Posted last month: Criminal Charges Unlikely Against Joe Cassano And AIG
- Prosecutors have since obtained notes written by a PwC auditor from a November 2007 meeting that appear to show Mr. Cassano informed the auditor about the adjustment and its potential positive impact, according to people familiar with the matter. That would make it difficult to bring a strong criminal case against Mr. Cassano, these people said.
- Federal investigators have found no evidence that Cassano lied to his bosses or shareholders about AIG's financial problems, sources told CBS News, according to the exclusive story posted online.
On BusinessInsider, Henry Blodget writes: Cassano Walks: No Criminal Charges Against AIG Bigs
- So why is it good news that charges weren't filed?
Because, despite crawling all over AIG for two years, Federal prosecutors apparently didn't find enough evidence to hang criminal charges on. And, to their great credit, they didn't go ahead and file charges anyway, which would have been the far more popular move. So the good news is that our justice system still appears to be focused on enforcing the law, rather than bending to popular opinion.
Moolah: yeah, I can undertstand why no criminal charges...
- Cynics will say that the reason the Feds didn't find evidence of crimes was that Cassano, et al, were smart enough not to leave any tracks. And that's always possible. But it's also possible that, as at other financial firms, there was no evidence of crimes because no crimes were actually committed. Being short-term greedy, betting the farm, and destroying your firm, it turns out, wasn't against the law.
Moolah: That's the sad thing. It wasn't a law for being short-term greedy, betting the farm, and destroying your firm!
- Given that taxpayers were (and are) on the hook for those bets, of course, it SHOULD BE against the law to recklessly gamble with other people's money (namely, ours). But at the time it wasn't. And, at least in part, we can thank two decades of de-regulation for that.
Now, not being guilty of crimes, of course, doesn't mean that Cassano and his colleagues at AIG weren't guilty of something else--gross negligence. Cassano & Co. gambled so recklessly that they destroyed their entire firm and forced taxpayers to step in with a ~$150 billion bailout. They also got paid hundreds of millions of dollars to do this--because AIG's incompetent management and board of directors applauded their every move.
Moolah: Posted last year: Joe Cassano: The Man Who Crashed The World. I fully agree that it is totally insane and outrageous and charging with Blodget that Cassano & Co should be charged with gross negligence!!!
- That the management and board of AIG got paid so well to fail so miserably is outrageous. Their conduct may not have been against the law, but it was against every principle of duty, prudence, and responsibility. AIG shareholders--and the American public who eventually had to clean up the mess--deserved better.
If there were any real justice here, AIG shareholders would be able to claw back every penny of the hundreds of millions of dollars that Cassano & Co. and the AIG board were paid to gamble recklessly at our expense. That we can't do that--or won't--is a crime.
Read more: http://www.businessinsider.com/henry-blodget-cassano-walks-no-charges-against-aig-bigs-2010-5#ixzz0onlyahmu
On Naked Capitalism, Yves Smith writes: No Criminal Charges Against AIG Execs
- Hhhm, are investigations disappearing into the night just like FDIC resolutions, Friday night massacres so as not to upset the great unwashed public?
Joe Cassano, head of AIG’s Financial Products Group and individual most responsible for the insurer’s collapse, will not be prosecuted. Per the Wall Street Journal:
Federal prosecutors will not bring criminal charges against current and former American International Group Inc. executives for their role surrounding financial contracts that nearly brought down the insurer about two years ago
Yves here. Now how could this possibly have come to pass? Wellie, if you rope your advisors like your accounting firm into signing off on your stupid or possibly even criminal behavior, then you get off scot free:
But after a series of meetings with the targets of their probe, prosecutors obtained information about Mr. Cassano’s disclosures to AIG senior executives and AIG’s outside auditor, PricewaterhouseCoopers LLP. That changed the course of the investigation, these people said.
Yves here. Now why hasn’t the bright spotlight been turned on PwC? They are too big too fail. Now that there are only four accounting firms deemed capable of auditing Fortune 500 companies, no one in the officialdom is about to launch an action against them that might lead to their demise, no matter how well deserved it might be. Francine McKenna has has written at considerable length about the fact that PwC was auditor to both Goldman and AIG, and was clearly signing off on valuations of the SAME instruments at DIFFERENT prices at each firm:
Why didn’t PwC speak up, act more strongly to match mismatched valuations between entities like AIG and Goldman Sachs, raise their hand and shout fire, or at least warn of suffocating black smoke obscuring woefully inadequate risk management and of pricing “models” strung together like so many holiday lights electrical cords, faulty wiring and all, ready to blow the circuits?
Was it the fees?
Well, there’s certainly $230 million plus reasons in 2008 to play nicey-nice between the two clients. But that explanation would be too simple.
Another little problem which has been completely missed in our rush to get Potemkin financial reforms in place is that prosecutors often cannot pursue lawyers and accountants even when they play a key role in perpetrating dubious or even criminal conduct. As we wrote in ECONNED:
Legislators also need to restore secondary liability. Attentive readers may recall that a Supreme Court decision in 1994 disallowed suits against advisors like accountants and lawyers for aiding and abetting frauds. In other words, a plaintiff could only file a claim against the party that had fleeced him; he could not seek recourse against those who had made the fraud possible, say, accounting firms that prepared misleading financial statements. That 1994 decision flew in the face of sixty years of court decisions, practices in criminal law (the guy who drives the car for a bank robber is an accessory), and common sense. Reinstituting secondary liability would make it more difficult to engage in shoddy practices.
Another perverse aspect is that the fact that AIG as a company, as opposed to individuals, may have engaged in criminal conduct is deemed to be moot. The attitude seems to be, “AIG is a ward of the state, why bother?” But that misses the point. UBS, which was rescued by the Swiss government, had to have outside investigators prepare a report of what went wrong. Why hasn’t every other bailed-out entity been required to make similar reports? The public, and more important, regulators and legislators would have a much better understanding of why the financial system went off the rails. And in the case of AIG in particular, there is ample evidence the company at a minimum had poor accounting and controls (recall the scenes in Andrew Ross Sorkin’s Too Big to Fail, where the AIG top brass has only a dim idea of how bad its cash shortfall is, and at a very advanced stage, discovers a $20 billion leak in its securities lending operation).
Given that AIG had a dubious and contested relationship with a sister firm, C.V. Starr (controlled by Hank Greenberg), which appears to have served as an executive enrichment vehicle, the sloppy accounting may have served as a cover for other types of executive-wallet-flattering activities. But the decision has clearly been made to pull a veil over AIG, to the detriment of the interest of taxpayers who are paying for its lapses.
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