The victims were mostly large corporations who were deceived into buying property and casualty coverage that may have cost more, but also included small and midsize businesses, municipal governments, school districts and individuals, Spitzer said.

Spitzer announced the civil suit against Marsh & McLennan Cos. of New York, the nation's leading insurance brokerage firm, accusing it of steering clients to insurers for lucrative payoffs under long-standing agreement.

The firm collected $800 million in so-called contingent commissions in 2003 alone, investigators said. Spitzer also accuses the company of soliciting rigged bids for insurance contracts. The practices go back to at least the 1990s, he said.

Some of the nation's largest insurance companies including New York-based American International Group Inc., ACE Insurance Co. of North America based in Philadelphia, The Hartford and Munich American Risk Partners are accused in Spitzer's suit of steering contracts and bid rigging. He said other insurance companies are being investigated.

Leaders of three of the companies have close family ties. Maurice Greenberg heads AIG, his son Jeffrey is chief executive officer of Marsh & McLennan and another son, Evan, is president and chief executive of ACE and was formerly chief executive of AIG from 1997 to 2000, according to Hoovers.com.

Shares in the companies fell sharply on the news, with Marsh losing more than 24 percent of their value.

Marsh issued a statement saying it is cooperating with Spitzer and was unaware of the charges until they were announced.

"We are committed to getting all the facts, determining any incidence of improper behavior, and dealing appropriately with any wrongdoing. This is our highest priority. Marsh is committed to serving its clients to the highest professional and ethical standards as demonstrated by its long history as the industry's leader."

Spitzer said that when he first contacted Marsh executives they said, "don't waste your time."

Two executives at AIG are the first charged in the probe. Karen Radke, 42, a senior vice president of an AIG division, and co-worker Jean-Baptist Tateossian pleaded guilty yesterday to felony charges of scheming to defraud in state Supreme Court in Manhattan. They face a sentence of up to four years in prison, but it would depend on how much more they cooperate, Spitzer said.

"We are saddened by this news because we hold ourselves to the highest ethical standards," AIG said in a statement. The company said it has sought guidance on the commissions from the state Insurance Department. "Any breach of those standards is unacceptable. We take these charges seriously and will continue to cooperate (with the attorney general's office)."

After the court appearance, Spitzer appeared angry at a New York City press conference, saying the scheme raises everyone's insurance premiums.

"The damages are vast, the corruption is remarkable," Spitzer said. "I don't know how far up we will establish criminal liability, but those who are implicated will face criminal charges."

Spitzer bases part of his insurance industry probe on internal e-mails and memos, in which he said insurance executives openly discussed actions that were aimed at maximizing Marsh's revenue and insurance companies' revenues, without regard to clients' interests.

One Marsh executive said in a memo that the amount of commissions would determine "who (we) are steering business to and who we are steering business from," according to Spitzer.

In some cases, Spitzer said, companies provided false and inflated quotes to help another in the scheme win a bid, with the idea that a subsequent bid would be steered to them.

The Hartford is cooperating fully, said company spokeswoman Cynthia Michener.