×

Prosecutors Are Said to Drop A.I.G. Executive Case

Federal prosecutors investigating the events leading up to the collapse of the American International Group in 2008 will not bring charges against Joseph Cassano, the chief executive of the unit that insured mortgage-related securities with calamitous results, according to two people briefed on the matter.

Aig Headquarters
Aig Headquarters

Mr. Cassano and other executives at A.I.G.’s Financial Products unit, which had insured almost $500 billion in securities backed by various types of loans, came under scrutiny by the Department of Justice after the insurer failed in September 2008. Investigators were examining whether Mr. Cassano misled investors when he stated in December 2007 that the company’s obligations on the mortgage securities it backed were unlikely to produce losses for A.I.G.

The Federal Reserve Bank of New York and the United States Treasury rescued A.I.G. with a taxpayer backstop totaling $180 billion. Nearly $30 billion of that went directly to banks like Goldman Sachs and Société Générale, which bought insurance on mortgage securities from A.I.G. during the credit boom.

The people briefed on the decision not to bring charges spoke on condition of anonymity because they were not authorized to speak publicly on the matter.

F. Joseph Warin, Mr. Cassano’s lawyer, said in a statement: “Although a two-year, intense investigation is tough for anyone, the results are wholly appropriate in light of our client’s factual innocence. 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.”

Mr. Cassano, who ran the company’s Financial Products unit from London, resigned in late February 2008 after A.I.G. wrote down $11 billion on the insurance it had underwritten on the mortgage securities. Mr. Cassano also came under pressure in late 2007 when A.I.G.’s auditors began questioning how the unit valued its holdings.

A former executive with Drexel Burnham Lambert — the investment bank made famous in the 1980s by Michael Milken, the junk bond impresario — Mr. Cassano helped start A.I.G.’s London unit in 1987. Amid taxpayer anger over the rising cost of various bailouts orchestrated in 2008, Mr. Cassano was portrayed as the principal architect of A.I.G.’s demise.

But as more information has emerged about Wall Street’s role in the sale of the mortgage related securities that A.I.G. insured, the view of Mr. Cassano has become more nuanced. Now securities regulators are examining whether the Wall Street banks that sold these securities to investors may have misled them about their characteristics and prospects.