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

[Joanne98]

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.

According to a “brokercheck report” put out by the financial regulatory agency FINRA, and unearthed by the blog Zero Hedge, the Justice Department in 2004 criminally charged Cassano’s unit with helping another firm, PNC Financial Services, to conceal certain assets from its books. In the end, AIG came to a settlement with DOJ and SEC, in which it paid a very hefty fine — $80 million.

Here’s the full relevant portion of the FINRA report:

Charge Details:
THE DEPARTMENT OF JUSTICE (”DOJ”) FILED A CRIMINAL COMPLAINT AGAINST AIG-FP PAGIC, CHARGING AIG-FP PAGIC WITH VIOLATING TITLE 15, US CODE SECTIONS 78J(B) AND 78FF(A), CODE OF FEDERAL REGULATIONS, SECTION 240.10B-5 AND TITLE 18, US CODE SECTION 2. THE COMPLAINT ALLEGED THAT AIG-FP PAGIC VIOLATED FEDERAL SECURITIES LAWS BY AIDING AND ABETTING SECURITIES LAW VIOLATIONS BY A PUBLIC COMPANY, PNC FINANCIAL SERVICES GROUP, INC. (”PNC”), IN CONNECTION WITH A TRANSACTION ENTERED INTO IN 2001 WITH PNC THAT WAS INTENDED TO ENABLE PNC TO REMOVE CERTAIN ASSETS FROM ITS BALANCE SHEET. THE COMPLAINT ALLEGED THAT AIG-FP PAGIC KNEW, OR WAS DELIBERATELY IGNORANT IN NOT KNOWING, THAT THE PNC TRANSACTION DID NOT SATISFY THE REQUIREMENTS OF GAAP FOR NON-CONSOLIDATION OF SPECIAL PURPOSE ENTITIES.

Disposition Details:
AIG, AIG-FP AND AIG-FP PAGIC ENTERED INTO A SETTLEMENT WITH THE DOJ COMPRISING SEPARATE AGREEMENTS WITH AIG AND AIG-FP AND A COMPLAINT FILED AGAINST, AND DEFERRED PROSECUTION AGREEMENT WITH, AIG-FP PAGIC. UNDER THE TERMS OF THE SETTLEMENT, AIG-FP PAID A MONETARY PENALTY OF $80,000,000 AND THE DOJ AGREED (I) THAT IT WILL NOT PROSECUTE AIG OR AIG-FP IN CONNECTION WITH THE PNC TRANSACTIONS OR THE BRIGHTPOINT TRANSACTION THAT WAS SETTLED BY AIG WITH THE SEC IN 2003 AND (II) TO SEEK A DISMISSAL WITH PREJUDICE OF THE AIG-FP PAGIC COMPLAINT IN DECEMBER 2005, IN EACH CASE PROVIDED THAT AIG, AIG-FP AND AIG-FP PAGIC SATISFY THEIR OBLIGATIONS UNDER THE DOJ AGREEMENTS. THE OBLIGATIONS OF AIG, AIG-FP AND AIG-FP PAGIC UNDER THE DOJ AGREEMENTS RELATE PRINCIPALLY TO COOPERATING WITH THE DOJ AND OTHER FEDERAL AGENCIES IN CONNECTION WITH THEIR RELATED INVESTIGATIONS. THE DOJ FILED THE MOTION TO DISMISS WITH PREJUDICE THE AIG-FP PAGIC COMPLAINT ON DECEMBER 16, 2005; THE COURT SIGNED THE ORDER GRANTING THE MOTION TO DISMISS THE AIG-FP PAGIC COMPLAINT ON JANUARY 17, 2006, RESULTING IN A FINAL DISPOSITION OF THE AIG-FP PAGIC MATTER.

The details of the PNC matter aren’t clear. But as Zero Hedge notes, had the SEC come down harder on Cassano and AIGFP, it’s conceivable that the agency could have helped stop the practices that would ultimately destroy AIG and that contributed to the current financial crisis.

Leaving the SEC aside, there’s no evidence that AIG sanctioned Cassano in any way after this episode. Indeed, as we’ve noted, when he resigned as CEO of AIGFP last year, he was initally given a $1 million-a-month consulting retainer.

http://www.popmartian.com/politrix/2009/03/under-cassano-troubled-aig-unit-was-charged-with-major-securities-law-violation-2/

OOOOOOOOPS!

[Joanne98]

1. I'm going to bed!

O8)

Kick this kicked if you want. It looks kinda important.

[OhioChick]

2. K&R

:kick:

[Mnemosyne]

3. knr n/t

[Joanne98]

4. kick

[Karenina]

5. . .