AIG

AIG: Our CEO Didn't Know Enough To Testify About What He Testified About

Zachary Roth | May 13, 2009, 5:49PM

Is a cornered AIG now trying to cast doubt on a key part of CEO Ed Liddy's testimony? It sure looks that way...

In his testimony in March before Congress, Liddy was asked about the company's risk management practices concerning AIGFP, the unit of the firm that made those disastrous credit default swaps.

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Topics: AIG, Ed Liddy, Financial Crisis, Joseph Cassano, Martin Sullivan, Wall Street

AIG

Feds Zeroing In On Cassano's Valuation Of Credit Default Swaps

Zachary Roth | April 29, 2009, 12:40PM

Yesterday we told you that federal investigators are now zeroing in on two other AIG staffers, in addition to Joseph Cassano, as part of their probe into potential criminal wrongdoing at AIG. But a report (sub. req.) in the Wall Street Journal, which confirmed that information, also began to flesh out the more interesting question of just what the Feds suspect Cassano and his crew may have done wrong.

We knew that that December 2007 presentation, at which Cassano and others reassured investors that everything was basically fine, was drawing particular scrutiny from investigators. But the Journal adds some meat to that bone.

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Topics: AIG, Financial Crisis, Joseph Cassano, Martin Sullivan, Wall Street

AIG

Report: Feds Probing Two Cassano Deputies

Zachary Roth | April 28, 2009, 1:02PM

CBS News has some new developments in the criminal probe into AIG...

We knew that Joe Cassano, the former head of AIG's Financial Products unit, was in investigators' crosshairs for potentially giving misleading public statements about AIGFP's position. But the network now reports that the Justice Department is also looking closely at two of his deputies -- Andrew Forster, an executive vice president, and Thomas Athan, a managing director -- for the same reason.

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Topics: AIG, Financial Crisis, Joseph Cassano, Justice Department, Wall Street

AIG

Justice Dragging Heels On Congress's Request For AIG Docs

Zachary Roth | April 15, 2009, 9:50AM

Last month, as we noted at the time, House Oversight committee chair Ed Towns formally asked the Justice Department for records kept by a government monitor, who since 2004 has had access to high-level internal deliberations at AIG.

But DOJ seems to be dragging its heels.

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Topics: AIG, Financial Crisis, Joseph Cassano, Justice Department, Wall Street

AIG

In Letter To Liddy, Lawmaker Probes AIG Risk Practices

Zachary Roth | April 3, 2009, 5:32PM

Investigators are starting to zero in on the crucial issue of how much access AIG's risk control team had to Joe Cassano's deals.

Earlier this week, we wrote about a December 2007 presentation in which AIG execs assured investors that the firm's risk control officers looked closely at the credit default swaps made by Cassano's financial products unit. But as we noted, those assurances were contradicted last month by AIG CEO Ed Liddy, who told Congress that Cassano limited the access of the risk control team to his unit. And there's additional evidence (sub. req.) supporting Liddy's claim.

And now it looks like one Democratic lawmaker is picking up on that same discrepancy.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Greenberg: "We Had No Problem Controlling Cassano

Zachary Roth | April 2, 2009, 2:00PM

Asked about whether Joe Cassano was given a free hand at AIGFP, Hank Greenberg, the former AIG CEO who stepped down in 2005, told Congress:

I'm sorry if you can't believe it, but I'm telling you, we had no problem controlling Cassano.

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Topics: AIG, Financial Crisis, Hank Greenberg, Joseph Cassano, Wall Street

AIG

Did More AIG Execs Mislead Investors About Risks?

Zachary Roth | April 1, 2009, 2:46PM

Yesterday, we told you about how several AIG execs reassured investors at a December 2007 presentation that company risk officers had closely scrutinized the transactions of the financial products unit -- the part of AIG that made those credit default swaps. And about how several pieces of evidence have surfaced in recent months that appear to contradict those claims.

This is serious business: US and British prosecutors are already investigating former AIGFP chief Joe Cassano, and, it appears, former AIG chief Martin Sullivan, for potentially painting an unduly rosy picture of the firm's exposure to the sub-prime crash -- and are said to be focusing on that December 2007 presentation in particular. So it's worth taking a moment to lay out what exactly we know here, and what it might amount to.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Did Risk Team Look At Cassano's Deals? AIG Execs Offer Contradictory Claims

Zachary Roth | March 31, 2009, 6:42PM

We've told you that the Feds are looking at that December 2007 presentation that Joe Cassano gave for investors, to determine whether he, along with AIG CEO Martin Sullivan, knowingly gave an unduly rosy picture of AIGFP's exposure to sub-prime losses.

But a review of that presentation suggests that a few other AIG execs may also have shaded the truth, to put it mildly, on a different question.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Cassano: CDOs Are "Money Good Assets"

Zachary Roth | March 31, 2009, 5:23PM

Earlier today, we picked out some fascinating-in-hindsight excerpts from a May 2007 presentation given by Joe Cassano, then the head of AIG's financial products unit.

Since then, we've been looking at a similar presentation (via Nexis) for investors given by Cassano and other AIG execs in December of that year. By that time, the collapse of the subprime housing market could no longer be downplayed, and Cassano's appears more anxious than ever to reassure clearly nervous investors about AIG's exposure to losses on its credit default swaps.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Joe Cassano, In His Own Words

Zachary Roth | March 31, 2009, 2:41PM

How did Joe Cassano -- the man who brought down AIG, and with it, perhaps the entire global financial system, with those disastrous credit default swaps -- talk about what his unit, AIG Financial Products, was up to?

We've been looking through a presentation that Cassano gave to a group of entrepreneurs and analysts in May 2007 -- just as the extent of the collapse of the sub-prime market was becoming clear. In his speech (accessed by Nexis), Cassano detailed AIGFP's various business lines, and, of course, painted a rosy picture of the unit's future earning potential.

The entire performance has an almost poignant quality, looked at in light of the tumult that would soon befall AIGFP. (Less than nine months later, it would announce Cassano's resignation after an $11.1 billion writedown of credit-default swaps.) But we've pulled out a few of Cassano's comments that day that are particularly noteworthy...

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Topics: AIG, Bailout, Financial Crisis, Joseph Cassano, Wall Street

Joseph Cassano

All Joe Cassano Ever Wanted Was To Not Pay Taxes

Moe Tkacik | March 30, 2009, 6:54PM

The Feds are closing in on a criminal fraud case against Joseph Cassano, reports ABC News, which tracked down the former AIG Financial Products czar wearing blue spandex and a sheepish expression outside his home in London. And before you wonder why a Brooklyn College educated swaps dealer with a name like Joe Cassano lives in London again, the answer is probably "taxes" -- and decimating taxes, it may not shock you to know, is fast emerging as the cornerstone of the AIG business model.

An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.

"This is the other very important issue underneath the AIG scandal," said [tax law expert Jack] Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."

And as breathtaking as the sum of taxpayer dollars AIG has managed to put down in its post-crisis nationalized afterlife, the zombie insurer might possibly have indirectly scammed the government out of more money back in its Triple-A days. Today the Wall Street Journal explores AIG's euphemistically-named "tax structuring" business in a story about an IRS battle with Hewlett-Packard over an offshore entity -- or what the IRS terms a "sham that lacked economic substance and a business purpose" -- that AIG set up for the company to collect $132 million in tax credits. AIG's tax business, is "even bigger than the credit-default swaps business that led to the company's meltdown," a person "familiar with the business" tells the Journal. But that might be compartmentalizing things: we are beginning to suspect the credit default swap business and the tax "structuring" business were the same thing -- not just because they served the same end.

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Topics: Joseph Cassano

AIG

Wife Of London-Based AIG Exec Claims He's Aiding Federal Probes Of Cassano

Zachary Roth | March 30, 2009, 12:01PM

Following in the footsteps of martyr to truth Jake DeSantis, another AIG Financial Products exec just can't help himself from going public about how unfairly he's being treated by just about everyone from his employer, to Congress, to Andrew Cuomo. But a blog post by his wife may be even more interesting....

The blog Clusterstock has posted a long rant from London-based Paul Harriman, which originally appeared on the site Live Journal. The predictable gist: Harriman complains that without his bonus, he won't be able to afford his $10,000 a month apartment and his kids' school fees.

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Topics: AIG, FBI, Financial Crisis, Joseph Cassano, Wall Street

AIG

How Did AIGFP Shut Out Risk Officers? Congressman Wants To Know

Zachary Roth | March 27, 2009, 3:44PM

Earlier today we flagged that exchange between AIG CEO Ed Liddy and Rep. Gary Peters (D-MI), during Liddy's testimony last week.

Peters asked Liddy about AIG's how AIG's internal risk management procedures could have failed so badly. In response, Liddy said that those procedures "generally were not allowed to go up into the financial-products business" that caused the firm's collapse.

When Peters pressed Liddy on how that could be, the CEO replied:

[Y]ou need to get the people who ran FP -- Mr. Cassano -- and the people who ran AIG before my arrival, and ask them that question.

Peters clearly agrees with us that this is worth some follow up: a spokesman from his office tells TPMmuckraker that they've contacted AIG for a fuller explanation of just how the financial products unit was able to operate in such secrecy.

So you can add Peters' office to the growing list of bodies that's probing, formally or informally, various related aspects of the AIG fiasco.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Did Cassano Shut Out AIG Risk Officers?

Zachary Roth | March 27, 2009, 1:38PM

Did AIG's entire risk management team fall down on the job? Or, like the firm's auditors, were they prevented from doing it?

Yesterday we told you about Bob Lewis, AIG's chief risk officer, who still has his job despite a rather obvious failure to ensure that the firm wasn't taking on an unmanageable level of risk.

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Topics: AIG, Bailout, Financial Crisis, Joseph Cassano, Wall Street

AIG

Why Can't AIG Get Rid Of Its Non-Toxic Assets?

Moe Tkacik | March 26, 2009, 4:06PM

Don't say AIG never put anything in your wallets, taxpayers! The company just sold its Taiwanese securities unit to the Bank of East Asia, for something between ten and twenty million dollars, or between five and nine retention bonuses. Which brings us to the latest twist in the ongoing mystery of America's great black-scholes hole: why is it taking so long to sell off the pieces? Surely the rest of the company's units couldn't be as toxic as the one that had Joe Cassano in charge! Or could they? On Tuesday Ben Bernanke let it slip to Congress that had AIG Financial Products been allowed to bust, its bread-and-butter insurance businesses might have folded as well -- so buried were their balance sheets in lethal "products."

Cue the red tape gestapo!! But isn't insurance regulated? Says Institution Risk Analytics:

Speaking of poor fundamentals, when AIG released information about the amounts and recipients of roughly $100 billion of its government loans from September to December 2008, almost utterly unreported was the fact that the staid, boring, heavily regulated insurance businesses managed to run up losses on securities lending requiring $44 billion of government support.

By contrast, the free marketeers at Institutional Risk Analytics point out, the "credit derivatives widely blamed for bringing down the world's financial system" were only consuming $27 billion. "Could it be that the big story at AIG is the unsoundness of the insurer, not the credit default swaps?" they ask. "Why the misdirected coverage?"

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Topics: AIG, Joseph Cassano

AIG

AIG Execs: We're Being Extorted!

Moe Tkacik | March 26, 2009, 12:31PM

No really, AIG Financial Products chief Gerry Pasciucco told a meeting of his European based derivatives gurus that the money vortex CEO Ed Liddy's request that they return their bonuses amounted to "blackmail." That's according to a London-based recipient of one of the bonuses -- London, you'll recall, is where the inimitable Joseph Cassano was employed -- who furnished the news agency with emails showing that AIG compliance officer David Haig had actually asked the country's Serious Organised Crime Agency to probe whether the (voluntary) requests could be legally considered extortion. Well what a fascinating use of government-bankrolled hours for the taxpayers of both countries!! But wait, don't shoot yourself, hear the anonymous employee out...

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Topics: AIG, Joseph Cassano, Wall Street

AIG

Source: Cassano In Congressional Investigators' Sights

Zachary Roth | March 24, 2009, 4:47PM

Another set of investigators is hot on the trail of Joseph Cassano, the man who walked away with a multi-million dollar golden parachute after spearheading the credit default swaps that brought down AIG.

Investigators for the House Oversight committee intend to interview Cassano about his role in the firm's collapse, and have already contacted his lawyer, a committee staffer told TPMmuckraker.

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Topics: AIG, Financial Crisis, House Oversight, Joseph Cassano, Wall Street

AIG

Cassano Lawyer Repped WorldCom

Zachary Roth | March 20, 2009, 3:03PM

Earlier today, we told you that in the view of one expert, some of the allegations about former AIGFP chief Joe Cassano echo those in the WorldCom case from earlier this decade, which ultimately sent former CEO Bernie Ebbers to jail -- in particular the charge, made in at least one investor lawsuit, that Cassano obstructed the work of his firm's auditors.

And it turns out that there's another parallel with the WorldCom case. Cassano's lawyer, white-collar crime expert Joseph Warin of Gibson, Dunn, and Crutcher, was hired by WorldCom in 2003 to conduct an internal investigation into allegations that it re-routed long-distance phone calls in order to get out of paying billions of dollars in fees owed to other companies.

That's a different charge from the one that felled Ebbers. Still, could it be another small sign that this whole AIGFP saga is going to take its place in the pantheon of high-profile white-collar fraud cases?

And while we're on the subject of Warin, here's another fun fact. In 2004, Washingtonian magazine compiled a list titled "Who to Call When You're Under Investigation." Guess who was on there.

Sounds like Cassano is a Washingtonian reader.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Expert: Allegation That Cassano Blocked Auditor Is "Analogy To Obstructing Justice"

Zachary Roth | March 20, 2009, 1:11PM

We've told you about allegations from AIGFP's internal auditor, Joseph St. Denis, that the unit's leader, Joseph Cassano deliberately thwarted St. Denis' effort to do his job. And according to one expert we just spoke to, those allegations, if borne out, could put Cassano in serious jeopardy.

To review: In a letter to congressional investigators, St. Denis claimed that Cassano repeatedly prevented him from participating in the process in which AIGFP valued its assets -- a crucial piece of the accounting puzzle St. Denis was hired to put together. According to St. Denis, Cassano told him in September 2007 (a time when evidence of the assets' exposure to the subprime mortgage mess was mounting): "I have deliberately excluded you from the value of the [credit default swaps] because I was concerned you would pollute the process." In addition, around the same time, Cassano berated St. Denis for pointing out accounting irregularities in a target company's hedge accounts. Cassano created a new organizational structure for AIGFP which isolated him from AIG proper, significantly reducing his influence. St. Denis resigned soon after, citing Cassano's moves as the reason.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

The Rise And Fall Of AIG's Financial Products Unit

Zachary Roth and Ben Buchwalter | March 20, 2009, 9:36AM

As we delve into the back-story behind the collapse of AIG, we thought it might be useful to lay out some key factual information about the firm's Financial Products unit, known as AIGFP, whose disastrous credit default swaps brought the company to its knees. How and when did AIG Financial Products get started? Who ran it, and from where? How did it get into credit default swaps, and what exactly are they, anyway? And how did this group of derivatives traders eventually wind up bringing down one of the most admired financial firms in the world?

So here's a rundown of some of the key developments in AIGFP's tumultuous history -- many gleaned from a superb three-part December 2008 Washington Post series on the unit (parts 1, 2, and 3):

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Topics: AIG, Bailout, Federal Reserve, Financial Crisis, Joseph Cassano, Wall Street

AIG

Cassano's Lawyer Is White Collar Crime Expert

Zachary Roth | March 19, 2009, 6:31PM

We've told you that Joe Cassano, who ran the AIG unit that made those credit default swaps, has hired a lawyer in connection with an ongoing Justice Department investigation.

And from the looks of the lawyer in question, Cassano is taking the charges very seriously indeed.

F. Joseph Warin, who works out of the Washington, DC office of the prestigious Los Angeles-based law firm Gibson, Dunn, & Crutcher, is, according to his bio, a former assistant US Attorney who specializes, perhaps unsurprisingly, in white collar crime and securities enforcement, and chairs the firm's White Collar Defense and Investigations Practice Group*.

Investigators are reported to be examining, in particular, whether Cassano and other AIG execs committed fraud by intentionally making misleading public statements about the firm's level of exposure to losses on its credit default swaps.

Warin didn't return a call from TPMmuckraker. But his assistant asked, unprompted, whether we were calling about Cassano.

Sounds like he's getting a lot of calls.

*This sentence has been corrected from an earlier version, which incorrectly reported that Gibson, Dunn is based in Washington, DC.

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Topics: AIG, Financial Crisis, Joseph Cassano, Justice Department, Wall Street

AIG

Is Cassano Vulnerable To Fraud Charges That Felled Ebbers, Lay?

Zachary Roth | March 19, 2009, 2:51PM

Yesterday we laid out some preliminary evidence that AIG execs -- led by Joseph Cassano, who ran the firm's financial products unit -- may have committed criminal fraud in connection with those credit default swaps that brought the company down. And as we noted, federal investigators have been probing that very question.

A former federal fraud prosecutor confirmed to TPMmuckraker today that criminal fraud occurs when someone willfully misstates the facts about a company's position in any public statement -- such as an SEC filing, an earnings release, a presentation to investors, or even a press conferences -- and when there's a clear financial motive for doing so. The former prosecutor further confirmed that the facts of the AIG case as currently known -- in which Cassano and other AIG execs made what turned out to be incorrect public statements, which had the effect of concealing from investors the company's true exposure to losses on its swaps -- could potentially lead to such charges, but declined to go further without access to the details of the investigation.

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Topics: AIG, Financial Crisis, Joseph Cassano, Justice Department, Wall Street

AIG

Did Cassano And AIG Commit Fraud?

Zachary Roth | March 18, 2009, 5:57PM

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.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Cassano's Million Dollar A Month Contract

Zachary Roth | March 18, 2009, 12:41PM

Here's that agreement that Joseph Cassano signed with AIG in March 2008, which gave him a $1 million a month consulting contract, after he had run the company into the ground.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

2003 Lawsuit Suggests AIG Wasn't Always So Careful To Honor Bonus Deals

Zachary Roth | March 17, 2009, 6:35PM

Since the AIG bonus brouhaha broke over the weekend, the hobbled insurance giant has essentially been claiming it had to make the payments because not doing so could have created a "defalt event," potentially exposing taxpayers to losses of hundreds of billions down the road.

That may or may not be a legitimate argument (most experts seem to be saying "not"). But it's worth noting that just a few short years ago, there was a case in which AIG wasn't quite so fastidious about honoring bonus agreements with its employees.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Investor Lawsuit: Cassano Hid AIG Losses

Zachary Roth | March 17, 2009, 4:44PM

More from the Joseph Cassano files, which are proving to be very interesting indeed.

According to an SEC filing made this month by AIG, a company shareholder in January filed a lawsuit charging Cassano with concealing his financial product unit's massive losses. Cassano stepped down as the head of the unit -- which made the credit default swaps that drove AIG into the ground -- last year.

Here's the full relevant portion of the filing:

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Under Cassano, Troubled AIG Unit Was Charged With Major Securities Law Violation

Zachary Roth | March 17, 2009, 4:21PM

We've been doing a little digging into Joseph Cassano, who until last year ran AIG's financial products unit, known as AIGFP. That's the unit, of course, whose staffers just got $165 million in bonuses despite undertaking those credit default swaps that helped bring the company down. And it was under Cassano that those deals were made.

As we noted earlier, the FBI and British authorities have lately been probing AIGFP. But it looks like under Cassano, the unit has been in criminal investigators' crosshairs before.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Since Last Fall, US And UK Launched Fraud Probes Into AIG

Zachary Roth | March 17, 2009, 2:31PM

Here's a point that's worth remembering amid the furor over those AIG bonuses: law enforcement agencies on both sides of the Atlantic have begun investigations into the company in recent months -- and those probes appear to be ongoing.

Last September, when the financial crisis began in earnest, following the collapse of Lehman Brothers, several news outlets reported (via Nexis) that the FBI had launched an investigation into potential fraud at four of the firms at the center of the collapse: Lehman, Fannie Mae, Freddie Mac ... and AIG. Subsequent reports have suggested that the AIG piece is focused on the financial products unit (AIGFP), where the losses that led to the firm's collapse mostly occurred.

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street

AIG

Cassano: AIG Finance Staffers Are "Generally Well-Compensated," So They Don't Get Severance Pay

Zachary Roth | March 17, 2009, 12:31PM

So we know that it was AIG's financial products unit that engaged in those disastrous credit default swaps that helped bring the company to its knees last fall. And it's staff from that same unit that the firm just paid bonuses to last week, setting off a tidal wave of fury across the country.

That unit, based in London and Connecticut, was led until last year by Joseph Cassano, who negotiated a $1 million-a-month retainer when he left (AIG says it has since terminated that arrangement).

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Topics: AIG, Financial Crisis, Joseph Cassano, Wall Street