We'll have some commentary on this story later, but for now enjoy the video update from Armen Keteyian of CBS.
From CBS:
A $5 million Connecticut mansion. A $4 million London townhouse. A $7 million English estate. The houses are owned by three men CBS News has learned are now the subjects of a Justice Department criminal investigation into how AIG crumbled.
Sources say investigators are digging into whether Joseph Cassano, the former head of London-based AIG Financial Products, and two of his top deputies - Andrew Forster, an executive vice president, and Thomas Athan, a managing director - committed securities fraud and other federal crimes, reports CBS News chief investigative correspondent Armen Keteyian.
At issue: whether they intentionally provided false information about the size of AIG's loses in the mortgage-backed securities market to the public and auditors.
"They would look at the email traffic to try and see who was saying what to whom," said John Laperla, a former fraud investigator for the U.S. Postal Inspection Service.
"The criminality would be if someone willfully intended to basically put in false information and ultimately defraud the general public and the stockholder," Laperla said.
CBS News has learned investigators are honing in on statements like one in a September 30, 2007, quarterly report, where potential accounting losses tied to its Cassano's unit, known as AIGFP, were $352 million. And the company said it was "highly unlikely..{it} will be required to make payments." To clients, it was an indication the company was saying it was healthier than it actually was.
Also under scrutiny is a November 7 press release where AIGFP upped that potential accounting loss to $550 million.
But by the end of the year the potential losses became real and devastating, ballooning to more than $11.5 billion.
"That's a significant red flag," said Patricia Pileggi, a former federal prosecutor. "I mean a jump like that in three months raises real questions."
In a statement AIG told CBS News: "To date, neither AIG nor AIGFP is aware of any fraud or malfeasance in connection with the underwriting and creation of the multi-sector CDS portfolio, as opposed to what, with hindsight, turned out to be bad business decisions. AIG and AIGFP are, however, aware of ongoing investigations by the Department of Justice and the SEC with respect to the subsequent valuation of the multi-sector CDS portfolio under fair value accounting rules and related disclosures. We have cooperated fully with these investigations and will continue to do so."
A senior AIG official told us: "Everyone at the corporate office was stunned when the problems with valuing the CDS portfolio came to light in February of 2008. It became clear immediately that the potential losses on the swaps were far greater than anyone imagined. That’s when (Martin) Sullivan asked (Joseph) Cassano to resign."
Through their attorneys for both Cassano and Forester declined comment on our story. Athan's attorney said his client arrived at AIGFP after it "sustained substantial losses" and was working "to help minimize the continuing risk."
And now CBS News has learned that Athan and Forster pocketed bonuses paid out by AIG just two months ago - in the midst of a federal investigation. Sources say they are now negotiating a way to pay them back.