WILMINGTON, Del. (CN) – American International Group Financial Products CEO Joseph Cassano got a $34 million retirement bonus and another $9 million for a 9-month “consulting contract” after helping to drive AIG to collapse by losing $33 billion in the subprime credit market, shareholders say in a Chancery Court class action.
The shareholders derivative complaint cites New York Attorney General Andrew Cuomo, who said that Cassano’s division, AIG-FP was “largely responsible for AIG’s collapse.”
It cites U.S. Rep. John Sarbanes, who said at an Oct. 7, 2008 hearing of the House Committee on Oversight and Governance Reform that “it appears to me that [Joseph Cassano] single-handedly brought AIG to its knees.” (Bracketed words in complaint.)
It quotes former SEC Chief Accountant Lynn Turner, who testified that “poor management and governance [at AIG] led to a poor tone at the top and lack of risk management controls,” and that AIG “has engaged in questionable business practices, including assisting others (to) engage in illegal activities.”
The complaint continues: “Nevertheless, in March 2008, the AIG-FP Board and the AIG Board permitted Cassano to ‘retire’ ‘without cause’ with a lucrative compensation package consisting of a $34 million bonus and a nine-month consulting contract worth an additional $9 million. The agreement also released any employment-related claims Cassano might have against AIG’s officers and directors. After allowing Cassano to walk away from AIG-FP with this egregious sum, neither the AIG-FP Board nor the AIG Board sought to recover any of Cassano’s compensation or to pursue claims on behalf of the company for the damage he caused.”
Shareholders sued in “a double derivative action on behalf of nominal defendant AIG Financial Products Corp. (‘AIG-FP’) seeking to recover damages and obtain disgorgement of unjust profits from defendant Joseph Cassano, AIG-FP’s former president and chief executive officer, for breaches of Cassano’s duty of loyalty to AIG-FP.”
AIG insured $500 billion in debt instruments by 2007, the complaint states. It claims that Cassano and other top dogs pushed the company into risky investments that paid off in the short term because “under the AIG-FP compensation structure, top management received 30% of the operating earnings they produced for the parent company. Consequently, for every dollar of revenue, Cassano and top management received $0.30.”
Plaintiffs claim Cassano deliberately concealed losses in CDOs and subprime-backed securities, telling the AIG Vice President of Accounting in September 2007, “I have deliberately excluded you from the valuations of the [CDOs] because I was concerned you would pollute the process.” (Brackets in original.)
The federal government kept AIG from collapse by throwing $85 billion at it on Sept. 16, 2008. On Oct. 8, the government “increased the possible loans to $123 billion,” and on Nov. 9 it upped its ante to “a new package worth about $150 billion – of which up to $60 billion is a loan,” according to the complaint.
Plaintiffs’ lead counsel it Pamela Tikellis with Chimicles & Tikellis.