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Prosecutors May Depose Former AIG Exec Cassano in Tax Case

Source: WSJ

Posted on 25 Sep 2009

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Federal prosecutors want to take the deposition of Joseph Cassano, the former head of American International Group Inc.'s (AIG) financial products business, in a lawsuit over whether the insurer is entitled to $306.1 million in tax refunds from 1997.

In a letter Wednesday, prosecutors from the civil division of the U.S. Attorney's office in Manhattan said they believe AIG isn't entitled to claim a foreign-tax credit for seven transactions at issue in the 1997 tax year and the insurer engaged in "abusive tax shelters."

"The transactions at issue are designed to be incredibly complicated and opaque, and will require extensive factual and expert discovery," prosecutors wrote. "But the government believes that, at the end of discovery, the evidence will show that the transactions are unlawful."

AIG sued the U.S. government in February to recover $306.1 million in federal income taxes, penalties and additions to tax that it claims were erroneously and illegally assessed for tax year 1997.

However, prosecutors believe the transactions were designed so that AIG could claim U.S. foreign tax credits for taxes that weren't borne by AIG, but foreign counterparties to the transactions.

"We respectfully disagree with the government's analysis of this case," said Mark Herr, an AIG spokesman. "As we said when we filed this case, AIG has taken this action to insure that it is not required to pay more than its fair share of taxes."

Prosecutors want to question Cassano, who lives in London, because the transactions were structured by AIG Financial Products, the unit he ran, prosecutors said.

A lawyer for Cassano declined to comment on Thursday.

AIG Financial Products has been blamed, in part, for the insurer's near-collapse last year.