Five years after investors filed suit over loses they say were linked to the company failure to disclose illegal practices, Marsh & McLennan Co. has reached a settlement.

The New York-based insurance brokerage announced it will pay $400 million to end a securities class-action suit filed in 2004 in the U.S District Court for the Southern District of New York.

The settlement, subject to final court approval, would settle all the claims in litigation against Marsh and employees named in the suits.

Of the $400 million, $205 million is expected to be covered by insurance, according to the company. Marsh announced it will use cash on hand to fund the remainder of the settlement.

The suit was filed in October 2004 in New York on behalf of shareholders who held stock in the firm between Oct. 14, 1999, and Oct. 13, 2004. The lead plaintiffs in the case were state pension fund holders in New Jersey and Ohio.

The company also reached a separate settlement, filed in the same court, on a 2004 lawsuit alleging Employee Retirement Income Security Act (ERISA) violations for $35 million, $25 million of which will be covered by insurance.

In a statement, Marsh said it believes “these settlements to be in the best interest of the company and its stockholders.

“While the company continues to deny all of the claims in these lawsuits, the resolution of these matters puts the litigation arising from the events of 2004 largely behind us and reduces the company’s ongoing legal costs,” the statement said. “MMC is focused on the future and further strengthening its world-class businesses.”

Anne Milgram

In a separate statement, New Jersey Attorney General Anne Milgram said that the estimated recovery from the settlement is 77 cents per share, with her state and Ohio also each receiving expenses as co-plaintiffs in connection with the filing, pending court approval.

“This is a substantial agreement that settles the claims we raised against Marsh in our suit to recover investment funds lost by our pension fund,” Milgram said in a statement. “We also believe the settlement best serves the interests of class members.”

Ohio Attorney General Richard Cordray said Marsh “harmed the investments and retirement benefits of workers in Ohio and across the country” through a “massive fraud …built on unethical and illegal practices and violated the best interests of clients and shareholders alike.

“By serving as counsel to the lead plaintiff in the case, we were able to make sure that Marsh is held accountable and that workers, families and investors, including many in Ohio, are compensated for their losses,” he said in a statement.

The suit alleged that Marsh made false and misleading statements in its public filing and other public communications in connection with “contingent commissions” from insurers, a practice subsequently banned.

Published reports indicate that Marsh, Aon and Willis Group Holding, who all reached settlements with Spitzer’s office to end the practice, may be seeking to end that prohibition. Arthur Gallagher & Co., which also reached a settlement years ago, recently reached a deal with Illinois regulators to end their ban of contingent commissions.

The plaintiffs in the Marsh case alleged that the firm violated federal securities laws by misrepresenting the nature of its contingent commission revenue. The price of Marsh stock subsequently dropped significantly when information was disclosed correcting the alleged misrepresentations and omissions.