Deals & People January 30, 2008

MMC Turns to Duperreault as new CEO

Marsh&McLennan Companies, Inc. (MMC), whose insurance brokerage unit has undergone management changes in recent months, on Wednesday tapped Brian Duperreault as MMC’s new president and chief executive officer.
Reported by

According to a company announcement, the 60-year-old Duperreault’s new assignment is effective immediately. He succeeds Michael G. Cherkasky who the company said was replaced amid disappointing financial results (See MMC Shuffles out CEO).

“Throughout his career, including 10 years as a CEO, Brian Duperreault has proven his ability to produce results and create shareholder value,” said Stephen R. Hardis, Chairman of MMC’s Board of Directors, in the announcement.

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Duperreault served as CEO of ACE Limited, a Bermuda-based insurer, from 1994 to 2004. He then served as chairman of the board from 2004 to 2007.

Prior to ACE, Duperreault was with American International Group for more than 20 years, holding numerous positions and eventually rising to become executive vice president of AIG Foreign General Insurance and chairman and chief executive of AIG’s American International Underwriters (AIU), which comprises all of AIG’s non-U.S. commercial business.

The December 21, 2007, announcement that Cherkasky would resign when MMC found a new CEO was the second major management change in less than four months. The board fired Brian Storms in September as chairman and CEO of brokerage unit Marsh Inc. for what MMC viewed as poor execution of Marsh’s long-term strategy (See CEO Storms is Out at Marsh).

Earlier in December, Marsh tapped Daniel S. Glaser, managing director of AIG Europe (U.K.) Ltd., regional president of American International Underwriters’ U.K./Ireland division, and a former Marsh employee, as its head (See Daniel Glaser to be New Marsh CEO).

Compliance January 30, 2008

SEC Smacks Firm with $3.9 Million Fine for Fund Mispricings

The Securities and Exchange Commission (SEC) has fined Heartland Advisors Inc. $3.9 million for mispricing two municipal bond funds.
Reported by

This week the company and its chief executive, William J. Nasgovitz, were fined $3.5 million, while chief operating officer Paul T. Beste and former employees Thomas Conlin and Greg D. Winston were fined $95,000 each. Senior vice president of trading Kevin D. Clark and former employee Kenneth J. Della were ordered to pay $25,000 each. The respondents consented to the SEC order without admitting or denying the Commission’s findings, except as to jurisdiction, which was admitted.

The SEC had alleged that the Milwaukee-based investment firm failed to properly price the value of some bonds in its Short Duration High-Yield Municipal Fund and High-Yield Municipal Bond Fund in 2000 (see SEC Charges Firm Mispriced Two Junk Bond Funds).

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At Issue

According to the SEC, the funds’ portfolios included several municipal bonds that were valued by the funds at prices above their fair values. As a result, throughout that time period, the funds’ net asset values were incorrect, the funds’ shares were incorrectly priced, and investors purchased and redeemed fund shares at prices that benefited redeeming investors at the expense of remaining and new investors. On October 13, 2000, Heartland devalued the bonds, thereby resulting in approximately $60 million in monetary losses to shareholders, according to the SEC.

The SEC’s original complaint said that Heartland, through Nasgovitz, Beste, Bauer, Clark, Conlin and Winston misrepresented the funds’ NAVs and, in commission filings and promotional materials, their efforts to manage certain risks associated with investing in the funds. For example, Heartland represented that it was actively managing the funds to minimize share price fluctuation when it was not doing so. The SEC said that Heartland also represented that it performed intensive credit research and limited the percentage of unrated high yield bonds held by funds – when the firm actually conducted inadequate research and the vast majority of bonds held by the funds were unrated and relatively illiquid.

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