Hartford Financial Services Group Inc. has settled with both the Connecticut and New York attorneys general over its use of expense kickback agreements with brokers selling certain types of group annuities.
Under the agreement, Hartford will pay $20 million, including more than $16 million to plan sponsors that bought terminal or maturity funding group annuities between Jan. 1, 1998, and Dec. 31, 2004. The two states will split the almost $4 million remaining equally.
The state officials charged Hartford with paying millions of dollars in hidden compensation to four brokers to steer pension plan business to the company.
“The Hartford paid secret kickbacks to brokers who steered pension plan business and undercut the competitive bidding process, raising the pension plan’s costs,” said Connecticut Attorney General Richard Blumenthal in a statement.
In addition to paying normal commissions on sales of these products, Hartford acknowledged it had a hidden expense payment agreement with four producers, Dietrich & Associates Inc., Brentwood Asset Advisors, USI Consulting Group and BCG Terminal Funding.
The practice raised costs for a number of pension plans, including Crown Vantage Inc., Tenet Health System, G.E. Consumer Finance and Kuehne & Nagel, according to Blumenthal.
New York Attorney General Eliot Spitzer said other pension plans hurt by the scheme included Montgomery Ward Co., Benetton Sportsystem USA Inc., PricewaterhouseCoopers and Mt. Sinai Medical Center of Florida.
As part of the settlement, Hartford will accept a three-year ban on paying contingent compensation for terminal or maturity funding group annuities.
The company also apologized to plan sponsors for failing to provide full disclosure of the compensation it paid brokers who sold the group plans.
“Resolving this matter was important for our company,” said Hartford’s chairman and CEO Ramani Ayer. “We have cooperated fully with regulators during their investigations and will continue to do so.”