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Former AIG Financial Products leader Joe Cassano to testify on Capitol Hill

By Brady Dennis
Washington Post Staff Writer
Wednesday, June 30, 2010; A12

Joe Cassano finally will speak.

The former leader of the unit that wrecked insurance giant American International Group has long served as one of the villains of the financial crisis. But for more than two years, he has remained hidden behind a veil of attorneys, silent and two-dimensional, a magnet for the anger and animosity generated by the bad choices and bailouts on Wall Street.

That could change Wednesday, as Cassano testifies on Capitol Hill before the 10-member Financial Crisis Inquiry Commission.

"He headed up AIG Financial Products," Phil Angelides, chairman of the bipartisan commission, said Tuesday. "He was at the center of this. He was a person extra-knowledgeable about the inner workings of that company and its relationship with others."

Angelides said Cassano already submitted to about five hours of interviews with staff ahead of Wednesday's hearing. His appearance comes as part of a larger exploration into the role of financial derivatives in the crisis, particularly the massive trading between AIG and Goldman Sachs. "Our role is to find out what happened," Angelides said. "We do hope to shed more light on how this system worked."

Cassano has mostly disappeared from the headlines, so much so that it's easy to forget the notoriety that once followed him, the hostility stirred up by the mere mention of his name and the lawmakers who called for his head.

For years, the son of a Brooklyn cop ran the Financial Products unit with an iron fist. His former co-workers in London and Wilton, Conn., described him as belligerent, driven and arrogant. They told stories about a boss who yelled and cursed, who belittled colleagues and bad-mouthed managers at AIG, and who, unlike his predecessors, did not tolerate dissent.

There's little doubt he was a company man, that his life revolved around Financial Products. He had come to the firm early in its existence, joining its founders shortly after they left Drexel Burnham in the late 1980s and taking the reins in 2002.

By most accounts, Cassano had a thirst for profits, a blind eye to risk and an obsession for the lucrative credit-default swap contracts that eventually brought AIG to its knees. He left Financial Products in early 2008, as the wheels were falling off and just months before its ruinous collapse prompted a near-meltdown of the global financial system.

Cassano walked away with more than $300 million in salary and bonuses. Taxpayers stepped in with a federal rescue package for AIG that would grow to more than $182 billion.

As public outrage exploded, first over the bailouts of AIG and later over the hefty retention bonuses paid to employees at Financial Products, Cassano remained out of sight, taking long bike rides through the English countryside. When speculation grew that he and other executives who had given upbeat assessments about the looming risks at AIG might face civil or criminal fraud charges, he said nothing. Even when it became clear that federal investigators had decided against charges and that Cassano and other AIG brass were off the hook, only his lawyers spoke for him.

The only glimpse most people have seen of Cassano is a picture that ran in newspapers and on television shows across the country. In it, he is peering warily from around the corner of his lavish London townhouse, his thin hair combed back, his wire-rimmed glasses clinging to his narrow face.

On Capitol Hill, there will be new pictures on Wednesday. More important, there will be words. His words.

Cassano will have a chance to air his side of the disaster. Chances are he will argue that he was merely a victim of the crisis rather than one of its causes, that no one could have foreseen the mortgage meltdown that led to Financial Products' demise.

Cassano will be joined by two other AIG executives whose reputations also have been sullied by the company's dramatic meltdown -- longtime chief risk officer Robert Lewis and Martin Sullivan, who took over as chief executive in 2005, as the company was gorging on the risky deals that eventually would sink it.

Sullivan was ousted by AIG's board months before the federal bailout. Like Cassano, he and Lewis have remained largely silent despite the criticism lobbed their way. An FCIC official said, however, that it did not take a subpoena to compel the men to appear on Capitol Hill.

The one place they have emerged was in thousands of e-mails obtained last year by The Washington Post. Their messages, written before the height of the crisis, revealed a company plagued by division and doubt.

At one point in February 2008, as the bad bets at Financial Products were beginning to overwhelm the firm, Cassano sent a particularly understated e-mail to colleagues.

"Quite a mess," he wrote.

On Wednesday, he'll have the chance to help explain just how that monumental mess happened.

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