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« AIG Bailout: CEO Edward Liddy Testifies Before House Oversight Committee (CNBC & Youtube Video; May 13) | Main | Bailout Revenge: Florida AG Suing Angelo Mozilo For Fraud (Video) »

Update On AIG Criminal Investigations: Joseph Cassano, Andrew Forster & Thomas Athan (CBS Video)

We'll have some commentary on this story later, but for now enjoy the video update from Armen Keteyian of CBS.

From CBS:

A $5 million Connecticut mansion. A $4 million London townhouse. A $7 million English estate. The houses are owned by three men CBS News has learned are now the subjects of a Justice Department criminal investigation into how AIG crumbled.

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 and other federal crimes, reports CBS News chief investigative correspondent Armen Keteyian.

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

"They would look at the email traffic to try and see who was saying what to whom," said John Laperla, a former fraud investigator for the U.S. Postal Inspection Service.

"The criminality would be if someone willfully intended to basically put in false information and ultimately defraud the general public and the stockholder," Laperla said.

CBS News has learned investigators are honing in on statements like one in a September 30, 2007, quarterly report, where 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 $11.5 billion.

"That's a significant red flag," said Patricia Pileggi, a former federal prosecutor. "I mean a jump like that in three months raises real questions."

In a statement AIG told CBS News: "To date, neither AIG nor AIGFP is aware of any fraud or malfeasance in connection with the underwriting and creation of the multi-sector CDS portfolio, as opposed to what, with hindsight, turned out to be bad business decisions. AIG and AIGFP are, however, aware of ongoing investigations by the Department of Justice and the SEC with respect to the subsequent valuation of the multi-sector CDS portfolio under fair value accounting rules and related disclosures. We have cooperated fully with these investigations and will continue to do so."

A senior AIG official told us: "Everyone at the corporate office was stunned when the problems with valuing the CDS portfolio came to light in February of 2008. It became clear immediately that the potential losses on the swaps were far greater than anyone imagined. That’s when (Martin) Sullivan asked (Joseph) Cassano to resign."

Through their attorneys for both Cassano and Forester declined comment on our story. Athan's attorney said his client arrived at AIGFP after it "sustained substantial losses" and was working "to help minimize the continuing risk."

And now CBS News has learned that Athan and Forster pocketed bonuses paid out by AIG just two months ago - in the midst of a federal investigation. Sources say they are now negotiating a way to pay them back.

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Reader Comments (32)

Has Daily Bail failed?

Nothing new for quite some time.
May 6, 2009 at 10:30 PM | Unregistered Commenterspeed racer
I doubt DailyBail has failed. Dailybail is here for the long term, same way the national deficit is here for long term.
May 7, 2009 at 10:09 AM | Unregistered CommenterSell Short
Given DB's general macro and market view I've been wondering if he was caught hyper-short and leveraged. For the last four weeks he may have been getting squeezed like Carrie Prejean into a bikini top. If so he's probably glued to the screens, chain smoking and eating delivered chinese food.

Not to worry DB, post Stress Test the event risk seems skewed to the downside. In absence of other catalysts there's nothing like continually mediocre macro news to kill euphoria and encourage profit taking.

Of course Obama, Geithner, Summers, et al will likely seach for additonal patches to support the reinflation of the bubble. If the shovel-ready projects start turning progressively more dirt and if the TARP recipients are slowly allowed to repay the extraordinary loans this cycle of market supporting news could continue for weeks.

Yikes, perhaps DB had better buy another carton of red apples and place another order for General Tso's Shrimp.
May 7, 2009 at 10:53 AM | Unregistered CommenterGeneral Tso
DB and Walstreetpro2 may be on vacation together...discussing the demise of the USA. They could be on permanent vacation sponsored by the FEDS......Snark
May 7, 2009 at 11:08 AM | Unregistered CommenterAin't Bullshittin'
@Ain't BSn',

No lie, I've always assumed that you were Walstreetpro2.
May 7, 2009 at 11:16 AM | Unregistered CommenterBridge Loan to Nowhere
Bank of America needs $35 billion more money and the stock has been going up 20% everyday. this is the biggest joke ever!!
May 7, 2009 at 12:11 PM | Unregistered CommenterSell Short

Me too. I thought you might be walstreetpro2. His upland South accent made me think he might be from Georgia, but turns out he lives in NC.
May 7, 2009 at 12:25 PM | Unregistered CommenterJames H
Looks like the clowns in Congress want to get in on the Bernank-Pauslon-Lewis action. This could be good. At least it will further discredit the whole bailout system. Cuomo is also complaining that he can't get a "full picture" of what happened because the Fed is hiding behind its special status. Could this be the wedge that cracks open up the Fed? Maybe. Will any of these three criminals go to jail? Not a chance.

May 7, 2009 at 12:41 PM | Unregistered CommenterJames H
Speaking of walstreetpro2, check out his new background photo. (Apologies in advance to Obama fans. BTW, can you be in the anti-bailout camp and still love Obama? Either way, it's all good with me. I just want my money back.)

May 7, 2009 at 12:45 PM | Unregistered CommenterJames H
I don't partake of the green in any way by smoking any it or folding it and shoving any in my wallet. However, I denounce his off the cuff lunacy that is so disrespectful of our current leadership and foreign trading partners. OK, I know you guys wouldn't buy that load of horse sh1t. I tried to be politically correct but it just aint gonna happen. I'm not the Pro but we could be long lost relatives because I concur with his assessment of the situation ....... WE ARE FUCK8D! Have a nice depression.....
May 7, 2009 at 3:43 PM | Unregistered CommenterAin't Bullshittin'

What are we, orphans?
May 7, 2009 at 9:18 PM | Unregistered CommenterMark McHugh
DB regrets to inform...he has been detained for questioning and it includes H2O and a board of some type...Move along this site is no longer a mouth piece for opposition.....Snark
May 7, 2009 at 10:58 PM | Unregistered CommenterAin't Bullshittin'
AB, I swear, for a split second I really thought...

Maybe I should get more sleep. No reason to paranoid. It's not like the government would be spying on people on the "internets."
May 7, 2009 at 11:36 PM | Unregistered CommenterJames H
Heck, Gore invented it and knows exactly where YOU ARE!!!!!
May 8, 2009 at 1:37 AM | Unregistered CommenterAin't Bullshittin'
Specter gets Durbins Committee Chair position...Ya don't think there was a little horse tradin' going on to get him to become a turncoat do ya'?????? All is fair in love, war, economics, and POLITICS. I need something flammable....to drink.
May 8, 2009 at 1:40 AM | Unregistered CommenterAin't Bullshittin'
Speaking of criminals, on Wednesday Rep. Elijah Cummings (D-MD) asked Bernanke directly whether he was involved, or whether Hank Paulson was involved, in the Merrill acquistion or whether they were involved in telling Ken Lewis not to disclose the MAC. Bernanke says he didn't do it. He offers to reveal all papers, notes, etc concerning the Merrilll acquisition. He also says that many people attended the meetings with Lewis about Merrill and so there was just no way anything scandalous could have happened without anyone knowing.

Here's the problem I have with his answer. He only addressed the question of disclosure of the MAC to Bank of Am shareholders, not whether he was the trigger-man in Merrill's shotgun wedding. In other words, he still could have threatened to remove Lewis, or asked Paulson to make the threat, without having directly told Lewis not to disclose the sorry state Merrill was in. Further, in no way does his answer directly deny that either he or Paulson forced the merger. He also leaves open the possibility that Paulson pressed the "no disclosure" issue on his own. Bernanke, of course, is a genius at taking three minutes to respond to a yes or no question without actually answering it. Mind you, this doesn't work with our good friend Jim Bunning, but maybe Bunning will get his chance soon.

I think there's far more to this. This was a very specific denial of a much larger question. Now we know someone is lying. I'm betting either Paulson or Bernanke. Let's hope Andrew "Subprime" Cuomo can get to the bottom of it. (Cummings' question begins at 00:48)

May 8, 2009 at 10:38 PM | Unregistered CommenterJames H
Just doing a little late-night obsessing, revisiting the scene of the crime. You know, normal stuff for the hardcore anti-bailout set.

Anyway, just a little reminder of what a banana republic we've become. According to this September 23 post by John Carney of Clusterstock, Bernanke and Paulson had been planning "The Bailout" since around the time of the Bear Stearns debacle. That's right, the same clowns, the Beard and the Bald, who had been talking about what great shape the banks were in and saying that subprime "was contained", were all the while planning the biggest heist in history. According to Carney, some members of the Resolution Trust Corporation (from the savings and loan fiasco) had been approached by Treasury as early as August to be part of the bailout team. This was like, you know, before they "knew" there was a "crisis."

And as of Wednesday, May 5, 2009, Bernanke is STILL whining about how the government lacks the "tools" or "authority" needed to "unwind" companies like AIG and Shiti. If the Beard knew as early as March of 2008 that he couldn't figure out how to "unwind" these fuckers, then what the hell was he doing all summer? Well, he sure wasn't looking out for you and me, and he sure wasn't looking out for our investments. (Ya know, Ben, I would have liked knowing BEFORE SEPTEMBER! that you thought the markets might implode at any minute.) That's right, the Beard and the Bald spent most of the spring and the summer lying to us. Here's Carney:

May 10, 2009 at 12:59 AM | Unregistered CommenterJames H
Just saw Elizabeth Warren on Squawk Box. Airheads seemed impressed. Even Joe Kernan. At the end of the segment, Ariana Huffington jokes about Warren being nominated for the Supreme Court. Here's my out-on-a-limb prediction (if anyone else has made it, apologies):

Barack Obama has put out hints that he plans to nominate a woman, possibly from outside the judicial system. What better way to get rid of the biggest thorn in the side of your Treasury Secretary and the plutocrats who support your political machine than to nominate her for the Supreme Court? That's right, Elizabeth Warren will be nominated for the next spot on the SCOTUS. (I'm also betting she doesn't accept the nomination.)

May 10, 2009 at 2:04 AM | Unregistered CommenterJames H
Just for laughs (or Howard Beale moments) here's Timmay admitting he used "Turbo Tax" and then Timmay talking about tax cheats. Yes, folks, it really is that fucked up. Enjoy.

"I used Turbo Tax"

Going After Tax Cheats
May 10, 2009 at 2:30 AM | Unregistered CommenterJames H
How is the traffic test going? I'm guessing posting vs. no posting will show an exponential decline in traffic. Your hardcore follower IP addresses will still remain. Perhaps we can hit the links before you return to posting.
May 10, 2009 at 11:26 AM | Unregistered CommenterInWestor
Where are you DB? We miss you.
May 11, 2009 at 6:48 PM | Unregistered Commenterspideydouble
May 11, 2009 at 7:57 PM | Unregistered CommenterJames H
Holy shit. Neel Kashkari on Charlie Rose. By the 4:00 mark, he's already spilled the beans that he and Paulson and Bernanke were doing "contingency planning" for a major "financial collapse" as early as JANUARY OF 2008. The only question for Bernanke and Paulson (per Kashkari) was "when to go to Congress."

Now, it's not news to anyone here that Paulson and Bernanke have been lying to us, but shit fire and spare the matches, now we REALLY know they've been lying to us. This shouldn't be shocking, but still it is. More disturbing, perhaps, these assholes think it's prefectly acceptable to both lie to us, and then go on national television a few months later to explain what a heroes they are for having lied to us.

May 12, 2009 at 1:27 AM | Unregistered CommenterJames H
DailyBail you work is very missed by all of us here!
May 12, 2009 at 10:10 AM | Unregistered CommenterSell Short
I'm tellin' you guys...DB has been deep 6'd for his insulting rants against our fearless leaders and can no longer spew his filth, as he no longer has fingers. I believe the term used during his abduction was......"needed for further questioning". That is all, you may return to consuming mass amounts of cheap crap made in China and purchased on your credit cards. We will get back to you on the job situation in a couple of years when things become more "transparent" for the budget office and treasury. Just bend over and keep taking it for the team...."It's your Patriotic duty"...Joe Biden
May 12, 2009 at 8:46 PM | Unregistered CommenterAin't Bullshittin'
Wow. David Sirota joins the anti-bailout crowd. Now that's what I call a mustard seed. From true believer to critic of "kleptocracy." Pulls no punches with Obama, either. I have to say I'm surprised by Mr. Sirota, but maybe this suggests we can be hopeful that Obama himself will turn around on the bailouts, too. We'll see.
May 13, 2009 at 10:22 AM | Unregistered CommenterJames H
The SEC is not going after criminal Angelo Mozilo for insider trading. I hope Mozilo scumbag burns in hell.
May 13, 2009 at 6:00 PM | Unregistered CommenterSell Short
Correction: I meant to say NOW and not NOT. SEC IS going after criminal mozilo. Yes! i hate mozilo!
May 13, 2009 at 6:01 PM | Unregistered CommenterSell Short
DB, I need my fix of your news, commentary, updates, I feel alone in a world gone mad, where are you :-(
May 13, 2009 at 10:22 PM | Unregistered CommenterDavid
DB may not be here to post, chat, or blog...but be sure...He is with you always in spirit. As for the rest of us, consider us abandoned refugees trying to struggle from the vast darkness into the light. We really do need more outlets for the frustration of this world gone mad...where we bailout crooks and elect thieves to do it. Insanity reigns while our pockets are drained....
May 13, 2009 at 11:33 PM | Unregistered CommenterAin't Bullshittin'
That last part sounded good. Do you think a guy can scratch out a living producing bumper stickers with messages like that? Daddy needs something to eat and a new pair of shoes.....
May 13, 2009 at 11:35 PM | Unregistered CommenterAin't Bullshittin'

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