According to ABC News, the Securities and Exchange Commission [SEC] has reportedly sent notifications (Wells notices) to various executives at American International Group (NYSE:AIG) Financial Products unit, known as AIG FP, letting them know that the agency’s enforcement division may recommend that the SEC take legal action against recipients.
The names of the AIG executives reportedly targeted, notes ABC, have not been disclosed, and the proceedings are kept private until the SEC files suit in federal court, should it choose to do so. Whether lawsuits alleging the firm committed securities violations will follow, is a subject yet to be determined at this point from the agency. What we do know from the release however, is that the SEC’s decision does not preclude a separate criminal indictment. Federal investigators are reportedly investigating former AIG FP CEO Joseph Cassano and possibly other current and former AIG execs for criminal fraud relating to the firm’s meltdown.
AIG FP unit, founded on January 27, 1987 and whose disastrous credit default swaps nearly pushed the giant insurer to the brink of bankruptcy, has largely been blamed for accelerating the deterioration of an already-weakening global economy.
SEC fines and penalties on some AIG FP executives, presumably including Cassano, “could range north of $1 million..and the loss of a professional license.” Joseph Cassano was receiving $1 million a month in 2008, after he had separated from the company. In all, Cassano reportedly raked in nearly $300 million with AIG, before leaving AIG FP. According to James Coffman, a retired 26-year veteran of the SEC’s enforcement division, the executives at AIG FP “did not appear to need any special licenses to concoct their exotic financial products”. Thus they likely would face only financial penalties.