AIG chief Edward Liddy endured his anticipated ritual flaying today by Capitol Hill lawmakers angered by those bonuses. But, as Josh has been writing about over at TPM, there's mounting evidence that some current and former AIG execs could have much more to fear than angry questions from Gary Ackerman when all is said and done.

Since at least June 2008, the Justice Department has been investigating (sub. req.) whether AIG intentionally -- and criminally -- overstated the value of its credit default swaps, hiding its dire position from investors and government regulators. Joseph Cassano -- who during the period at issue ran AIG's financial products unit, AIGFP, which made those disastrous swaps, out of a London office -- has reportedly hired a lawyer in connection with that investigation. Britain's Serious Fraud Office is said to be on the case as well.

So here at TPMmuckraker, we've spent much of today taking a close look at the reams of evidence contained in news reports, documents submitted to congressional investigations, SEC filings, and civil lawsuits filed by AIG shareholders -- one of which charges that Cassano "hid AIGFP's ballooning exposure from public markets and short-circuited alarms within the AIG organization." And from this mass of data, a clear picture emerges in which Cassano -- aided by other AIG execs, who appear to have given his AIGFP unit broad autonomy within the company -- repeatedly downplayed the risks his unit faced, publicly painting a rosy picture that was at odds with reality. Perhaps most egregiously, he actively shut out voices -- primarily those of AIGFP's own internal and external accountants -- that highlighted potential problems at the unit.

Here's a rough, and far-from-comprehensive, timeline of events that begins to suggest a level of deliberate fraud and deception on a level that goes beyond what's generally been acknowledged so far.

- 2004: AIG pays $80 million to settle criminal charges brought by the Justice Department against Cassano's unit, AIGFP. The unit had been charged with securities fraud for allegedly helping PNC Financial improve its reported financial results by shifting about $750 million in assets off PNC's balance sheet, in return for lucrative fees. AIG admits to engaging in transactions that violated accounting rules, and signs a deferred prosecution agreement with DOJ, meaning it has to be on its best behavior to avoid charges. The episode suggests that Cassano and AIGFP were, at best, happy to cut corners in the pursuit of profits. (Wall Street Journal, June 2008)

- Late 2005: AIGFP execs, worried about loosening lending standards in the subprime-mortgage market, decide to stop selling credit protection on certain swaps, partly due to "concerns that the model was not going to be able to handle declining underwriting standards," according to one AIG risk expert. In other words, Cassano and his colleagues were aware of the risk even at this early stage. (Wall Street Journal, October 2008)

- Mid 2007: Cassano is still providing assurances that AIGFP's accounting is on the level. Referring to the PNC episode from 2004, Cassano says publicly: "We made some mistakes in those transactions and we suffered dearly for that ... [T]hat was the only accounting driven transaction we've ever done." Cassano added that AIGFP had instituted new controls to prevent a recurrence of the problem.

- Aug 9, 2007: Referring to credit default swaps, Cassano tells investors: "It is hard for us, and without being flippant, to even see a scenario, within any kind of realm of reason that would see us losing $1 in any of those transactions....we see no issues at all emerging. We see no dollar of loss associated with any of that businesss."

- Aug 13, 2007: Summarizing those comments, the Wall Street Journal reports: "Exotic financial instruments linked to subprime mortgages are showing huge losses in debt markets and weighing on companies from lenders to banks to insurers. But not at American International Group Inc. -- or so it's executives say." In other words, Cassano's representations to investors achieved their goal of reassuring the press and public that AIG was doing fine. (Wall Street Journal, August 2007)

- August 2007: Cassano berates Joseph St. Denis, AIGFP's in-house accountant, for discovering accounting irregularities in a target company's hedge accounts. St. Denis had been brought in specifically to address problems in AIGFP's accounting cited by an auditor. (Letter from St. Denis to House Oversight committee)

- Sept 2007: Cassano tells St. Denis: "I have deliberately excluded you from the valuation of the Super Seniors [ CDS's] because I was concerned that you would pollute the process." St. Denis later told Congress he had no involvement in the process of valuing the CDS portfolio, because Cassano worked to exclude him from that process. (St. Denis letter.)

- Oct 2007: St. Denis resigns. He would later explain to Congress: "I resigned because on multiple instances beginning in the late summer of 2007, Mr. Cassano took actions that I believed were intended to prevent me from performing the job duties for which I was hired." (St. Denis letter)

- Nov 6, 2007: Michael Roemer, AIG's chief auditor, informs the firm's audit committee of the reasons St Denis gave for his departure. (St. Denis letter)

- Nov 29, 2007: Accountants for PriceWaterhouse Coopers (PWC), AIG's outside accounting firm, inform AIG CEO Martin Sullivan of their belief that the company has material weaknesses related to the credit default swaps, which could result in future errors on income statements or dislcosures. PWC later said that AIG was not interested in fully understanding the impact of the collateral disputes that at this point had been set off with AIG's counter-parties.

- December 2007: Cassano, preparing for an upcoming presentation to investors about potential losses associated with the credit default swaps, tells PWC accountants not to interfere.

- Dec 5, 2007: At that meeting, Sullivan and Cassano assure investors that everything's fine. Sullivan: "AIG has accurately identified all areas of exposure to the US residential-housing market ... we are confident in out markets and the reasonableness of our valuation methods. Cassano: "It is very difficult to see how there can be any losses in these portfolios." These statements, in particular, would later be looked by federal investigators as evidence of possible fraud.

- Jan 2008: In an audit opinion included in an SEC filing, PWC accountants write that AIG did not maintain "effective internal control over financial reporting" related to its credit default swaps. They assert that "there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. (AIG SEC filing).

- Feb 26, 2008 -- In what appears to be an effort to absolve itself of responsibility, PWC accountants declare at an Audit committee meeting, that AIGFP alone conducted the process of valuing 4th quarter assets.

- Mar 31, 2008: Cassano "retires" with million dollar a month consulting contract and a $34 million golden parachute. According to one investor lawsuit filed in January, Cassano had earned $280 million over the previous 8 years -- more than AIG's CEO.

- June 13, 2008: In a statement put out in response to news of the DOJ investigation, AIG declares, "As is the case throughout AIG, our colleagues [in the financial-products division] have been rigorously focused on transparency and accuracy in all its disclosures. The goal is clear: make sure the numbers are right, whether it's good news or bad news." (Wall Street Journal, June 2008)