Tuesday, June 29, 2010

The SEC and DOJ Fold

"The Justice Department's decision last week to abandon a criminal probe against current and former exectuives at [AIG] underscores the difficulty facing prosecutors who want to hold individuals criminally accountable for the financial crisis. ... But, late last Friday, Mr. Cassano and two colleagues who were also investigated were told through their lawyers that they wouldn't face criminal charges after prosecutors found evidence supporting Mr. Cassano's account, people familar with the matters said. ... The conclusion of the two-year criminal investigation marks a setback for prosecutors who have come under public and political pressure to find evidence of criminal conduct in the wake of the recession. ... The travails aren't over for Mr. Cassano. The [SEC], which has to meet a lower standard of proof, is considering whether to file civil charges, according to people familiar with the matter. Mr. Cassano's lawyers declined to comment on the civil probe. ... For months, they believed Mr. Cassano hadn't disclosed to senior AIG executives or its auditors, PricewaterhouseCoopers LLC, that an accounting adjustment allowed his unit to avoid writing down the value of its swaps by billions of dollars, these people said. PwC declined to comment", Amri Efrati at the WSJ, 24 May 2010: http://online.wsj.com/article/SB10001424052748704904604575262942729708122.html.

"The [SEC] dropped its investigation of a former [AIG] executive who ran a subsidiary at the center of AIG's problems, following a similar move last month by prosecutors. ... Federal investigtors looked into whether [Joseph] Cassano misled investors with reassuring statements about AIG's exposure to mortgage losses, people familiar with the matter have said. A turning point came when prosecutors found evidence Mr. Cassano did make key disclosures. ... Mr. Cassano's lawyers called the SEC's move 'completely appropropriate in light of the facts.' They said the SEC staff 'realized that our client acted in good faith, kept his superiors informed, and was honest with investors", Kara Scannell at the WSJ, 17 June 2010, link: http://online.wsj.com/article/SB10001424052748703513604575311350142446886.html.

Well SEC? Will you now go after PWC for its wonderful AIG audit? Well PCAOB?

I expected this after the DOJ folded.


Anonymous said...

Any wonder that the American people have lost confidence in their government.

If the government exposed the truth on AIG the people would tar and feather Paulson, Geithner and Bernanke. And a few others too...

The AIG scandal is bigger than Teapot Dome... astounding that no one has any "fault".

Independent Accountant said...

Albert Fall went to prison after Teapot Dome. I agree, why are: Paulson, Geithner and Blankfein still at large? I'll give Zimbabwe Ben a pass. He's just a lower level functionary.