New Class Action Targets Former AIG CEO Cassano


Warning: Illegal string offset 'wordbooker_share_button_post' in /nfs/c07/h01/mnt/112606/domains/subprimeshakeout.com/html/wp-content/plugins/wordbooker/wordbooker.php on line 1784

Warning: Illegal string offset 'wordbooker_share_button_page' in /nfs/c07/h01/mnt/112606/domains/subprimeshakeout.com/html/wp-content/plugins/wordbooker/wordbooker.php on line 1785

Warning: Illegal string offset 'wordbooker_like_button_post' in /nfs/c07/h01/mnt/112606/domains/subprimeshakeout.com/html/wp-content/plugins/wordbooker/wordbooker.php on line 1937

Warning: Illegal string offset 'wordbooker_like_button_page' in /nfs/c07/h01/mnt/112606/domains/subprimeshakeout.com/html/wp-content/plugins/wordbooker/wordbooker.php on line 1938

Warning: Illegal string offset 'wordbooker_like_button_post' in /nfs/c07/h01/mnt/112606/domains/subprimeshakeout.com/html/wp-content/plugins/wordbooker/wordbooker.php on line 1856

Warning: Illegal string offset 'wordbooker_like_button_page' in /nfs/c07/h01/mnt/112606/domains/subprimeshakeout.com/html/wp-content/plugins/wordbooker/wordbooker.php on line 1857

Courthouse News Service reports that a new shareholders derivative complaint has been filed in the Chancery Court in Delaware against former American International Group Financial Products (AIG-FG) CEO and president Joseph Cassano for allegedly driving AIG to ruin by losing $33 billion in the subprime credit market.

The double derivative lawsuit, filed by the law firm Chimicles & Tikellis on behalf of shareholders of AIG-FG, who themselves are suing on behalf of nominal defendant AIG-FG, seeks to recover damages and obtain disgorgement of unjust profits from Cassano for breaches of his duty of loyalty to AIG-FP. The suit quotes New York Attorney General Andrew Cuomo as saying that AIG-FP was “largely responsible for AIG’s collapse” and U.S. Rep. John Sarbanes, who said during a hearing of the House Committee on Oversight and Governance Reform that “it appears to me that [Cassano] single-handedly brought AIG to its knees.” The suit further alleges that despite Cassano’s poor management and questionable business practices, the AIG board permitted Cassano to retire with a lucrative compensation package worth upwards of $43 million.
It will be interesting to see how well such derivative shareholder class actions fare in pinning responsibility for large financial crisis-related losses on the executive of major financial institutions (see prior article on loss causation issues). Given the scope of this crisis, it is difficult to believe that any individual “single-handedly” brought a company that in 2007 insured $500 billion in debt instruments to its knees. And proving such massive loss causation in a court of law would be even harder.
While we would love to hold those at the top, who certainly made many questionable decisions and exercised poor judgment during the last several years, responsible for their actions, and while it rankles our sense of justice to see these individuals walk away with millions, it was the financial climate (fueled and supported by everyone from national governments to individual borrowers) that made such massive abuses possible. I’m not suggesting that people like Cassano, if it can be proven that they acted negligently or criminally, should not be held responsible. But, it is far too easy to blame this on a few high-powered individuals, rather than taking a hard look at the circumstances and the society that engendered and encouraged yet another financial bubble to mutate unsustainably.
Whenever too much money chases too few good investments, it creates a climate ripe for another meltdown; and until the incentives change, the villains may be different, but the results will stay the same.
This entry was posted in AIG, causes of the crisis, class actions, derivative lawsuits, incentives, litigation, loss causation, public perceptions, shareholder lawsuits, subprime. Bookmark the permalink.