More woe for AIG: Exec probed for fraud
Prosecutors are investigating Joseph Cassano, former head of AIG’s financial products unit, to discover whether he had lied to investors and auditors on subprime-related losses, insiders told Bloomberg.
Prosecutors are investigating Joseph Cassano, former head of AIG’s financial products unit, to discover whether he had lied to investors and auditors on subprime-related losses, insiders told Bloomberg.
The investigators are looking into memos written in the fall of 2007 by auditors at PricewaterhouseCoopers LLP of New York, people familiar with the probe told Bloomberg.
The memos discussed how Mr. Cassano and other American International Group Inc. executives valued credit default swaps backing some $62 billion in mortgage-backed securities, according to those insiders.
The U.S. Attorney’s Office for the Eastern District of New York in Brooklyn, and the Justice Department are collaborating with the Securities and Exchange Commission to find out whether executives of New York-based AIG made poor choices or committed crimes, the insiders said to Bloomberg.
AIG’s trail of tears goes back to November 2007, when PricewaterhouseCoopers told Martin Sullivan, then chief executive of the New York-based insurer, that auditors were challenging the firm’s financial controls.
In December 2007, Mr. Sullivan and Mr. Cassano reassured investors about losses on the insurer’s book of super-senior credit default swaps, which had fallen by $1.1 billion in October and November of that year.
Mr. Cassano said that those losses would “come back,” according to Bloomberg.
Losses on the contracts zoomed up to $26.1 billion by June, when AIG’s board booted Mr. Sullivan from its helm.
To date, the insurer has picked up more than $150 billion in federal aid.
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