DOJ drops criminal probe of AIG executive Sarah Miley at 9:45 AM ET
[JURIST] The US Department of Justice (DOJ) [official website] has decided not to file charges against former American International Group (AIG) [corporate website] executive Joseph Cassano, according to prosecutors from the US Securities and Exchange Commission (SEC) [official website] on Saturday. The decision appears to end a two-year criminal investigation of several executives from AIG's Financial Products subsidiary [official website], which played a large role in constructing complex contracts known as credit-default swaps [TIME backgrounder] that insured bond losses tied to the US housing market. The SEC investigation was undertaken to determine whether AIG officials deceived investors and auditors in 2007 by misrepresenting the accounting value of a credit default swap portfolio, which nearly bankrupted the company. The SEC will continue its investigation into the London-based Financial Products subsidiary and could eventually lead to civil actions.
In August former AIG executives agreed to settle [JURIST report] a suit brought by the SEC alleging their involvement in inflating the company's reported financial records. The SEC accused former CEO Maurice Greenberg and former CFO Howard Smith of being "control persons" under the Securities Exchange Act [text], making them liable for AIG's securities law violations. The SEC claimed that the two executives made false statements which allowed the company to misrepresent key earnings between 2000 and 2005. Greenberg will pay $15 million in disgorgement and penalties without admitting any charges to "put these issues behind him," while Smith settled for $1.5 million.
Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible, ad-free format.