PCI’s Csiszar Has Tough Words for N.Y. AG Eliot Spitzer
AAMGA University Day Program
New York Attorney General Eliot Spitzer has bypassed due process and used McCarthy-like tactics to wage “corporate terrorism” against the insurance industry even while ignoring his own alleged conflicts of interest, a leading insurance industry executive recently charged.
Ernie Csiszar, president and chief executive officer of the Property Casualty Insurers Association of America, said Spitzer is unfairly using the threat of jail and a “trial by media” against insurance executives and that Spitzer’s avowed political ambitions taint his prosecutorial positions.
“The reality is that Spitzer did find practices in the industry that are deplorable; bid-rigging is the classic example,” Csiszar said. “The problem that we have, that I have personally and the PCI’s position is, that Spitzer takes it much further than that. If you leave it to the prosecutorial charge, fine, you’ve got them, a criminal offense was uncovered by your investigation by all means charge people and get on with,” Csiszar said at an insurance industry meeting of the American Association of Managing General Agents in Orlando, Fla. recently.
Trial by media
“Instead what we are seeing is a trial by media, a media that is only too happy to give Spitzer his podium; and an industry that basically left itself defenseless over the years, and that is our fault.”
Csiszar, who was South Carolina insurance commissioner before taking the top job at the insurance companies’ trade group PCI, exclaimed: “Spitzer has discovered the ultimate weapon of mass destruction. It wasn’t Saddam Hussein; it was Spitzer’s corporate terrorism, the threat of an indictment, the threat of going to jail.”
According to Csiszar, there is no due process involved and no one is reviewing the actions of Spitzer, who the PCI leader said is attacking industry after industry and overreaching as a prosecutor.
“If Spitzer is out to eradicate conflict of interest which he seems to be doing, he should look in his own mirror in the morning and question his own conflict of interest,” Csiszar charged. “Here you have a prosecutor who has clearly expressed his lust for political power by declaring himself as a candidate for the governor of New York.
“There are some of us who think, not without good reason, who think that his ambitions go beyond that. The governor of New York historically has not been a bad place to begin a run for the presidency at some point down the road. I think that Spitzer is positioning himself for that. The reality of it is that in and of itself, in comparison to his prosecutorial position, truly creates a conflict of interest and what is the punishment for that?”
“This smacks of McCarthyism, and I am sorry, that is not what America is all about.”
Csiszar said that what’s going on with American International Group, which is under investigation for various accounting practices and reporting of finite reinsurance transactions, is dangerous because Spitzer is attempting to control corporations, which raises the specter of an Enron-like failure.
AIG’s fate
“It brought Enron down and it brought down Arthur Anderson, are we going to bring down AIG?” Csiszar asked.
According to Csiszar, Spitzer said he is not going to prosecute AIG.
“But there has been silence from FCC, state attorney generals and federal prosecutors for that matter,” Csiszar said. “I think that whether or not there will be an indictment or the threat of an indictment is still in question.
“Does that also then mean since we did what we did to Arthur Anderson that PWC is next?” Csiszar asked, referring to PriceWaterhouseCooper, AIG’s accounting firm.
Csiszar said the industry may not like it, but there should never be side agreements that are not disclosed. Whatever is there should be transparent. He explained that as an investor he expects that and that the industry can overcome that.
Csiszar’s comments came during a question-and-answer session held immediately after a group of panelists completed their discussions.
Tom Gallagher, Florida’s chief financial officer, and Gordon Breslin, senior property underwriter from ACE Insurance in London, joined PCI’s Csiszar on the panel, which was held during afternoon sessions at the AAMGA’s University Day Program.
Florida’s reaction
Gallagher said Florida had to react to Spitzer’s indictments and did so by issuing subpoenas in cooperation with the Florida Attorney General. He said that using a multiple-departmental approach meant more insurance expertise was involved in looking at the information as it came in.
“One of the problems that existed with Spitzer is that they did not understand what the transactions were and how they worked,” Gallagher said. “Truly, they found something and there is no defense for it.
“But, recognizing that, we felt it would be good to work with our Attorney General so that if we found something bad we would know what it was and how to deal with it and if it’s not bad, we know how to deal with that also.”
Rewrite language
Gallagher said Florida supports the National Association of Insurance Commissioners’ model on compensation because it requires disclosure and transparency.
“We have been working closely with industry associations that have helped us rewrite the language,” Gallagher explained. “We can allow the business to move as it has been, while at the same time making sure that if a transaction takes place, there are certain commission schedules.
“If an agent sells for a company there is no reason in my opinion for that customer to buy from anybody to know about commissions,” he said. “But if you are paying an agent to find you a product and expect that is what you are paying, you get net costs, that’s what you have and that’s what the person should do for you.”