Marsh to Refund Overcharges to Seven Oregon Schools

The scandal engulfing the world’s largest insurance brokerage firm has reached Oregon.

The Portland office of insurance broker Marsh USA–the firm at the center of a corruption investigation in New York–has agreed to reimburse six Oregon school districts and one community college for $1.2 million in insurance overcharges stretching back to 2000.

Marsh officials told school districts in Beaverton and in Eugene that they each had been overcharged $180,000 dollars over the last four years, district officials told The Oregonian newspaper.

Officials at the Salem-Keizer and Reynolds school districts confirmed they each had been overcharged by $200,000. And the Oregon City School District, Springfield School District and Lane Community College said they too had been billed thousands of dollars more than they should have paid for property and casualty insurance.

State insurance agents and the attorney general have opened an investigation into Marsh’s dealings with Oregon schools.

Marsh, the target of a sweeping white-collar corruption investigation by New York Attorney General Eliot Spitzer, has admitted it improperly charged the districts commission payments.

But the insurer is vigorously attempting to distance the overbilling error in Oregon from Spitzer’s broader bid-rigging lawsuit against Marsh’s New York-based parent company, Marsh & McLennan Cos.

Spitzer filed his lawsuit Oct. 14. Days later, Marsh alerted its Oregon clients about the overbilling.

According to Ed Healy, managing partner of Marsh’s office in Portland, the problem is limited to the six districts and Lane Community College. It’s an isolated event, he said, unrelated to accusations out of New York that the company masterminded widespread insurance bid-rigging.

Marsh blames all the overcharging on a single individual, a former account manager named Robert Lilly. All seven of the clients affected by the inflated bills were clients of Lilly’s, said James McDermott, a Portland lawyer who represents Marsh.

Lilly, who left Marsh in October, said he was the one who brought the improper billing to the attention of Marsh management. He added that he did not personally benefit from the padded bills. The money went to Marsh, not to him, he said.

But the school districts and state regulators are not ready to accept Marsh’s version of events. The districts have asked Marsh to pay for an independent audit of Marsh’s services and billings.

The Oregon Insurance Division opened an investigation, as has the state Dept. of Justice, according to the Oregon Dept. of Consumer and Business Services.

School district officials said they didn’t catch on because their insurance bills, which they received from Marsh, were misleading and made it hard to find the improper commissions.

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Topics New York Education Oregon