Aon deceptive too

n six months of examining documents from insurance companies and brokers, investigators for the New York attorney general have discovered evidence at the Aon Corporation of deceptive and coercive practices, a person close to the inquiry said yesterday.

Until now, the sweeping investigation by Eliot Spitzer, the attorney general, has centered on Marsh & McLennan Companies, the world's largest broker, with headquarters in New York. In a civil lawsuit nearly two weeks ago, Mr. Spitzer accused Marsh of cheating customers by faking bids, fixing prices and steering business to the highest-paying insurance companies.

Investigators are pushing to complete their work on Aon, the world's second-largest broker, with headquarters in Chicago, and could bring a civil lawsuit against the company within two weeks, said another person who has been briefed on the case.

The investigators are also expected to file lawsuits shortly against some smaller national insurance brokers, this person said. Mr. Spitzer's accusations against Marsh and criminal charges that he brought against two executives of the American International Group and one executive of Ace Ltd. have shaken the insurance industry and investors. The stock prices of all big insurance brokers and insurance companies have fallen sharply, and several attorneys general and insurance regulators across the country have started or widened separate investigations.

On Friday, shares of Aon rose 54 cents, or 2.8 percent, to $19.80 on the New York Stock Exchange; they were trading at about $28 a share two weeks ago.

The discovery of improprieties at Aon broadens Mr. Spitzer's investigation to a company that, along with Marsh, dominates the insurance brokerage business. Together, they control more than 70 percent of the market.

At Aon, the person close to the case said, investigators have found documentation of brokers steering business to insurers that paid the company incentives. They also found another anticompetitive practice known as tying, a kind of pay-to-play arrangement in which brokers threaten to curtail sales for an insurance company unless the insurer lets the broker also arrange its own coverage needs or reinsurance. Fees on reinsurance, which insurers buy to reduce their risk, can run into the tens of millions of dollars.

Both steering and tying can violate New York's fraud and antitrust laws and apply to anyone doing business in the state. Though Aon is based in Chicago, it has offices in New York, which is an important center for the insurance industry. Its founder, Patrick G. Ryan, announced late last month that he would be stepping down as chief executive after running the company for 40 years, but he gave no indication of when he planned to move on.

Gary Sullivan, a spokesman for Aon, declined to comment yesterday.

While the investigators have found what they regard as antitrust violations at Aon, they so far have found no evidence of bid rigging and price fixing, people briefed on the case said.

Bid rigging and price fixing are the most serious accusations to arise thus far in the investigation because they are clearly defined antitrust violations that can also result in criminal charges, legal experts said. Steering and tying can also be against the law, the experts said, but they involve certain issues of judgment by the courts. These include the possibility that a company paying the highest incentive also provided the best deal to a customer and, in tying arrangements, the degree to which an insurance company was actually pressured to comply or acted in what it perceived to be its own best interests in anticipation of pressure.

"Bid rigging and price fixing are an absolute per se violation of antitrust laws," said John Coffee, a Columbia University specialist on securities law. "Steering and tying are in a gray area."

Insurance executives and analysts have been anticipating that Aon would be the next target. Marsh arranges the insurance coverage for about 40 percent of corporate America, and Aon handles 30 percent. Between them, they have enormous purchasing power that enables them to compel insurance companies to meet their demands or risk losing business, industry experts said.

"Anytime you have this much market power concentrated in the hands of such a small number of brokers, the pure competition that is supposed to occur in the free market is stifled," said Paul Equale, a Washington consultant. He is the former chief executive and chief lobbyist for the Independent Insurance Agents and Brokers of America, one of the industry's largest trade groups whose members mainly sell commercial insurance to small and medium-size businesses around the country as well as home and auto insurance.