Tweet
Re: AIG in "Conservatorship"
http://www.bloomberg.com/apps/news?p...7Mt8s&refer=uk
Originally posted by jk
View Post
AIG Financial Products Unit Probed by U.K. Prosecutor (Update3)
Email | Print | A A A
By Hugh Son and James Lumley
Feb. 12 (Bloomberg) -- American International Group Inc.’s financial products unit, which brought the firm to the verge of collapse with bad bets on credit-default swaps, is being investigated by U.K. prosecutors for possible criminal conduct.
Investigators are working with authorities in the U.S. who are conducting separate reviews, the London-based Serious Fraud Office said today in a statement. AIG said it is cooperating with the probe, which isn’t related to insurance operations.
“We will use our full range of powers to seek information and to speak to those with an inside knowledge of the company’s operations,” Richard Alderman, director of the SFO, said in the statement. “It is right for us to look into the UK operations of AIG Financial Products Corp., to determine if there has been criminal conduct.”
AIG is unwinding the financial products business, which sold derivatives including protection on fixed-income assets and caused about $34 billion in writedowns amid the collapse of the subprime mortgage market. The government rescued AIG last year to cut losses for banks that did business with the insurer.
It was a “surprise” for the SFO to disclose the probe so early in the investigation, said David Corker, a lawyer at Corker Binning in London who isn’t involved in the case. The agency usually makes announcements after conducting searches, he said.
Joseph Norton, a spokesman for New York-based AIG, declined to comment. The firm acknowledged the U.K. probe in a statement.
U.S. Probes
The U.S. Department of Justice and Securities and Exchange Commission are investigating how AIG valued its swap portfolio and disclosed information about the contracts to investors, AIG said in a November regulatory filing. Some employees have received so-called Wells notices indicating the SEC may seek an enforcement action, the company said.
Prosecutors were looking at statements made by Joseph Cassano, former head of the financial products unit, according to people familiar with the situation. Cassano and then-AIG Chief Executive Officer Martin Sullivan told investors in December 2007 not to worry about declines on the contracts.
“It is very difficult to see how there can be any losses in these portfolios,” Cassano said at an investor meeting.
Cassano stepped down in March after his business, with offices in London and Connecticut, drove a $5.29 billion quarterly net loss for AIG. The financial products unit was founded in 1987 by ex-employees of Drexel Burnham Lambert, the securities firm that helped popularize “junk-bond” investing before it collapsed.
Subprime Loans
Cassano built it into operations providing guarantees on more than $500 billion of assets at the end of 2007, including $61.4 billion in securities tied to subprime mortgages.
AIG had to seek an $85 billion federal loan in September after downgrades of its credit ratings, which the company previously said could force more than $10 billion in collateral calls from the debt investors who bought swaps. The bailout expanded to about $150 billion in November, partly to fund an entity designed to retire the swap contracts by purchasing the underlying assets from banks. Joseph Warin, a lawyer for Cassano, didn’t immediately return a call for comment.
SFO spokesman Sam Jaffa said that U.K. investigators have been discussing starting an investigation with the U.S. “for some time.” In the next two to three weeks they plan to meet with U.S. investigators and executives at the company, he said.
Britain’s market regulator, the Financial Services Authority, is also participating in the AIG probe The SFO investigates and prosecutes the most complex and high value financial crime in the U.K.
Email | Print | A A A
By Hugh Son and James Lumley
Feb. 12 (Bloomberg) -- American International Group Inc.’s financial products unit, which brought the firm to the verge of collapse with bad bets on credit-default swaps, is being investigated by U.K. prosecutors for possible criminal conduct.
Investigators are working with authorities in the U.S. who are conducting separate reviews, the London-based Serious Fraud Office said today in a statement. AIG said it is cooperating with the probe, which isn’t related to insurance operations.
“We will use our full range of powers to seek information and to speak to those with an inside knowledge of the company’s operations,” Richard Alderman, director of the SFO, said in the statement. “It is right for us to look into the UK operations of AIG Financial Products Corp., to determine if there has been criminal conduct.”
AIG is unwinding the financial products business, which sold derivatives including protection on fixed-income assets and caused about $34 billion in writedowns amid the collapse of the subprime mortgage market. The government rescued AIG last year to cut losses for banks that did business with the insurer.
It was a “surprise” for the SFO to disclose the probe so early in the investigation, said David Corker, a lawyer at Corker Binning in London who isn’t involved in the case. The agency usually makes announcements after conducting searches, he said.
Joseph Norton, a spokesman for New York-based AIG, declined to comment. The firm acknowledged the U.K. probe in a statement.
U.S. Probes
The U.S. Department of Justice and Securities and Exchange Commission are investigating how AIG valued its swap portfolio and disclosed information about the contracts to investors, AIG said in a November regulatory filing. Some employees have received so-called Wells notices indicating the SEC may seek an enforcement action, the company said.
Prosecutors were looking at statements made by Joseph Cassano, former head of the financial products unit, according to people familiar with the situation. Cassano and then-AIG Chief Executive Officer Martin Sullivan told investors in December 2007 not to worry about declines on the contracts.
“It is very difficult to see how there can be any losses in these portfolios,” Cassano said at an investor meeting.
Cassano stepped down in March after his business, with offices in London and Connecticut, drove a $5.29 billion quarterly net loss for AIG. The financial products unit was founded in 1987 by ex-employees of Drexel Burnham Lambert, the securities firm that helped popularize “junk-bond” investing before it collapsed.
Subprime Loans
Cassano built it into operations providing guarantees on more than $500 billion of assets at the end of 2007, including $61.4 billion in securities tied to subprime mortgages.
AIG had to seek an $85 billion federal loan in September after downgrades of its credit ratings, which the company previously said could force more than $10 billion in collateral calls from the debt investors who bought swaps. The bailout expanded to about $150 billion in November, partly to fund an entity designed to retire the swap contracts by purchasing the underlying assets from banks. Joseph Warin, a lawyer for Cassano, didn’t immediately return a call for comment.
SFO spokesman Sam Jaffa said that U.K. investigators have been discussing starting an investigation with the U.S. “for some time.” In the next two to three weeks they plan to meet with U.S. investigators and executives at the company, he said.
Britain’s market regulator, the Financial Services Authority, is also participating in the AIG probe The SFO investigates and prosecutes the most complex and high value financial crime in the U.K.
Comment