I was reading TPMmuckraker's workup on Joe Cassano and started doing my usual due diligence. I can't pass a dangling string up for the life of me.
So, off I go, pulling on strings with a couple of questions in mind...
* How long has Cassano been at this and creating problems for AIG's Chief Executives?
* How many Chief Executives have back-peddled to cover for AIGFP?
Turns out, the financial media and, more importantly, the DOJ have been tracking top-level management malfeasance and illegality at AIG for nearly a decade:
The Reckoning: Behind Insurer’s Crisis, Blind Eye to a Web of Risk, by Gretchen Morgenson
In February, A.I.G.'s auditors identified problems in the firm's swaps accounting. Then, three months ago, regulators and federal prosecutors said they were investigating the insurer's accounting.
This was not the first time A.I.G. Financial Products had run afoul of authorities. In 2004, without admitting or denying accusations that it helped clients improperly burnish their financial statements, A.I.G. paid $126 million and entered into a deferred prosecution agreement to settle federal civil and criminal investigations.
The settlement was a black mark on A.I.G.'s reputation and, according to analysts, distressed Mr. Greenberg, who still ran the company at the time. Still, as Mr. Cassano later told investors, the case caused A.I.G. to improve its risk management and establish a committee to maintain quality control.
A deferred prosecution arrangement? That seems like a pretty important piece of information to discuss when people are looking to make scapegoats of President Obama or Senator Dodd.
A little more:
New AIG chief plans to reach out to investors, by Jonathan D. Glater
Greenberg was asked to resign in 2005 after news that regulators had sent the company subpoenas. Sullivan's departure comes just weeks after AIG confirmed that it was the subject of new investigations by regulators and the U.S. Justice Department.
[...]
When the board asked for the resignation of Greenberg, it was in the context of a widening accounting scandal. Regulators identified a financial transaction that Greenberg struck in 2000 and 2001 that had made AIG's financial position look better.
The company ultimately acknowledged that its accounting for several transactions was faulty. In February, five former insurance industry executives, including one from AIG, were convicted in federal court in Connecticut of conspiring to manipulate the company's financial statements; AIG had already paid $1.6 billion in 2006 to settle federal and state investigations of the matter.
The company's board turned to Sullivan, who had risen to co-chief operating officer at AIG and who had already been chosen by both the board and by Greenberg to take over leadership of the company - if not quite at the moment he did.
[...]
In December, Sullivan said that the turmoil in credit markets was "manageable" for AIG. Then in February, the company disclosed that its auditor, PricewaterhouseCoopers, had identified "material weakness" in the accounting for AIG's swaps portfolio. A few months later, the company announced that it had lost $5.3 billion in the last three months of the year. And in May, it reported a loss of $7.8 billion.
So the answers to my questions are:
How long has Cassano been at this and creating problems for AIG's Chief Executives?
Cassano started the AIGFP unit in 1987. It took roughly ten years for it to become an Enron-esque problem and AIG Chief Executives have been wrestling with questions about it for at least nine years.
How many Chief Executives have back-peddled to cover for AIGFP?
Two.
* Maurice "Hank"
Greenberg, who "was at the helm in 1987 when AIG Financial Products was born and in 1998 when it started getting involved in credit default swap insurance."
&
* Martin Sullivan, who succeeded Greenberg as AIG's CEO.
The C-level management failures extend back as far as 2000.
The bottom line is that Bush's administration had AIG in it's sights. It's DOJ should have been able to discern that AIG needed to be unspooled. And the SEC also knew that AIG was playing too fast and loose to be left to its own devices.
Therefore, Holder should go back and dig up the casework on AIG laying around the DOJ. Specifically, I'd like to know more about the "deferred prosecution agreement" and its terms. Was AIG in violation of that agreement prior to its catastrophic implosion and taxpayer bailout?
***
Just for fun, this is cute too:
AIG's Former Chief Sullivan Gets $47 Million Package (Update2), by Hugh Son and Erik Holm
July 1 (Bloomberg) -- American International Group Inc., the world's largest insurer by assets, agreed to give ousted Chief Executive Officer Martin Sullivan about $47 million in severance and long-term compensation.
Sullivan, who was replaced by Robert Willumstad on June 15, will receive $15 million in severance pay, a bonus of $4 million and equity and long-term cash awards valued at about $28 million, the New York-based company said today in a regulatory filing. AIG lost 46 percent of its market value during his three-year tenure.
Especially in light of this:
AIG replaces CEO after shareholder outcry
If Sullivan is fired without cause, he is entitled to $35 million in pay and benefits, AIG said in an April 4 filing. If he's fired for cause, Sullivan may get nothing, the company said. Severance hasn't been decided yet, George Miles, head of the AIG board's nominating committee, said in an interview.
Pressure on Sullivan intensified June 6 when AIG said the US Securities and Exchange Commission and the Justice Department were probing the way AIG valued financial products customers used to manage credit risk. New York state regulators disclosed their own inquiry on June 13. US and state probes into AIG's accounting led to Greenberg's departure in 2005.
* Please note that the essence of this diary first appeared as a comment on mysticlaker's diary "Wall Street: It's time for Department of Justice". Following a suggestion form a fellow dKos denizen, I turned it into a diary of its own.