 through January 2001 in which Raimund “Ray” Wersching, a former San Francisco 49er’s football player, served as a Farmers Insurance Agent. CDI Investigators obtained numerous search warrants during the investigation to research allegations of premium theft, embezzlement and other violations. According to the indictment, Locke embezzled and misappropriated more than $8 million in insurance premiums and failed to remit the premiums to Farmers. Locke allegedly directed premiums to accounts controlled by her and Mr. Wersching, and subsequently diverted premium payments to pay off tens of thousands of dollars in gambling debts to casinos. Source: State of California State: Texas Area of Interest: OSHA Fines BP Products North America More Than $21 Million Following Texas City Explosion Company Agrees to Make Extensive Plant-Wide Improvements BP Products North America Inc. has agreed to pay more than $21 million in penalties for safety and health violations following an investigation of a fatal explosion at its Texas City, Texas, plant March 23 that claimed the lives of 15 workers and injured more than 170 others. The penalties are part of a settlement agreement announced by the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA). The agreement settles citations issued against BP Products following the fatal explosion at the Texas City refinery complex caused by a fire in the Isomerization Unit (ISOM) when a cloud of hydrocarbon vapors ignited during the start up of the ISOM. The settlement also addresses other ongoing investigations at the Texas City Refinery and requires BP Products to address process safety management (PSM) plant-wide. Under terms of the settlement, BP Products agreed to:
BP Products North America Inc. is part of BP of London, England, which engages in petroleum exploration and refining. The Texas City refinery, where the explosion occurred, is BP's largest oil refinery with thirty process units spread over 1,200 acres and 1,600 permanent employees. Employers are responsible for providing a safe and healthful workplace for their employees. OSHA's role is to assure the safety and health of America's workers by setting and enforcing standards; providing training, outreach, and education; establishing partnerships; and encouraging continual process improvement in workplace safety and health. Source: Occupational Safety and Health Administration State: Pennsylvania Area of Interest: Insurance Department Takes Action Against Switching Campaign Insurance Commissioner Diane Koken today announced that that the Insurance Department has reached a settlement that requires the brokerage firm Waddell & Reed to pay $11 million in restitution to consumers nationwide whose variable annuities were switched from one product to another. The Pennsylvania Insurance Department estimates that 150 consumers were affected. Pennsylvania has joined in a joint, multi-state settlement involving Waddell & Reed Inc. and W & R Insurance Agency Inc. as a result of their replacement of certain variable annuity products. The settlement was coordinated through the National Association of Insurance Commissioners (NAIC), together with the National Association of Securities Dealers, and involves several state insurance and securities regulators. Under the terms of the settlement, Waddell has agreed to pay $11 million in restitution to affected consumers, to be implemented over a six-month period through an independent consultant, and $2 million in civil penalties to be apportioned among the participating states. According to the terms of the settlement, Waddell has paid a $44,383.90 civil penalty to the Commonwealth based on the number of Pennsylvania residents affected. Source: State of Pennsylvania State: California Area of Interest: Insurance Commissioner John Garamendi Announces Preliminary Results of Department Survey Showing $7 Billion in Insurance Industry Investments for Underserved Communities Insurance Commissioner John Garamendi, who has made insurance industry investment in emerging and underserved communities one of his top priorities, announced the preliminary findings of a Department of Insurance survey Thursday showing that insurers have invested more than $7 billion in these communities since 1996. The survey of more than 1,000 insurers doing business in the state identified more than 2,500 individual investments that qualify under the guidelines of the California Organized Investment Network (COIN). COIN facilitates insurance industry investments in California's underserved urban and rural communities, providing solid returns to investors and important economic and social benefits to the target communities. Nearly a year ago the Commissioner released his Roadmap for Success for the COIN program, which included as a top priority the first comprehensive review of industry investment in low to moderate income communities. Source: State of California State: New York Area of Interest: OSHA Orders Bronx Bus Company to Rehire Driver and Pay Nearly $60,000 in Back Wages and Legal Fees The U.S. Labor Department's Occupational Safety and Health Administration (OSHA) has ordered Kids Bus Service, Bronx, N.Y., to rehire a driver fired for refusing to operate a school bus under unsafe circumstances. OSHA is ordering the bus service pay him nearly $60,000 in back wages, interest and damages. On Feb. 3, 2004, Jack Marziano was operating a school bus carrying teenagers when a disturbance broke out. Marziano was pelted several times on the back of the neck with packed ice and snow. He blacked out momentarily, became dizzy and felt he could not operate the bus safely. He refused to continue operating the bus, for which he was later fired. Marziano filed a complaint with OSHA Feb. 19, 2004. The agency's investigation found merit in Marziano's allegation that he had been discharged in violation of the Surface Transportation Assistance Act (STAA). OSHA determined that a reasonable bus driver would not have continued driving with students throwing packed snow and ice, after a blackout and while feeling dizzy and disoriented, because these conditions could have caused an accident. As a result, OSHA has ordered Kid's Bus Service to immediately reinstate Marziano to his former position; pay him $33,227.80 in lost wages, $1,288.82 in interest and $25,000 in compensatory damages; expunge any adverse references to the discharge in Marziano's personnel record; and refrain from negative comments about the discharge in response to any future requests for employment references. The STAA authorizes the Labor Department to investigate complaints by bus drivers and others involved in operating commercial motor vehicles who believe they have been discriminated against for their involvement in protected safety activities. If an OSHA investigation determines that an employee's complaint has merit, OSHA can order remedies such as reinstatement and back pay. Both the company and Marziano have 30 days to file objections and request a hearing on the matter with the U.S. Labor Department's Office of Administrative Law Judges. Source: Occupational Safety and Health Administration State: New York Area of Interest: Ammonia Leak at Buffalo Food Plant Leads to $37,500 in OSHA Fines A manufacturer of non-dairy creamers and desserts faces $37,500 in fines from the U.S. Labor Department's Occupational Safety and Health Administration (OSHA) following a May 4 ammonia leak. Rich Products Inc. was cited for 15 alleged serious safety and health violations at its Buffalo plant. OSHA's inspection found deficiencies in the plant's emergency response program and its process safety management system. Responders to the ammonia leak had not received annual refresher training, did not wear appropriate respiratory protection and personal protective equipment, and had not been fit-tested and medically evaluated for respirator use. Hazardous conditions associated with the response had not been identified and addressed, and appropriate air monitoring had not been performed. The company also failed to develop and implement written operating procedures for the plant's ammonia systems; ammonia safety relief valves were not inspected and tested according to manufacturer's recommendations; ammonia alarms were not operational or fixed in a timely manner, and the company failed to develop and document responses to a 2003 process safety management audit of the refrigeration system. OSHA also noted that plant employees were exposed to ammonia hazards from certain rooms that had doors and other openings that permitted passage of escaping refrigerants to other parts of the building or were not provided with a mechanical ventilation system Source: Occupational Safety and Health Administration Area of Interest: Secretary of Labor Deploys OSHA Teams to Texas to Ensure Worker Safety in Anticipation of Hurricane Rita Before Hurricane Rita makes landfall, the Department of Labor's Occupational and Safety and Health Administration (OSHA) response teams are in Texas and informing workers and employers of ways to avoid injury and illnesses associated with cleanup and recovery efforts after the storm passes. OSHA's Region VI Regional Response Team has been dispatched to South Texas where they are providing technical assistance to the petrochemical industry on shutdown-related safety and health issues. Advance arrangements also are being made with utility companies to do post-storm safety briefings as needed. Hurricane-related job safety and health fact sheets have been distributed in the region and OSHA professionals in the area are ready to respond to safety and health issues facing recovery workers. OSHA has also identified home supply and construction stores to distribute safety and health fact sheets and materials to South Texas. Public service announcements have been issued to the Gulf Coast region to inform workers about hazards related to restoration and cleanup. These PSAs may be downloaded from DOL's Hurricane Recovery Web page at www.dol.gov, and from OSHA's Web page at www.osha.gov/OshDoc/hurricaneRecovery.html. FEMA has expanded its Joint Field Office operation in Austin in anticipation of Rita and the OSHA area director as well as several staff members will be present. After Hurricane Katrina made landfall, FEMA activated the Worker Safety and Health Support Annex under the National Response Plan. The annex describes actions needed to ensure that threats to responder safety and health are anticipated, recognized, evaluated and controlled consistently so that responders are properly protected during incident management operations. OSHA was charged with coordinating technical support for federal responder and federal contractor safety and health during cleanup and recovery operations in Louisiana, Mississippi and Alabama. Source: Occupational Safety and Health Administration
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