BOSTON: A multimillion-dollar billing dispute involving scandalized former AIG head Maurice "Hank" Greenberg is shining light on a rarely seen business model in which respected academic figures allegedly sold their intellectual endorsements for hefty fees through front groups.
The case centers on a lawsuit filed March 7 by eSapience, a Boston-based firm that describes itself as "a media and research entity that shapes the debate on issues that intersect law, economics, and policy." The top two executives at eSapience are David Evans, a professor at University College London, and Richard Schmalensee, dean of the Massachusetts Institute of Technology's Sloan School of Management. Richard Epstein, a prominent professor at the University of Chicago Law School, also worked for Greenberg on behalf of eSapience.
The firm is suing C.V. Starr & Co., the insurance company where Greenberg took over as CEO after being pushed out by AIG in 2005 while under investigation by then-New York attorney general Eliot Spitzer.
In May 2006, C.V. Starr hired eSapience to help boost Greenberg's tarnished image. The suit says the firm's goals were to "change the public conversation about Greenberg," "demystify the insurance industry," and "raise questions about the effectiveness of the current legal and regulatory environment."
The agency's plan was as ambitious as its billing rates. According to its plan summary: "Academic billing rates range from $400 per hour to $1,000 per hour. Consulting team billing rates range from $175 per hour to $600 per hour."
Over four months - from August to November - eSapience billed a total of $2.3 million to C.V. Starr for work on its account. When the company balked, paying only $254,000, the firm proceeded to sue for the balance.
Sarah Lubman, a partner at Brunswick Group who is now serving as C.V. Starr's spokeswoman, said, "C.V. Starr did hire eSapience as a PR adviser, and the relationship ended after several months, and there's now a billing dispute." She declined to comment further, but did say Brunswick has been working with C.V. since September.
ESapience set up two think tanks as front groups to serve as "channels for [C.V.] Starr's and, in particular, Greenberg's benefit," the suit alleges. One, the eSapience Center for Law and Business, was headed by Epstein. The other, The Barbon Institute, was chaired by Schmalensee. Both sponsored events last September: at one, David Boies, Greenberg's attorney, gave a speech that "addressed a number of themes of direct relevance to Greenberg's legal situation," per the suit; at the other, Greenberg himself gave the keynote address on insurance issues.
Calls to Evans and Schmalensee were referred to their attorney, Sharon Burger, who declined via a secretary to comment on the case. A call to Epstein was not returned.
In August, C.V. Starr hired Harry Clark, MD of Stanwich Group, to oversee Greenberg's reputational effort. Clark told PRWeek he advised the company to quit working with eSapience.
"[After September], I had made it quite clear to eSapience that their plans were much too ambitious and were not consistent with the best interests of C.V. Starr," Clark said. "For the money that they were intending to charge, the value of that effort was not even close to what I thought that same money could be used for on other efforts."
Much of that money, he said, was planned to "keep academics on retainer" to continue producing content for The Barbon Institute so it would retain its credibility. Clark said that would've benefited eSapience much more than C.V. Starr.
The case is also notable for the way in which eSapience brazenly touted its ties to respected academic institutions as a selling point that could be leveraged on behalf of paying clients. In its plan summary, the firm promised to "leverage our relationships with important and highly credible channels, including [think tanks], MIT, University of Chicago Law School, and The Federalist Society, among others. Those organizations will work with us to host conferences... co-author papers" and on other work.
None of the named institutions apparently took the promised actions. Paul Denning, director of media relations for MIT's Sloan School, said it had no connection to eSapience and referred further questions to Burger.
The eSapience Web site had no current reference to the Center for Law and Business, and the Barbon Institute Web site was down at press time.