UPDATE 1-US drops criminal probe of AIG execs -lawyers

* Probe focused on complex securities

* AIG welcomes decision
(Updates with confirmation investigation dropped, lawyers’
comments, previous CHICAGO)

By Christian Plumb

NEW YORK, May 22 (BestGrowthStock) – The U.S. Justice Department
has dropped a probe of American International Group Inc (AIG.N: )
executives involving the credit default swaps that sent the
insurer to the brink of bankruptcy and forced a huge taxpayer
bailout, lawyers for the executives said on Saturday.

The investigation had centered on AIG Financial Products,
which nearly brought down the giant insurer after writing tens
of billions of dollars on insurance-like contracts on complex
securities backed by mortgages that turned out to be toxic.

The U.S. government stepped in with a $182 billion bailout
to avert a bankruptcy filing by AIG.

The criminal probe had focused on whether Joseph Cassano,
who ran the financial products unit, and Andrew Forster, his
deputy, knowingly misled investors about the company’s
accounting losses on its credit default swaps portfolio.

“Although a 2-year, intense investigation is tough for
anyone, the results are wholly appropriate in light of our
client’s factual innocence,” F. Joseph Warin and Jim Walden,
Cassano’s lawyers, said in a statement.

Forster’s lawyers also confirmed the probe had been

“We were very pleased but not surprised to hear from the
DOJ late yesterday that they were dropping the criminal
investigation of our client,” David Brodsky, one of Forster’s
lawyers, said in a statement. “In the end, the facts were
stronger than the emotions surrounding AIG’s problems.”

The Department of Justice declined to comment.

AIG said in a statement it welcomed the decision’

The Wall Street Journal first reported on Friday that the
two-year investigation, one of the highest profile of the
various probes stemming from the 2008 financial meltdown, had
been dropped.

The FBI and other government agencies had been looking into
whether Cassano misled investors with overly optimistic
forecasts about the extent of the firm’s exposure to securities
backed by risky subprime mortgages.

Investigators were said to have focused on a December 2007
investor presentation at which Cassano played down the market
value of losses on the credit default swaps.

Over the course of the next year, AIG took writedowns of
more than $40 billion on the swaps and had to put up billions
more in collateral to counterparties like Goldman Sachs
(GS.N: ).

Cassano resigned under pressure in March 2008 as AIG’s
financial situation began to weaken.

Investment Basics

(Additional Reporting by Jim Marshall in Chicago and Jim
Vicini in Washington; Editing by Peter Cooney)

UPDATE 1-US drops criminal probe of AIG execs -lawyers