The Justice Department has decided not to file criminal charges against the former head of a division at American International Group Inc. whose dealings in mortgage-related securities nearly bankrupted the company and led to a controversial government bailout, according to lawyers involved in the cases.

The decision appears to bring an end to the criminal investigation of AIG, but a Securities and Exchange Commission probe into AIG and the dealings of its London-based Financial Products subsidiary is continuing and could lead to a civil securities fraud case.

Lawyers representing Joseph Cassano, who formerly ran AIG’s Financial Products unit, and Andrew Forster, who worked for Cassano, said they were told by federal prosecutors late Friday that no criminal charges would be filed.

A person familiar with the government’s criminal investigation of AIG confirmed that charges wouldn’t be brought. The person was not authorized to speak publicly on the matter and spoke on condition of anonymity.

The Justice Department declined comment Saturday.

SEC investigators have been involved in the case from the start, but it is unclear when a decision would be made on a civil fraud case.

Federal prosecutors were investigating AIG’s Financial Products unit, which dealt in financial contracts called credit default swaps that helped sink AIG in September 2008, leading to a taxpayer-funded bailout. The credit default swaps AIG sold were insurance-like guarantees on mortgage securities that wound up forcing AIG to pay out billions of dollars after the housing market went bust.

Investigators were looking into whether Financial Products officials tried to deceive investors and AIG’s auditors, PricewaterhouseCoopers, by misstating the accounting value of a credit default swap portfolio.

When AIG posted a loss for the fourth quarter of 2007, it pinned the blame on an $11 billion writedown related to the credit default swaps held by its Financial Products group.

If AIG couldn’t make good on its promise to pay off the contracts, many of which were held by major banks, regulators feared the consequences would pose a threat to the whole U.S. financial system. That led the government to go ahead with the $180 billion bailout.

Cassano’s attorneys, F. Joseph Warin and Jim Walden, said in a statement that the two-year federal investigation was intense and difficult.

“The results are wholly appropriate in light of our client’s factual innocence,” said the statement, which lauded federal agents and prosecutors for following the facts to end the case. “This result was the product of two things: An innocent client and fair prosecutors and agents.

The system worked,” the statement said.

The bill, which passed on a 247-171 vote, would give the U.S. Treasury broad powers to prohibit “unreasonable and excessive” compensation and bonuses that are not based on performance standards.

The new curbs would apply to all employees, not just executives, of firms that have received capital investments from the Treasury’s $700 billion financial rescue fund. The standards also would cover compensation paid to an employee after leaving a firm or before joining it.

Even more surprising according to Malkin’s post is that Eric Cantor pulled an Obama and voted “present”. WTF is up with that?

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

All of the people should be executed with piano wire around their neck.

After which Frank smirked, “I am not persuaded:”. What if this same threat had been that homosexuals should be strangled with piano wire? Wouldn’t Barney be calling on the FBI to find the culprit and hang him/her?

Can’t bash Democrats here, but WTF! Heres a quote from the MyWay article

The Republican lawmaker’s harsh comments came during an interview with Cedar Rapids, Iowa, radio station WMT on Monday. They echo remarks he has made in the past about corporate executives and public apologies, but went further in suggesting suicide.

“I suggest, you know, obviously, maybe they ought to be removed,” Grassley said. “But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of two things: resign or go commit suicide.

“And in the case of the Japanese, they usually commit suicide before they make any apology.”

Grassley spokesman Casey Mills said the senator isn’t calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.

“Senator Grassley has said for some time now that generally speaking, executives who make a mess of their companies should apologize, as Japanese executives do,” Mills said. “He says the Japanese might even go so far as to commit suicide but he doesn’t want U.S. executives to do that.”

The senator’s remarks added to a chorus of public outrage over the disclosure that AIG intends to pay its executives $165 million in bonuses after taking billions in federal bailout money. President Barack Obama lambasted the insurance giant for “recklessness and greed” on Monday and pledged to try to block payment of the bonuses.

Being that this did come from a braindead Republican, I’m sure the media will be all over this story.