Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Welcome to MMC's press conference call. Before we begin, I would like to remind you that remarks made today may contain forward-looking statements. Please refer to MMC's most recent SEC filing, as well as the press release MMC issued today on the settlement agreement with the New York State Attorney General and Superintendent of New York State Insurance Department which are available on MMC's website for additional information on factors that could affect forward-looking statements.
I will now turn this call over to Michael Cherkasky, President and CEO of Marsh & McLennan Company Inc.
MICHAEL CHERKASKY, PRESIDENT & CEO, MARSH & MCLENNAN COMPANY INC.: Good morning. I'm pleased to announce that Marsh & McLennan has reached an agreement with the New York State Attorney General and the New York State Insurance Department. The key points of the agreement are as follows. First, that this agreement settles all litigation between MMC and Marsh by the New York AG and New York Insurance Department. Second, over the next four years Marsh has agreed to create a compensation fund payable to our clients totaling $850 million. There is no penalty or fine. Third, the fund will be distributed primarily to Marsh's U.S. policyholders.
Clients in all 50 states will participate in the compensation fund with California clients being allocated the largest amount because Marsh placed more business in California than any other state. New York is next, Pennsylvania and so on. It will be done on a client specific basis. Marsh will run an ethical and high integrity Company with a series of the industry reforms that will set the standard for other companies to follow.
This agreement culminates a dark period in this Company's history. We are ashamed of what a few amongst the tens of thousands of Marsh employees have done to our clients, their follow employees, our shareholders and our Company. The cost is significant. But if it can help the healing process, assist us in restoring trust with our clients -- and we believe it will -- then it is an investment that will in the end be well worth it and make us a better Company. We believe we are a better Company today than on October 13 of 2004 -- the day before the Attorney General of New York State and the New York State Insurance Department took action. We believe we're more transparent, more conflict free, more compliant and more efficient, and we will only get better.
The key for us is that this settlement begins to provide answers to a number of important questions raised by the investigation and issues surrounding that investigation. Some of those answers are, one, that Marsh will not be subject to criminal prosecution. Marsh will not have to pay a fine or a penalty. All the money we paid will be paid as compensation to our clients. Marsh will have four years to pay, and this compensation fund will not threaten the Company's viability. Our clients who voluntarily elect to receive a distribution will provide (inaudible) so hopefully that this will provide a measure of closure on this front of potential litigation. And the business reforms required are ones that we either have adopted or will readily adopt. All of this will make us and put us in a position to be the industry standard.
This agreement does not prevent or settle other litigation, nor does it end our commitment to deal with regulators throughout the United States and the world. We hope and expect that all will see the actions we have taken and the relief we have provided and will take this into account as we deal with them.
In sum, this agreement starts the process of ending a period of uncertainty and allows us to proceed forward, temporarily scarred but fundamentally well-positioned to be the industry leader in serving the needs of our clients and delivering performance, value and integrity. We look forward to tomorrow. Thank you.
With that, I will now open it up for questions. I have with me a series of senior executives at Marsh, including our General Counsel, our CFO and our Head of Compliance, and we would now like to take questions.
OPERATOR: (OPERATOR INSTRUCTIONS). PJ Joshi, Newsday.
PJ JOSHI, ANALYST, NEWSDAY: I was wondering if you could comment a little bit about the fact that there is no penalty or fine? I mean usually in some of the past settlements involving conflict of interest there have been companies that have had to pay a statutory fine. Was this a key component of the agreement to you that you wanted to make sure that you didn't have to pay fines?
MICHAEL CHERKASKY: It certainly was key to us. This is a large sum of money, and for us it was just so important that it go back to our clients. I think that the AG's Office and the Department of Insurance understood what our position was and also understood that there are other jurisdictions out there. We wanted to send a message that this is not in any way to try to give states a recovery. We need to, in fact, make sure it is going back to the place where I think it will do the most good in restoring Marsh's reputation. And that is our clients. So it was a critical factor for us. And we certainly do recognize that it is not typical, and we thank the regulators for agreeing to do it in this way.
PJ JOSHI: Okay.
OPERATOR: Kathleen Day, Washington Post.
KATHLEEN DAY, ANALYST, WASHINGTON POST: Hello. I have two questions. One is, I just want to make clear this does not preclude other settlements with other states, correct?
MICHAEL CHERKASKY: It absolutely does not. No.
KATHLEEN DAY: Or with the SEC?
MICHAEL CHERKASKY: Well, there is no SEC involvement as far as I am aware in this.
KATHLEEN DAY: Okay. My other question is in the context of tort reform, which I'm assuming that you guys are lobbying in favor of tort reform?
MICHAEL CHERKASKY: I'm not lobbying in favor of tort reform. (multiple speakers)
KATHLEEN DAY: Is your Company?
MICHAEL CHERKASKY: I don't think our Company is; certainly it is not now under my leadership. We have enough issues to deal with (multiple speakers)
KATHLEEN DAY: Have you in the past? What I'm getting at here is that one of the reasons cited for …