Marsh Mac share scheme perk costs UK staff dear

Hundreds of employees of Marsh & McLennan in the UK are to be hit by a financial double whammy as a result of the investigation into the insurance giant by New York Attorney General, Eliot Spitzer.

Hundreds of employees of Marsh & McLennan in the UK are to be hit by a financial double whammy as a result of the investigation into the insurance giant by New York Attorney General, Eliot Spitzer.

The announcement of the probe last month sent Marsh Mac's shares tumbling from over $46 to under $25. They closed on Friday at $27.60.

The share price collapse could not have come at a worse time for UK-based employees, as it coincided with the annual awards of stock in the group's share save scheme. Under the scheme, employees save in a special account and can then use the money to buy shares at a discount to the market price.

This sale takes place once a year in early October. Marsh Mac's shares were sold to employees at around $43 each.

A few days later Mr Spitzer announced he was probing the company and the shares collapsed. Employees who had bought in the share scheme lost nearly half their money. To add insult to injury, this month they will have to pay tax on the deal as the discount is deemed to be a taxable benefit.

The US investigation has led to the resignation of the group's chief executive, Jeffrey Greenberg, general counsel, William Rosoff and four senior executives linked to allegations of market rigging and corruption.

Bruce Carnegie-Brown, the head of Marsh Mac's UK operation, has hired lawyers Freshfields to investigate whether there were any improper financial arrangements in the UK market. The report is due by the end of this month.

Despite the Financial Services Authority saying it had no problem with the practice, Marsh Mac is to stop collecting any payments from insurers and underwriters under so-called market service arrangements. These were worth $840m (£450m) to the group last year, $200m of which was from the UK insurance market.

Marsh Mac will now seek to replace this income. This may be by charging insurers and underwriters for services such as drafting policies or providing specialist information.