Bloomberg News reports that prosecutors are examining statements by former American International Group Inc. executive Joseph Cassano to see if he misled auditors and investors on subprime mortgage-related losses, said people familiar with the probe.
Investigators are asking auditors at PricewaterhouseCoopers LLP about memos they wrote last fall on how Cassano and other AIG executives valued contracts protecting $62 billion in mortgage-backed securities. The government is also looking at AIG’s reliance on valuations that have been questioned by auditors and banks.
On Feb. 11 of this year, AIG said the contracts declined more than sixfold in November, for an unrealized loss of $5.96 billion. AIG also said PWC found a “material weakness” in how it valued the credit-default swaps. On Feb. 28 AIG posted what was then its biggest quarterly loss, writing down $11.1 billion on the swaps. AIG announced Cassano’s resignation as president and CEO of AIG Financial Products a day later.
AIG’s board ousted Sullivan on June 15, pegging paper losses on the contracts at $26.1 billion. While the New York- based insurer said it will probably never realize those losses, it got an $85 billion loan from the Federal Reserve in September.
The Justice Department in Washington and the U.S. Attorney’s Office in Brooklyn, New York, have joined with the Securities and Exchange Commission to determine whether AIG executives committed crimes or merely exercised bad judgment.