Liberty Mutual has agreed to settle allegations of bid rigging leveled against it in 2006 by the state. Though its actions apparently inflated prices in the market for all consumers, Attorney General Richard Blumenthal said consumers won’t get any money back, instead the $2 million will go into the state’s General Fund.
Here’s the AG’s take on it.
Attorney General Richard Blumenthal today announced that Liberty Mutual Insurance Company will pay Connecticut $2 million to settle allegations it conspired with brokers to rig insurance bids and that it paid insurance brokers secret kickbacks for preferential treatment.
The agreement settles a lawsuit that Blumenthal filed in 2006.
Since 2005, Blumenthal has recovered hundreds of millions of dollars in restitution for consumers and businesses in similar cases involving Marsh, Inc., Aon Corp., and others in the insurance industry. To date, those cases have produced more than $35 million in civil penalties to the state. The lawsuit against Liberty Mutual is the last pending legal action resulting from Blumenthal’s investigations into the insurance industry.
“Liberty Mutual’s conduct was reprehensible, illegally increasing insurance premiums for consumers and businesses and undermining the free market,” Blumenthal said. “The company brazenly broke the law, using underhanded, unethical and illegal methods to rip off its customers.
“This settlement — along with others achieved by this office providing hundreds of millions of dollars in restitution — sends a message: insurance kickbacks and bid rigging are intolerable and will be punished.”
Blumenthal’s lawsuit charged that Liberty Mutual paid so-called “contingent commissions” — undisclosed kickbacks — to insurance brokers like Marsh, Aon, Willis Group Holding Ltd. and Arthur J. Gallagher & Co. In exchange, brokers steered insurance contracts to Liberty Mutual.
Blumenthal said the far-reaching scheme raised insurance premiums not only for Liberty Mutual’s customers, but also for all consumers because the illegal practices artificially inflated prices market-wide.
The $2 million will go into the state’s General Fund.
Financial Mines
Archive for December, 2010
Liberty Mutual pays state $2 million
Malloy keeps Pitkin at Banking
Governor-elect Dan Malloy announced Tuesday that he intends to keep State Department of Banking Commissioner Howard Pitkin on the job. Here’s the full release.
(HARTFORD, CT) – Governor-Elect Dan Malloy announced that he has chosen to reappoint Howard Pitkin to be the commissioner of the Connecticut Department of Banking. Commissioner Pitkin has lead the department for more than five years, and began his career at the Department of Banking more than 30 years ago.
“Howard Pitkin has had a long, successful tenure at the Department of Banking, and I’ve been impressed with his leadership since becoming commissioner five years ago,” said Governor-Elect Malloy. “The Connecticut Department of Banking will play a large part in our state’s economic recovery and I’m pleased he will continue in this role.”
“I appreciate Governor-Elect Malloy’s confidence in me, and I’m looking forward to continuing on in my current role under his leadership,” said Commissioner Pitkin. “Connecticut consumers need to have confidence in their banking institutions as we begin to reemerge from the recession and move toward recovery.”
Prior to his appointment as commissioner, Pitkin was Chief of Administration at the Department of Banking, which included overseeing the agency’s technological initiatives, and restructuring the bank examination and credit union divisions into the financial institutions division.
As Banking Commissioner, Pitkin has jurisdiction over Connecticut’s laws pertaining to commercial banks, savings banks, savings and loan associations, credit unions, consumer credit, broker-dealers, investment advisers, securities, tender offers and business opportunities. He oversees the supervision of 40 state-chartered banks and thrifts and 34 state-chartered credit unions and heads a department with approximately 118 employees. In his capacity as Banking Commissioner, Pitkin serves as an Ex officio Member of the Board of the Connecticut Housing Finance Authority. He also serves on the Board of Directors of the Community Economic Development Fund Foundation. In addition, Commissioner Pitkin is a member of the Conference of State Bank Supervisors (CSBS), a professional association of state banking regulators.
Commissioner Pitkin has long been active in professional and civic affairs. His past professional associations include time spent on various committees of the Conference of State Bank Supervisors and the board of the National Association of State Credit Union Supervisors. Commissioner Pitkin graduated from Stonier Graduate School of Banking at Rutgers University and is a veteran of the United States Army Reserve. Commissioner Pitkin resides in South Windsor Connecticut. He has two children and three grandchildren.
People’s United consolidates insurance agencies
People’s United Financial Inc. said Tuesday morning it is consolidating its insurance agencies into a single unit called People’s United Insurance Agency. Daniel Casey, former president and chief executive of Chittenden Insurance has been tapped to lead the Bridgeport-based bank’s insurance division.
The bank said as of Jan. 1, 2011, R.C. Knox, Beardsley, Brown and Bassett, Chittenden Insurance Group, Bank of Smithtown Insurance Agents and Brokers Inc. will become part of the People’s United Insurance Agency and a single management team.
Implications are that some management positions will be cut resulting in cost savings down the road.
GE engine still in it for F-35
GE’s engine for the F-35 jet fighter will remain alive after Congress agreed to continue funding it as part of a continuing budget resolition. Pratt & Whitney is the main engine provider for the F-35, but GE was devoloping a back-up engine with Rolls Royce. The Pentagon wants to discontinue the GE program. Bloomberg News has a good piece on this today.
U.S. Sen. Joe Lieberman, I-Conn., was not pleased with the move. Here’s his statement on the matter from Tuesday.
WASHINGTON, DC—Senator Joe Lieberman (I-CT) today issued the following statement in response to the Office of Budget and Management Director Jacob Lew’s letter concerning funding for the continued development of an alternate engine for the Joint Strike Fighter for the duration of the continuing resolution passed by the Senate:
“It is unconscionable that while the Air Force and Navy struggle to sustain their essential programs under the constraints of a continuing resolution, the administration could be forced to waste one more dollar on this unnecessary second engine for the Joint Strike Fighter. I will continue to fight to terminate the alternate engine during the term of the CR and when the Senate considers a measure to fund the government for the rest of 2011.
“The representations made in Director Lew’s letter to Senator Brown contradict OMB’s own guidelines about funding programs under a continuing resolution and is inconsistent with the strong opposition of President Obama and Secretary Gates to this second engine. I will ask Director Lew to reconsider based upon those guidelines.”
NewAlliance First Niagara to drop 50 jobs
NewAlliance Bancshares and First Niagara Financial said Monday if their merger is completed 50 jobs will be cut and the new bank will have a $1 billion loan fund for community reinvestment.
The proposed merger has come under fire from the Mayor of New Haven and outgoing Attorney General Richard Blumenthal. The pair have expressed concern about jobs and community involvement as First Niagara is based in Buffalo, N.Y.
Here’s the press release from the banks:
First Niagara and NewAlliance Detail CRA Investments and
Workforce Plans for New England Following the Banks’
April 2011 Merger
NEW HAVEN, Conn., December 20, 2010 – As First Niagara Financial Group, Inc. (Nasdaq: FNFG) and
NewAlliance Bancshares, Inc. (NYSE: NAL) continue the process of preparing for merger completion
and integration in April 2011, pending regulatory and shareholder approval, the banks today jointly
announced additional details on Community Reinvestment Act (CRA) investments and workforce plans.
COMMUNITY REINVESTMENT ACT INVESTMENTS
The banks jointly announced their five-year plan to invest more than $1 billion in CRA and other
economic development initiatives within NewAlliance’s legacy market.
As indicated when their merger plan was first announced in August, the banks will continue the
outstanding record of NewAlliance in its legacy markets by perpetuating key programs and investments in
areas such as small business lending, residential lending in low- to moderate-income census tracts, and
community development lending.
“NewAlliance’s outstanding CRA program has served the region well,” said First Niagara President and
Chief Executive Officer John R. Koelmel. “We intend to build on past successes and take the very best
elements from each of our banks’ robust CRA initiatives to continue making a positive difference in the
communities we serve, not only in Connecticut and Massachusetts, but wherever we do business.”
First Niagara and NewAlliance’s CRA plan, to be implemented upon completion of the merger, includes
the following:
• $750 million in small business loans including doubling Small Business Administration (SBA)
loans to qualified loan applicants
• $250 million in low- to moderate-income lending, including a $30 million loan pool with special
rates and reduced fees
• $100 million in community development loans, with a focus on revitalizing low- and moderateincome
areas and, where possible, expand community related programs
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• $7.5 million in First Niagara Foundation funding to support nonprofit and charitable
organizations
• $4.5 million for community and economic development, education and youth programs
• $2 million for community sponsorships, local branch support and regional events
In addition, as previously announced, the NewAlliance Foundation will fulfill the $6.7 million balance of
its $25 million commitment to the First City Fund. Upon completion of the merger, the NewAlliance
Foundation itself will be independent from the combined banks.
WORKFORCE PLANNING
The workforce plan calls for a net reduction of 50 positions in 2011, or 4 percent of NewAlliance’s
current 1,200-employee workforce. As previously announced, First Niagara anticipates its workforce in
New England will return to NewAlliance’s current employment levels by the end of 2012 as the bank
implements its growth strategy in the region.
While First Niagara and NewAlliance expect up to 230 back-office and support positions at the New
England bank to be impacted by workforce reduction and consolidation next year, the banks also plan to
create about 180 new customer-facing positions in the region in 2011. Half of the impacted back-office
and support positions are located in New Haven and with the balance in Manchester and other
NewAlliance back-office locations.
The banks have been communicating departmental-level workforce plans with teams of NewAlliance
employees since the beginning of November, more than five months ahead of next year’s anticipated
merger completion date. Of the 230 impacted employees, 60 employees have already elected to take
severance, retire or pursue opportunities outside the bank rather than apply for new positions within First
Niagara, leaving employees in roughly 65 positions in New Haven, 95 positions in Manchester and 10
positions in other locations without permanent positions with First Niagara. However, alternatives are
still being investigated for these 170 employees.
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“The decision to eliminate even one job is a difficult one, and we’ve used the last four months to work
closely with our colleagues at NewAlliance to develop a workforce plan that minimizes the impact on
employees,” Koelmel said. “The creation of many new customer-facing positions in NewAlliance’s
legacy market, combined with normal attrition and retirements, will further minimize the number of
positions impacted by the merger.”
No changes will be made to the NewAlliance workforce until after completion of the transaction
anticipated in April 2011, and effected employees will receive severance compensation and be eligible for
outplacement counseling and services.
The 180 new positions in 2011 will reposition the banks’ workforce in Connecticut and Massachusetts to
be more heavily focused on retail and commercial banking services, in order to drive the combined
institutions’ growth in New England. The newly created positions will include senior commercial
lending, cash management, retail management and other professional banking roles, in addition to some
branch personnel. More customer facing employees will enable the banks to expand branch hours,
implement First Niagara’s sales model in New England, and provide enhanced capabilities in middle
market and commercial real estate lending as well as cash management services.
First Niagara also reported that a national search firm, Korn/Ferry International, has been actively
recruiting for the newly created position of New England regional president. An initial slate of candidates
has been identified and first round interviews have started. In the meantime, First Niagara Executive Vice
President Frank J. Polino is leading the merger’s Transition Team.
All 88 NewAlliance locations will remain open after the merger and no branch positions will be impacted
by the workforce plans announced today. In addition, the NewAlliance Bank Building on Church Street
in New Haven will become the financial institutions ’ New England Regional Market Center.
About NewAlliance Bancshares
NewAlliance Bancshares is a New Haven, Connecticut headquartered regional banking and financial
services company and the parent company of NewAlliance Bank, the third largest bank headquartered in
Connecticut and fourth largest headquartered in New England. NewAlliance Bank has a network of 88
branches in Connecticut and western Massachusetts with assets of $8.8 billion. NewAlliance Bank
provides a full range of consumer and commercial banking products and services, trust services and
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investment and insurance products and services. The bank’s website is at www.newalliancebank.com.
Shareholders are encouraged to monitor the investor relations section of the company’s website.
About First Niagara Financial Group
First Niagara Financial Group, Inc., through its wholly owned subsidiary, First Niagara Bank, N.A., has
$21 billion in assets, 257 branches and $13 billion in deposits. First Niagara Bank is a multi-state
community-oriented bank with about 3,800 employees providing financial services to individuals,
families and businesses. Upon completion of its pending merger with NewAlliance Bancorp, Inc. –
subject to customary closing conditions including approvals from regulators and shareholders — First
Niagara will have more than $29 billion in assets, $18 billion in deposits and 340 branches across Upstate
New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.fnfg.com.
Additional Information for Stockholders
In connection with the proposed merger, First Niagara Financial Group, Inc. (“First Niagara”) has filed
with the SEC a Registration Statement on Form S-4 that includes a Joint Proxy Statement/Prospectus for
NewAlliance Bancshares, Inc. (“NewAlliance”) and First Niagara, as well as other relevant documents
concerning the proposed transaction. NewAlliance and First Niagara have mailed the definitive Joint
Proxy Statement/Prospectus to stockholders of NewAlliance and First Niagara (which mailings were first
made on or about November 5, 2010). Stockholders are urged to read the Registration Statement and the
definitive Joint Proxy Statement/Prospectus regarding the merger and any other relevant documents filed
with the SEC, as well as any amendments or supplements to those documents, because they contain
important information. You may obtain a free copy of the definitive Joint Proxy Statement/Prospectus, as
well as other filings containing information about First Niagara and NewAlliance at the SEC’s Internet
site (http://www.sec.gov). You may also obtain these documents, free of charge, from First Niagara at
www.fnfg.com under the tab “Investor Relations” and then under the heading “Documents” or from
NewAlliance by accessing NewAlliance’s website at www.newalliancebank.com under the tab
“Investors” and then under the heading “SEC Filings.”
