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Probe Against Former AIGFP Exec Cassano Reopens

Source: Business Insurance

Posted on 26 Jul 2010

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According to a person familiar with the matter, New York Attorney General Andrew Cuomo reopened his probe of former American International Group Inc. (AIG) executive Joseph Cassano after federal authorities closed theirs.

Mr. Cuomo’s office held meetings with Mr. Cassano’s lawyers and AIG earlier this month and are expected to meet again, the person said. Mr. Cassano, head of AIG's Financial Products unit until March 2008, made derivative bets on subprime loans that forced AIG into a U.S. bailout.

Mr. Cuomo shelved a 2008 investigation of Mr. Cassano after federal authorities began probes. Now he wants to make an independent assessment of whether Mr. Cassano bears any civil liability for his AIG conduct, the person said.

The Wall Street Journal reported Friday that Mr. Cuomo had a “renewed interest” in Mr. Cassano, citing an unidentified person familiar with the matter.

The focus of the U.S. investigations was whether Mr. Cassano misrepresented the value of AIG’s portfolio of “super senior” credit-default swaps, which insured bond losses tied to the U.S. housing market. AIG, once the world’s largest insurer, received a $182.3 billion bailout after these bets went bad.

In May, a person familiar with the Justice Department investigation said after a two-year probe, there was insufficient evidence to charge Mr. Cassano. In June, Mr. Cassano’s lawyers said the SEC also closed its Cassano investigation.

“We think they realized that our client acted in good faith, kept his superiors informed, and was honest with investors,” Mr. Cassano’s lawyers, F. Joseph Warin and Jim Walden, of the law firm Gibson, Dunn & Crutcher L.L.P., said in a June 16 statement.

Mr. Warin had no immediate comment on the renewed Cuomo investigation. Mark Herr, a spokesman for AIG, declined to comment, as did Richard Bamberger, a spokesman for Mr. Cuomo.

On June 30, Mr. Cassano defended the credit-default swaps blamed for the firm’s losses, according to remarks submitted to the Financial Crisis Inquiry Commission.