US drops criminal probe against AIG
Source: Agencies |
May 24, 2010, Monday
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Print Edition
Print Edition
THE US Justice Department has decided not to file criminal charges against the former head of a division at American International Group Inc whose dealings in mortgage-related securities nearly bankrupted the insurance giant and led to a controversial government bailout, according to lawyers involved in the cases.
The decision appears to bring an end to the criminal probe of AIG, but a Securities and Exchange Commission probe into AIG and the dealings of its London-based Financial Products subsidiary is continuing and could lead to a civil securities fraud case.
Lawyers representing Joseph Cassano, who formerly ran AIG's Financial Products unit, and Andrew Forster, who worked for Cassano, said they were told by federal prosecutors late Friday that no criminal charges would be filed.
A person familiar with the government's criminal investigation of AIG confirmed that charges wouldn't be brought.
The person was not authorized to speak publicly on the matter and spoke on condition of anonymity.
The Justice Department declined comment on Saturday.
SEC investigators have been involved in the case from the start, but it is unclear when a decision would be made on a civil fraud case.
Federal prosecutors were investigating AIG's Financial Products unit, which dealt in financial contracts called credit default swaps that helped sink AIG in September 2008, leading to a taxpayer-funded bailout. The credit default swaps AIG sold were insurance-like guarantees on mortgage securities that wound up forcing AIG to pay out billions of dollars after the housing market went bust.
Investigators were looking into whether Financial Products officials tried to deceive investors and AIG's auditors, PricewaterhouseCoopers, by misstating the accounting value of a credit default swap portfolio.
When AIG posted a loss for the fourth quarter of 2007, it pinned the blame on an US$11 billion writedown related to the credit default swaps held by its Financial Products group.
The decision appears to bring an end to the criminal probe of AIG, but a Securities and Exchange Commission probe into AIG and the dealings of its London-based Financial Products subsidiary is continuing and could lead to a civil securities fraud case.
Lawyers representing Joseph Cassano, who formerly ran AIG's Financial Products unit, and Andrew Forster, who worked for Cassano, said they were told by federal prosecutors late Friday that no criminal charges would be filed.
A person familiar with the government's criminal investigation of AIG confirmed that charges wouldn't be brought.
The person was not authorized to speak publicly on the matter and spoke on condition of anonymity.
The Justice Department declined comment on Saturday.
SEC investigators have been involved in the case from the start, but it is unclear when a decision would be made on a civil fraud case.
Federal prosecutors were investigating AIG's Financial Products unit, which dealt in financial contracts called credit default swaps that helped sink AIG in September 2008, leading to a taxpayer-funded bailout. The credit default swaps AIG sold were insurance-like guarantees on mortgage securities that wound up forcing AIG to pay out billions of dollars after the housing market went bust.
Investigators were looking into whether Financial Products officials tried to deceive investors and AIG's auditors, PricewaterhouseCoopers, by misstating the accounting value of a credit default swap portfolio.
When AIG posted a loss for the fourth quarter of 2007, it pinned the blame on an US$11 billion writedown related to the credit default swaps held by its Financial Products group.
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