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Josh Marshall at Talking Points Memo has been looking into the activities of the former head of AIG’s Financial Planning Unit—the Unit whose workers just got huge bonuses.  This Unit, under Joseph Cassano’s leadership, is the one that masterminded all those toxic Credit Default Swaps.  Marshall’s uncovered quite a few things that Congress and the Administration should be seriously considering at this time:  (emphasis mine)

"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."


So, AIG was charged with crimes, but settled with the DOJ and SEC, paid a fine, then continued on its merry way to pull off more shady schemes for the next several years until they managed to bring the company down.  

What about internal audits?  Didn’t these show any problems?  Well, they might have, if Cassano hadn’t prevented the company auditor from checking the books:

"...Company auditor Joseph St. Denis became concerned about the Financial Products unit, but Cassano barred him from checking.

St. Denis later quoted Cassano as saying, "I have deliberately excluded you ... because I was concerned that you would pollute the process..."

Amazing--Cassano was concerned that the auditor might "pollute the process" by looking into Cassano’s Unit’s books?  What process exactly would be "polluted" by the books being audited? Maybe the process of Hiding AIG’s losses from investors?

Last fall, the FBI and British Authorities Launched Fraud Probes into AIG:

"...Last September...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...

And last month, Britain's Serious Fraud Office -- in conjunction with the Financial Services Authority, the British counterpart to the SEC announced (via Nexis) that it had launched its own probe of that same AIG unit, focusing on suspected illegal transactions there. AIGFP had offices Connecticut and London, but its CEO during the time at issue, Joseph Cassano, was based in London...."

Oddly, it seems that Congress and the Administration were/are totally unaware of these ongoing fraud investigations—or they don’t think it’s problem handing taxpayer money over to a firm that may have been engaging in criminal activities.  Also mysteriously, the new AIG leadership apparently don't have problems with meekly handing over bonus money to people whose past activities are under investigation by law enforcement in two countries.

Originally posted to kurious on Wed Mar 18, 2009 at 11:00 AM PDT.

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