Ex-cabinet minister caught up in Marsh corruption scandal

Lord Lang of Monkton, the president of the Board of Trade in the last Conservative government, is under pressure to resign from the board of Marsh & McLennan, the insurance broker accused of corruption.

Lord Lang of Monkton, the president of the Board of Trade in the last Conservative government, is under pressure to resign from the board of Marsh & McLennan, the insurance broker accused of corruption.

The Tory peer has been a director of the group since shortly after he left the cabinet in 1997. He received over $130,000 (£71,000) in fees, stock and expenses from the group last year and currently owns shares worth over $270,000. He sits on three group committees, including the executive committee, which has the power to take decisions on behalf of the full board.

Marsh has been thrown into turmoil by an investigation led by Eliot Spitzer, the New York Attorney General, into its insurance broking business. Mr Spitzer launched legal actions against Marsh 10 days ago alleging fake bids, collusion, improper steering of business, paying rivals not to make competitive quotes and threatening firms that would not agree to Marsh's controversial deals.

Its fund management operation, Putnam, paid $55m in a settlement with the US Securities & Exchange Commission last year after an investigation into malpractice in the trading of mutual funds.

Marsh has also been accused of excessive secrecy and a culture of high-pressure selling. Its chief executive, Jeffrey Greenberg, is understood to be close to resigning, though reports that he would be replaced by Julius Kroll, who heads the group's private investigations subsidiary, were denied on Friday.

Mr Greenberg is the son of Hank Greenberg, the chairman of US insurance giant AIG, while Evan Greenberg, Jeffrey's brother, runs Ace, a property and casualty insurer. Two employees of AIG and one from Ace have pleaded guilty to criminal charges as part of Mr Spitzer's investigation.

The scandal has brought a collapse in Marsh's shares from $46 at the turn of the year to under $27 on Friday. Analysts in New York have questioned whether the giant group can survive this latest scandal.

Mr Spitzer's investigation will ask how much oversight of the Marsh business the board, and the executive committee, had. Among the issues it is looking at are the setting up of a private fund, called Trident, which allowed executives at Marsh to co-invest in deals with the company. Though this is not illegal, it is unusual. The setting up of Trident was approved by the executive committee.

Lord Lang's involvement at Marsh has echoes of the problems that best another former Tory cabinet minister, Lord Wakeham, thanks to his positions on the board of Enron. When the US energy giant collapsed in 2001, Lord Wakeham was forced to resign from his role as chairman of the Press Complaints Commission.

Lord Lang did not responds to numerous phone calls and emails asking for comment.

Neal Brendel, a partner at US law firm Kirkpatrick & Lockhart, said the Spitzer investigation would have a big impact on insurance companies internationally and that a raft of litigation was likely to follow.

"A number of substantial policyholders will elect to pursue a full recovery in the courts," Mr Brendel said. "It's difficult to imagine this issue can be isolated to the US market. We are going to see a substantial global impact." Already, inquiries were coming in from his corporate clients, he said.