AIG's Collapse: Was It Criminal?

CBS News is reporting that the Justice Department has opened a criminal investigation into AIG’s downfall:

Sources say investigators are digging into whether Joseph Cassano, the former head of London-based AIG Financial Products, and two of his top deputies - Andrew Forster, an executive vice president, and Thomas Athan, a managing director - committed securities fraud or other federal crimes…

At issue: whether they intentionally provided false information about the size of AIG’s losses in the mortgage-backed securities market to the public and auditors.

The story also noted that Forster and Athan were among bonus recipients two months ago, though the two are “negotiating” a way to pay them back. Continuing…

CBS News has learned investigators are honing in on statements like one in a September 30, 2007, quarterly report, where: AIG said potential accounting losses tied to its Cassano’s unit, known as AIGFP, were $352 million. And the company said it was “highly unlikely..{it} will be required to make payments.” To clients, it was an indication the company was saying it was healthier than it actually was.

Also under scrutiny is a November 7 press release where AIGFP upped that potential accounting loss to $550 million.

But by the end of the year the potential losses became real and devastating, ballooning to more than $11 billion.

If misleading investors about the size of impending losses is criminal, why aren’t more executives under investigation?

Comments

[1worldcurrency:]

How about the 15 billion of AIG's bailout bucks that went straight to Goldman Sachs, with Liddy on GS's Board of Directors?

Apr 28 06:50 AM

[prairiedog555:]

Isn't it amazing that the world has been defrauded of Trillions of dollars and countless lives shattered and NO ONE has been held accountable.

And the Dem's are preoccupied with looking in on CIA interogation techniques that really amount to prisoner discomfort.

Barney Frank Chris Dodd should be prosecuted. They took money from the organizations they were regulating.
I mean you have to laugh, is there no shame in Washington?

Apr 28 09:00 AM

[IMWatchingU:]

Magicians. Pure and simple. Watch these issues on this hand but don't watch the other. Washington is so worried about the prisoners so that we will not see their own failings. Just a game. Keep focused. Those 500 prisoners didn't cause of the collapse of the world financial markets.

The financial destruction of the world is not the hands of any one financial institution, group, or individual. Still, it is the individual and their choices that created the house of cards from pure greed. It is only a matter of time for some of these individuals be brought up to account for their actions. IF their actions are within the laws, you know the lawmakers will get involved. As investors, we has the responsibility to punish these companies by avoiding their stock like the plague until management changes policy and executives and boards are REPLACED.

Apr 28 10:44 AM

[wakeup call:]

As stated earlier Goldman is too powerful to be prosecuted. There have been numerous articles tying the Goldman pieces together that ultimately led to the AIG collapse but Washington has not taken a single action and shows no inclination to do so. Washington has been rife with tax cheats, amnesia of convenience and "hollier than thou" rhetoric and that's just our elected officials. Chasing Cassano might be worth while but once the AIG board sent an auditor to AIGFP review CDS valuation, Cassano refused to let him see the books and the auditor reported this to the Board, the lack of action by the board became the major problem. Once Sullivan and Bensinger (former CEO and CFO) signed off on the financial statements for AIG they became responsible to the shareholders for any inaccuracies in those financials.

Does anyone really want all the ugly details on what went on at AIG because it might shed too much light on how Goldman was the ultimate beneficiary? Bringing us back to the original comment that Goldman is too big to prosecute.

Anyone want to start a new reality show titled "Where in the World is Henry Paulson"?

Apr 28 11:13 AM

[pimaCanyon:]

would you like to volunteer to submit to these methods of "prisoner discomfort"? After they have all been used on you for several months, then and only then, will you be able to say whether they were prisoner discomfort or outright torture.


On Apr 28 09:00 AM prairiedog555 wrote:

> Isn't it amazing that the world has been defrauded of Trillions of
> dollars and countless lives shattered and NO ONE has been held accountable.
>
>
> And the Dem's are preoccupied with looking in on CIA interogation
> techniques that really amount to prisoner discomfort.
>
> Barney Frank Chris Dodd should be prosecuted. They took money from
> the organizations they were regulating.
> I mean you have to laugh, is there no shame in Washington?

Apr 28 12:02 PM

[pfin:]

Your article ends with "If misleading investors about the size of impending losses is criminal, why aren’t more executives under investigation?"
I agree with your conclusion, but that cannot be a reason not to pursue those responsible for the bigger and more pervasive problems. In society, many individuals and institutions are responsible for negative outcomes of different level of gravity and impact. In the case of the financial crisis, the punishment should be also for those mortgage brokers that pocketed commissions from unsustainable loans. However, it is impossible even for a sound legal system, to investigate and pursue all. In case of AIG, the behavior caused too much distress. It is therefore natural for them to be held accountable before others.

Apr 28 12:40 PM

[infp:]

While I welcome criminal investigations of AIG executives I think that this will largely be a sideshow to appease an angry public. The real scandal of the credit crisis is that the wild excesses of the derivatives market were largely legal. Wall Street executives know that there is no reason to break the law when you can simply direct a compliant politician to change the law on your behalf.

Apr 28 12:43 PM

[Between The...:]

"If misleading investors about the size of impending losses is criminal, why aren’t more executives under investigation?"

Well, we did investigate Ken Lewis, CEO BofA - but of course he blamed Bernake and Paulson. AIG execs could blame Geithner, and everyone can find a scapegoat. As long as they are political appointees in the executive branch "acting the best interest of the country", then no one will face any consequences (save the Federal Government's Balance Sheet).

Apr 28 06:36 PM