The UK Serious Fraud Office announced that it had launched a preliminary inquiry today into the UK operations of American International Group's AIG Financial Products Corp. subsidiary.

Its announcement said it is cooperating with U.S. authorities whom, it noted, are already conducting separate, independent investigations involving conduct at AIG Financial Products Corp.

In a financial filing AIG has said it is being looked at by the Securities and Exchange Commission, Department of Justice and FBI over the AIGFP valuation disclosures concerning its portfolio.

SFO said it is also working on the probe with the UK-based financial services regulator, the Financial Services Authority. SFO noted that its inquiry does not concern the insurance operations of AIG in the UK or elsewhere.

The agency said its “swift action is in keeping with its new approach under the current director of intervening proactively at an early stage when it is made aware of irregularities which warrant further investigation.”

The Director of the Serious Fraud Office, Richard Alderman, said in a statement that, “It is right for us to look into the UK operations of AIG Financial Products Corp., to determine if there has been criminal conduct. We will use our full range of powers to seek information and to speak to those with an inside knowledge of the company's operations.”

AIG Financial Products Corp. and AIG are cooperating with the SFO and have offered their assistance to the SFO as it conducts its inquiry.

In addition to announcing that it is cooperating with the probe, AIG noted that it had disclosed last year that it was in the process of unwinding certain of AIGFP's and its subsidiaries' businesses and portfolios, including those in the UK.

The company said there are approximately 370 employees in AIGFP worldwide who are working on the winding down of the business.

AIGFP's involvement in credit default swaps on collateralized debt obligations caused the parent conglomerate massive losses, which forced it to give the U.S. government a 79.9 percent interest in the company in exchange for billions in government loans.

AIGFP was headed by Joseph Cassano who was fired Feb. 29, 2008 after his operation lost $11 billion. He was allowed to retain $34 million in bonuses and was kept on for awhile as an AIG consultant at a $1 million per month salary.

The London Times reported that AIG is one of around six preliminary investigations into suspected financial scandals being conducted by the SFO and include the Bernard Madoff, pyramid scheme.

(Daniel Hays can be contacted at dhays@nuco.com or 201-526-1245)

Special Reports /

UK Fraud Unit Probing AIG Financial Products

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