By Ian Swanson - 05/22/10 04:27 PM EDT
Department of Justice prosecutors have been looking into charges against Joseph Cassano, the insurer’s former chief executive of the Financial Products unit.
But according to several published reports on Saturday, authorities will not go forward with a case.
The Financial Products unit run by Cassano handled credit-default swaps that led to the company’s bailout by the federal government. The bailout totaled $180 billion, and much of that money is not expected to be repaid.
Cassano led the unit of AIG that insured hundreds of billions in securities backed by other financial institutions. When the mortgage crisis erupted and those mortgage-backed securities went bust, AIG didn’t have the funds to pay off the claims from those who held credit-default swaps with AIG.
It’s unclear why Justice decided against going forward with a case, which would have centered on whether Cassano and others misled investors on AIG’s financial position.
In a quotation provided to The New York Times and other media outlets, Cassano attorney F. Joseph Warin said the system had worked and that no charges were justified.
“The large group of federal agents and prosecutors was diligent and professional throughout the investigation, and our client is grateful that they did their jobs by following the facts to the end. This result was the product of two things: an innocent client and fair prosecutors and agents. The system worked,” the statement from Warin said.
The decision not to bring charges against Cassano is likely to come up in the Wall Street reform debate.
The Senate approved legislation on Thursday, but this bill must be reconciled with legislation approved by the House.