(Bloomberg) ? A former Marsh & McLennan Cos. managing director and two employees from American International Group Inc. pleaded guilty to New York Attorney General Eliot Spitzer's charges of rigging insurance bids. Marsh's Josh Bewlay, who was dismissed from the world's largest insurance broker last week, and AIG's Carlos Coello and John Mohs pleaded yesterday before New York State Supreme Court Judge James Yates. Coello and Mohs work in a liability insurance unit of AIG, Coello as an underwriter, Mohs as an assistant vice president, their lawyers said.

Spitzer, who is investigating kickbacks and collusion between insurers and brokers, has charged six other executives from Marsh, AIG, ACE Ltd., and Zurich Financial Services AG since he sued Marsh on October 14. He obtained an $850 million settlement from the brokerage last month and plans to use the pleas to build cases against more senior executives.

"You've got to give Spitzer a lot of credit," said Robert Mintz, a former federal prosecutor and current partner at Newark- based McCarter & English LLP. "He's been busy."

Bewlay, 39, and Mohs, 36, pleaded to one felony count of scheme to defraud, a charge that brings up to four years in prison. Coello, 33, pleaded to a misdemeanour charge that carries a maximum sentence of one year. All three were led out of the New York Police Department's First Precinct in lower Manhattan in handcuffs before appearing in court. Their sentences could be reduced as a result of their cooperation. The pleas describe how insurers inflated quotes as part of a phoney bidding system Marsh designed to steer business to insurers that paid it the highest fees. The system simulated competition and raised the cost of insurance, Spitzer said.

Insurers participated to hold onto their clients and maintain a good relationship with Marsh, Spitzer said. Marsh chose which insurer would get a piece of business and typically protected the incumbent by instructing competitors to submit more expensive bids, according to court documents.

Bewlay, who had worked for Marsh since 1991, told the judge he "personally solicited losing quotes on a number of occasions." He said he sought to cover up the arrangement when Spitzer began his investigation by inaccurately describing the false bids as alternative quotes.

Marsh had a "protocol designed to prevent Marsh's clients from obtaining accurate information" about the amount of fees the company received from insurers, Bewlay said. The protocol required "multiple layers of inquiry" by clients and "significantly understated" the fees when clients demanded a response. Marsh eliminated the fees, which brought in $845 million of revenue in 2003, after Spitzer said they were tantamount to kickbacks. Marsh spokeswoman Barbara Perlmutter had no immediate comment.

AIG, the world's largest insurer, said in a statement today that Mohs and Coello worked under Karen Radke and Jean-Baptist Tateossian, who pleaded guilty in October. All four worked for American Home Assurance, a unit that sells commercial liability policies for large losses.

"AIG takes this matter very seriously and deeply regrets that some of its employees were involved," AIG said.

Coello's attorney, Nicholas DeFeis, said his client hoped to remain at AIG, while Mohs's attorney, Jeffrey Lichtman, said Mohs was on paid leave and was evaluating his options.

"John is accepting full responsibility for his conduct and is doing all he can to right his wrong," Lichtman said. In addition to Radke and Tateossian, 33, executives charged by Spitzer include: Robert Stearns, a former Marsh managing director; John Keenan and Edward Coughlin, former underwriters at Zurich; and Patricia Abrams, a former assistant vice president at ACE.

Stearns's January plea agreement mentions Bewlay as having instructed Stearns to request fake quotes from insurers. Bewlay worked at Marsh Global Broking, a unit that the company has since disbanded. Bewlay ran the excess casualty insurance business, which helps companies find liability policies for large losses, he told the judge. He surrendered his insurance brokers license in the plea agreement.

Spitzer's October suit against Marsh prompted the company to remove chief executive Jeffrey Greenberg and at least three other senior executives. The company apologised for its employees' conduct in last month's settlement.