SEC Closes Inquiry of AIG Exec Joseph Cassano

The Securities and Exchange Commission has decided to close its inquiry of Joseph Cassano, the former head of AIG's financial products unit, without taking any action against him, CBS News has learned.

Word of the SEC's decision followed similar action by the Justice Department, which decided not to file criminal charges against Cassano, whose dealings in mortgage-related securities nearly bankrupted American International Group Inc. and led to a controversial $182 billion federal bailout of the insurance titan.

The Justice Department also had decided not to bring criminal charges against Andrew Forster, who worked for Cassano.

Cassano's lawyers, F. Joseph Warin and Jim Walden, said they were pleased by both decisions. The SEC staff "demonstrated the utmost professionalism in this matter," they said in a statement. "We think they realized that our client acted in good faith, kept his superiors informed and was honest with investors."

SEC spokesman John Nester declined to comment.

The agency has been investigating AIG and the dealings of its London-based Financial Products subsidiary. It is unclear whether that probe will lead to civil fraud charges.

The subsidiary dealt in complex financial contracts called credit default swaps that helped sink AIG in September 2008, leading to the taxpayer-funded bailout. The credit default swaps AIG sold were insurance-like guarantees on mortgage securities that wound up forcing AIG to pay out billions of dollars after the housing market went bust.

Investigators were looking into whether Financial Products officials tried to deceive investors and AIG's auditors, PricewaterhouseCoopers, by misstating the accounting value of a credit default swap portfolio.

When AIG posted a loss for the fourth quarter of 2007, it pinned the blame on an $11 billion writedown related to the credit default swaps held by the Financial Products unit.

If AIG couldn't make good on its promise to pay off the contracts, many of which were held by major banks, regulators feared the consequences would pose a threat to the whole U.S. financial system.

Cassano left AIG in 2008, shortly after the $11 billion loss was reported.

The AIG bailout has drawn much public anger, largely because the company paid employees $165 million in retention bonuses after the company nearly failed and had to be bailed out by the government. A watchdog panel said last week it's still unclear whether U.S. taxpayers will ever fully recoup the $182 billion they plowed into AIG, and the government should have used up all its options before bailing out the company.