Criminal Failure to Disclose
April 29, 2009 Leave a comment
The criminal investigation into the accounting practices at AIG is progressing and the focus is none other than Joseph Cassano, former head of the Financial Products group that brought AIG to its knees. Here is what the Wall Street Journal reported yesterday.
Federal prosecutors are also focusing on a December 2007 investor presentation in which Mr. Cassano said write-downs tied to the swaps had reached an estimated $1.6 billion. Authorities are looking at whether Mr. Cassano should have disclosed to investors that the figure would have been higher by several billion dollars if not for the aid of a value adjustment known as “negative basis,” according to people familiar with the matter. Several months later, when AIG disclosed that its auditor, PriceWaterhouseCoopers, found a “material weakness” in its accounting of the swaps, it said it would abandon the adjustment, according to company filings.
Had it not been for the identification of a material weakness by the auditors, who knows how long it may have taken to properly disclose the losses. At this point, it looks like Mr. Cassano deserves to be bunkmates with Bernard Madoff.