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The Executive Who Brought Down AIG

Modelworks

Lifer
Feb 22, 2007
16,240
6
76
Surely there is something we can do about this guy. The whole , I'm not coming back to the USA thing , there has to be some way around that.


I love the part how they can't even lose $1 on each transaction.

http://abcnews.go.com/Blotter/Story?id=7210007&page=1
The FBI and federal prosecutors are reportedly closing in on the AIG executive whose suspect investments cost the insurance giant hundreds of billions of dollars. The government is investigating whether or not 54-year old Brooklyn-native Joseph Cassano committed criminal fraud in virtually bankrupting the company.

"He almost single-handedly is responsible for bringing AIG down and by reference the economy of this country," said Rep. Jackie Speier (D-Ca.)

Cassano, who lives in London, made more than $300 million running the infamous Financial Products Division of AIG where he, with about a dozen others, committed AIG to insure what turned out to be more than a trillion dollars worth of junk quality loans held by banks.

"He is the golden boy of the casino," said Rep. Speier. "They basically took peoples' hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he's wrought on America."

When approached by ABC News outside of his London home Cassano said he did not want to talk about the allegations against him.

Cassano Received $1M a Month Even After He Was Fired From AIG

After the huge losses became known, Cassano was fired from AIG in early 2008, but he still received a salary of $1 million a month until Congress intervened. AIG has received about a $180 billion in bailout funds so far.

"AIG was insuring junk and it was the AIG insurance that made the junk marketable," said tax law expert Jack Blum. "American taxpayers have been put on the hook for this insurance junk."

Even as the bad loans began to emerge, Cassano boasted to Wall Street analysts that his transactions, called credit default swaps, were foolproof.

"It is hard for us, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions," he said on an AIG investor conference call in August 2007.

Yet, according to Blum, many others saw the writing on the wall.

"This stuff was absolutely toxic and most of the people who were dealing in it knew how toxic it was," said Blum.

Cassano Kept Transactions Out of Sight of Regulators

An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.

"This is the other very important issue underneath the AIG scandal," said Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."

And nobody in the United Kingdom was monitoring AIG's actions either, according to a member of Parliament there.

"There was a culture that was called light touch regulation," MP Vince Cable told ABC News, "which meant that these activities could go on and nobody kept a close eye on it."

Even Cassano's bosses at AIG seem to have been in the dark, ignoring warnings from the AIG accountant assigned to Cassano, Joseph St. Denis.

St. Denis says Cassano told him he was kept away from the books because Cassano was concerned St. Denis "would pollute the process."

AIG CEO Liddy Said He Didn't See Anything Illegal in Cassano's Actions

Earlier this month, AIG CEO Edward Liddy told Congress Cassano had done nothing wrong.

"I'm not a lawyer but there is no evidence of wrongdoing in any of this," said Liddy.

Former colleagues of Cassano's say he has no plans to return to the U.S. to face questioning by the FBI and the hostility of the U.S. taxpayers who are now making good on his bad bets.

"I don't thing the American people, nor would I ? be content until we hear the click of the handcuffs on his wrists," said Rep. Speier.
 

Genx87

Lifer
Apr 8, 2002
41,063
495
126
Lets not forget who #2 on AIG's donation list is. This could go right to the top.
 

Dari

Lifer
Oct 25, 2002
17,134
38
91
Originally posted by: Genx87
Lets not forget who #2 on AIG's donation list is. This could go right to the top.
Or they can start with the US Government. I love how people like to point fingers at everyone but themselves.
 

Firebot

Golden Member
Jul 10, 2005
1,476
1
0
Originally posted by: Modelworks
Originally posted by: LTC8K6
http://www.washingtontimes.com...sed-to-donate-to-dodd/

Cassano pushed AIG money to Dodd in a fairly blatant quid pro quo arrangement...
The plot thickens.


I think we are going to find out the corruption in all this goes further than anyone ever imagined.
The plot doesn't thicken. This is how US politics has worked for decades and will continue to work. All we will ever hear is a few 'upset' Americans talk on message boards and make a post or two, and then go right back to watching American Idol and go on with their own lives. Until the whole Democrat / Republican 2 party system and lobbyism is broken apart, nothing will change.
 

StageLeft

No Lifer
Sep 29, 2000
70,150
2
0
The hell he is staying in London. England should nab that fvcker and ship him back here.

Regarding Dodd he talks the good talk but he has credibility issues. Countrywide and this come to mind. Now, these guys accept donations from all kinds of sources but when you have a government that is held in place by non-anonymous donations from business leaders and lobbyists you have something that's rife for conspicious corruption, and then you end up with the government we see here.
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Not to say the guy is innocent or guilty of charges, but don't forget this is more than one person.

AIG and his division was pricing insurance based on the rating of the instrument. It's like your insurance agent pricing your car insurance based on your cars safety rating, your driving records...etc.

So S&P, Moody and the rest got paid hundreds of millions to come up with AAA rating for those instrument, so AIG price the insurance based on that. And the next day, the rating agency says ooops, we didn't have enough info and we have to change the rating to junk. Sorry AIG, too bad you got screwed, it's not our fault.

Yeah, blame one guy, it's all his fault.
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,907
173
106
Originally posted by: rchiu
Not to say the guy is innocent or guilty of charges, but don't forget this is more than one person.

AIG and his division was pricing insurance based on the rating of the instrument. It's like your insurance agent pricing your car insurance based on your cars safety rating, your driving records...etc.

So S&P, Moody and the rest got paid hundreds of millions to come up with AAA rating for those instrument, so AIG price the insurance based on that. And the next day, the rating agency says ooops, we didn't have enough info and we have to change the rating to junk. Sorry AIG, too bad you got screwed, it's not our fault.

Yeah, blame one guy, it's all his fault.
That's odd?

I very recently read that it was the other way around. That the bonds could get good ratings because of the CDS 'insurance'. And that without the CDS insurance these crap bonds could have never been sold.

But one way or another the rating agencies bear some blame. Even if they did give AAA because of CDS they are at fault. They should have known that because CDS's on any given bond were issued multiple times over in the event of default the CDS's themselves would default. It was 'fake' insurance.

Fern
 

rchiu

Diamond Member
Jun 8, 2002
3,846
0
0
Originally posted by: Fern
Originally posted by: rchiu
Not to say the guy is innocent or guilty of charges, but don't forget this is more than one person.

AIG and his division was pricing insurance based on the rating of the instrument. It's like your insurance agent pricing your car insurance based on your cars safety rating, your driving records...etc.

So S&P, Moody and the rest got paid hundreds of millions to come up with AAA rating for those instrument, so AIG price the insurance based on that. And the next day, the rating agency says ooops, we didn't have enough info and we have to change the rating to junk. Sorry AIG, too bad you got screwed, it's not our fault.

Yeah, blame one guy, it's all his fault.
That's odd?

I very recently read that it was the other way around. That the bonds could get good ratings because of the CDS 'insurance'. And that without the CDS insurance these crap bonds could have never been sold.

But one way or another the rating agencies bear some blame. Even if they did give AAA because of CDS they are at fault. They should have known that because CDS's on any given bond were issued multiple times over in the event of default the CDS's themselves would default. It was 'fake' insurance.

Fern

Fern
Well, it will take a big post to clearly explain CDS and probably 1% of people here would understand. Just to make things simple, we are talking about different rating. You are talking about the rating of the finished product of CDS, so with CDS or insurance, sure it will get a better rating and sell more. But there are rating of the parties going into CDS, and the underlying instruments going into CDS that's rated as well, and those rating determines the premium/pricing/valuation of the CDS.
 

jman19

Lifer
Nov 3, 2000
11,183
610
126
Originally posted by: Fern
Originally posted by: rchiu
Not to say the guy is innocent or guilty of charges, but don't forget this is more than one person.

AIG and his division was pricing insurance based on the rating of the instrument. It's like your insurance agent pricing your car insurance based on your cars safety rating, your driving records...etc.

So S&P, Moody and the rest got paid hundreds of millions to come up with AAA rating for those instrument, so AIG price the insurance based on that. And the next day, the rating agency says ooops, we didn't have enough info and we have to change the rating to junk. Sorry AIG, too bad you got screwed, it's not our fault.

Yeah, blame one guy, it's all his fault.
That's odd?

I very recently read that it was the other way around. That the bonds could get good ratings because of the CDS 'insurance'. And that without the CDS insurance these crap bonds could have never been sold.

But one way or another the rating agencies bear some blame. Even if they did give AAA because of CDS they are at fault. They should have known that because CDS's on any given bond were issued multiple times over in the event of default the CDS's themselves would default. It was 'fake' insurance.

Fern

Fern
One of the reasons these bonds were so easy to get insurance on is because the default rate was already considered low; CDS were used to bump credit ratings even further.
 

wwswimming

Banned
Jan 21, 2006
3,702
1
0

Originally posted by: Modelworks
Surely there is something we can do about this guy.
how about requiring him to donate 12 pints of blood in one sitting ?

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more on Cassano from Karl Denninger -

"Yoo Hoo! Yes, Mr. Cop - Over THERE! (AIG)

Hmmm..... this is interesting....

"He is the golden boy of the casino," said Rep. Speier. "They basically took peoples' hard earned money and threw it away, gambled it and lost everything. And he must be held accountable for the fraud, for the dereliction of his duty, and for the havoc that he's wrought on America."

Oh, I see. There's that nasty "F" word, and this one you can say on TV!

But let's not be misdirected by bonus payments and "special legislation" eh? After all, anyone who believes this guy acted alone must be smoking something....

After the huge losses became known, Cassano was fired from AIG in early 2008, but he still received a salary of $1 million a month until Congress intervened. AIG has received about a $180 billion in bailout funds so far.

Ah. Let me see if I can grok this. Here's a guy who allegedly "hid" huge losses, was fired for it, but got a $1 million a month "salary" after being "fired", and he acted alone? That's why they paid him $1 million a month after firing him?

You expect The American People to believe that?

It gets better:

An ABC News investigation found that Cassano set up some dozens of separate companies, some off-shore, to handle the transactions, effectively keeping them off the books of AIG and out of sight of regulators in the U.S. and the United Kingdom.

"This is the other very important issue underneath the AIG scandal," said Blum. "All of these contracts were moved offshore for the express purpose of getting out from under regulation and tax evasion."

Yes, and again, there was nobody else within the firm that saw something like "Lichtenstein Subsidiary Profit, $10 billion" in the internal accounting of the company and thought that was funny?

Anyone remember the infamous "barge transactions" from the era of ENRON?

Of course AIG's CEO didn't see anything wrong with this.....

Earlier this month, AIG CEO Edward Liddy told Congress Cassano had done nothing wrong.

"I'm not a lawyer but there is no evidence of wrongdoing in any of this," said Liddy.

Really Mr. Liddy?

There's nothing wrong with moving transactions offshore through a series of shell companies to both avoid taxation and regulation, nor with having the accountant assigned to that unit intentionally kept away from the guy who's structuring the transactions so he can't ask "too many" questions? You seem to imply that you knew about it, but that sort of subterfuge (if it is as reported) in a company you are operating is all ok?

I must admit that in my time as a CEO I never ran a company as large as AIG (or anything even close to it) but I did, a couple of times, find people in the company who were intentionally concealing some aspect of what they were doing from me (and by extension, the other shareholders.)

My response? They were immediately fired and no, they didn't continue to be paid their salary or bonus.

Oh, and what about the external auditors? AIG has those, right? After all, it is a public company. Hmmmm....

Again I ask - who's interest does Mr. Liddy represent? Is it the taxpayer (as it should be, since this firm would not exist but for our largesse) or is it Goldman Sachs and other banking interests, given that Mr. Liddy was a director at Goldman before Hank Paulson, Goldman's former chief, tapped him to work for a "mere" $1 salary?

This is what the NY Daily News said back on March 17th (which unfortunately went under my radar at the time):

Company auditor Joseph St. Denis became concerned about the Financial Products unit, but Cassano barred him from checking.

St. Denis later quoted Cassano as saying, "I have deliberately excluded you ... because I was concerned that you would pollute the process."

St. Denis would recall Cassano saying he did not want to be promoted even further up the corporate ladder "because it would separate [him] from the money." St. Denis would remember Cassano telling him "AIG's corporate management was "scared to death" of him."

That's very interesting. What's even more interesting is his written testimony to the House Oversight Committee:

"I have deliberately excluded you from the valuation of the Super Seniors because I was concerned that you would pollute the proces."

My belief is that the "pollution" Mr. Cassano was concerned about was the transparency I brought to AIGFP's accounting policy process.

Ah, so Mr. St. Denis, the accountant, puts in writing (on October 4th 2008, before much in the way of funds were disbursed to AIG) claims that appear to be a "smoking gun" in regards to what has been going on within AIG (read the whole thing; its rather ugly) and yet somehow both Henry Paulson and Tim Geithner agree to transfer nearly $170 billion of taxpayer money to AIG to "bail it out", with full knowledge of this written testimony not only within the administration but also within the Congressional Committee on Oversight and Government Reform!

And where did this guy (Cassano) come from?

Joseph Cassano started out at Drexel Burnham Lambert under Michael Milken, "the Junk Bond King." Drexel imploded in 1990 and Milken landed in prison.

AIG promptly hired a team of Drexel people to start a Financial Products unit, Cassano among them. Cassano became the head and began dealing in securities known as "credit default swaps" out of one office in Wilton, Conn., and another in England, dubbed "the London casino."

You can't be serious? Drexel?

How does this sort of thing "fly under the radar" in Washington DC? Why you just make some "campaign contributions" to Chris Dodd and Barack Obama, the latter of whom wins the election and then allows yet another slug of money to be funneled through your former "employer" to hide the bad bets you made that now are being paid down to foreign banks?

Nor does this appear to be "just him" giving those "donations" either:

In March 2009 Cassano was linked to e-mails he authored in 2006 which solicited contributions from AIG executives for Dodd's campaign due to Dodd's position as incoming chairman of the Senate Banking Committee.[10]

Oh Mr. Cop! Mr. Cop! Mr. ERIC HOLDER!

One has to wonder - is the reason that Mr. Eric Holder, United States Attorney General, is not after this is due to campaign contributions made to his boss?

Has Barack Obama told his employee Eric Holder not to go after this guy?

And how about Chris Dodd? Nothing wrong there either?

Hmmmmm.

And no, I will not be satisfied if the law just goes after Joe here. Every single individual and firm that knew of this and did nothing, if criminal culpability is proved (and it sure looks like this "business" was intentionally structured in an attempt to avoid regulatory oversight and perhaps to unlawfully avoid paying taxes!), needs to hang from the (lawful) yardarm, including the accountants, external auditors and every single person within our government who knew and yet allowed the Treasury to be looted to pay off these "bad bets", including Henry Paulson, Tim Geithner and the entire Federal Reserve Board who approved the AIG transactions with The Fed.

Anyone remember Arthur Anderson?

PS: Mr. Cassano is alleged to have very extensive property holdings in The United States as well as having been paid some $300 million dollars over the last few years. Can we find a cop interested in serving up clawbacks and forfeiture actions for lunch?"
 

nobodyknows

Diamond Member
Sep 28, 2008
5,474
0
0
I'm begining to think we should be spending some of our stimulus money on bounty hunters.
 

Lemon law

Lifer
Nov 6, 2005
20,984
2
0
Unfortunately stupidity is not a crime, and using the magic words "credit default swaps", enabled that division of AIG to escape all insurance regulations.
So basically, combine the two and its not hard to realize how this guy was golden boy a few years ago.

As AIG, rather than backing any of those insurance bets, simply put 100% of the premiums in their pocket as pure profit.

But tell me again, why should Uncle Sucker do anything but fire the stupid, and instead we continue to pay them bonuses?????????????????

At least the new Geithner rules may partly shut down such scams in the future, but no legislation is idiot proof.
 

GTKeeper

Golden Member
Apr 14, 2005
1,118
0
0
Originally posted by: rchiu
Originally posted by: Fern
Originally posted by: rchiu
Not to say the guy is innocent or guilty of charges, but don't forget this is more than one person.

AIG and his division was pricing insurance based on the rating of the instrument. It's like your insurance agent pricing your car insurance based on your cars safety rating, your driving records...etc.

So S&P, Moody and the rest got paid hundreds of millions to come up with AAA rating for those instrument, so AIG price the insurance based on that. And the next day, the rating agency says ooops, we didn't have enough info and we have to change the rating to junk. Sorry AIG, too bad you got screwed, it's not our fault.

Yeah, blame one guy, it's all his fault.
That's odd?

I very recently read that it was the other way around. That the bonds could get good ratings because of the CDS 'insurance'. And that without the CDS insurance these crap bonds could have never been sold.

But one way or another the rating agencies bear some blame. Even if they did give AAA because of CDS they are at fault. They should have known that because CDS's on any given bond were issued multiple times over in the event of default the CDS's themselves would default. It was 'fake' insurance.

Fern

Fern
Well, it will take a big post to clearly explain CDS and probably 1% of people here would understand. Just to make things simple, we are talking about different rating. You are talking about the rating of the finished product of CDS, so with CDS or insurance, sure it will get a better rating and sell more. But there are rating of the parties going into CDS, and the underlying instruments going into CDS that's rated as well, and those rating determines the premium/pricing/valuation of the CDS.
You must work on Wall St. This is EXACTLY the same f-ing answer I get from my buddies in NYC. You wouldn't understand..... bla bla bla I make so much money because I know all these complex things bla bla bla.

Try me.
 

Modelworks

Lifer
Feb 22, 2007
16,240
6
76
Originally posted by: nobodyknows
I'm begining to think we should be spending some of our stimulus money on bounty hunters.
Agree

The guy even was paid $1 million a month after being fired . I don't see how anyone at AIG could justify their actions.
 

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