Posted on 17 Jun 2010
The Securities and Exchange Commission will not sue Joseph J. Cassano, the head of the Financial Products unit at the American International Group before the giant insurer nearly collapsed, a lawyer representing him said Wednesday, Gretchen Morgenson of The New York Times reports.
In dropping its case, the S.E.C. is following the lead of federal prosecutors, who said last month that they would bring no criminal charges against Mr. Cassano or Andrew Forster, an AIG colleague. The S.E.C. has also concluded its investigation into Mr. Forster and will not file suit against him.
Regulators were examining upbeat statements made by Mr. Cassano in the months before AIG nearly collapsed to see if he had misled investors. The Financial Products unit, overseen by Mr. Cassano from London, had insured almost $80 billion in mortgage-related securities. Banks like Société Générale, Goldman Sachs and Deutsche Bank bought the insurance to protect against losses in their mortgage securities.
Mr. Cassano resigned in late February 2008 after A.I.G. wrote down $11 billion on the insurance covering the mortgage securities. But two months earlier, he said A.I.G. was unlikely to lose any money on the insurance it had written.
By September 2008, losses on the instruments mounted, requiring a huge federal bailout of AIG
According to people briefed on the discussions, Mr. Cassano’s lawyers presented regulators with examples of disclosures he had made about his unit’s losses, its accounting methods and valuation models, and its dealings with the banks whose collateral demands during the mortgage crisis pushed AIG to the brink.
Mr. Cassano’s lawyers said in a statement that they were pleased that the agency and federal prosecutors had closed the case.
“We think they realized that our client acted in good faith, kept his superiors informed and was honest with investors,” said F. Joseph Warin and Jim Walden, lawyers at Gibson Dunn & Crutcher who represented Mr. Cassano.