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.
May 1, 2009 at 4:07 PM
Reader Comments (32)
Nothing new for quite some time.
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.
No lie, I've always assumed that you were Walstreetpro2.
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.
http://online.wsj.com/article/SB124165134448493413.html#articleTabs%3Darticle
http://www.youtube.com/user/walstreetpro2
What are we, orphans?
Maybe I should get more sleep. No reason to paranoid. It's not like the government would be spying on people on the "internets."
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)
http://www.youtube.com/watch?v=mfxE3oOIfug&feature=related
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:
http://www.businessinsider.com/2008/9/treasury-sought-to-hire-former-rtc-officials-for-bailout
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.)
http://www.youtube.com/watch?v=6Zt5wP9ZZ7M
"I used Turbo Tax"
http://www.youtube.com/watch?v=eKVxGlkPRlo
Going After Tax Cheats
http://www.youtube.com/watch?v=emQEldcAqoQ
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.
http://www.ritholtz.com/blog/2009/05/neel-kashkari-former-assistant-treasury-secretary/#comments
The SEC is not going after criminal Angelo Mozilo for insider trading. I hope Mozilo scumbag burns in hell.