With AIG bonuses sparking outrage from taxpayers and lawmakers, government investigators have the company in its crosshairs, investigating whether its executives misled investors and government regulators about its financial health.
In Securities and Exchange Commission filings, AIG acknowledges that it is under federal scrutiny for and notes that it is cooperating with the government's probe.
Investigators are looking at statements from company leaders, who sometimes painted a sunny picture, even in the months and weeks before financial implosion. More than 100 companies are under federal scrutiny for possible fraud; last September, FBI Director Robert Mueller said bureau investigators were looking at "larger corporations, who may have engaged in misstatements in the course of what transpired during this financial crisis."
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In August 2007, Joe Cassano, then head of AIG Financial Products, held a conference call with investors, reassuring them that the company was financially sound, despite its involvement in a growing housing finance meltdown.
"It is hard for us with, and without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions," he said, referring to credit default swap transactions.
And in October 2007, AIG ran a television ad promoting its solvency and financial savvy.
"Who do you go to in the clutch?" the ad asked, while noting that more than 65 million customers rely on the company "when their money is on the line."
In December 2007, more confidence from AIG leadership, despite darkening economic clouds, when then-AIG President and CEO Martin Sullivan described the company's exposure as "manageable" and that it was "confident in [its] marks and the reasonableness of [its] valuations."
Three months later in February 2008, Sullivan said that "AIG is well positioned to grow shareholder value despite the current turbulent environment."
The next month, with the housing market collapsing, AIG leadership told investors not to expect "significant losses" despite the economic uncertainty.
Sullivan reiterated the confident statements in May 2008, telling investors that, with the exclusion of "external market issues, the underlying fundamentals of our core businesses remain solid."
But within weeks, AIG recorded losses in the billions of dollars.
'Great Company' AIG Gets a Bailout
Company officials addressed investors again in an August 2008 conference call.
On that call, they acknowledged challenges, but still, they said, AIG was strong enough to survive and become profitable again.
Even the company's then-chairman and CEO, Robert Willumstad, said, "I'm convinced AIG is a great company."
The company's executives were proved wrong once again, when, just days later, the government asked taxpayers to provide $85 billion to bail the company out.
Now, the government is investigating whether these and other statements made to investors knowingly misrepresented the facts, painting a much rosier picture of the company's financial fortunes.
FBI and SEC investigators are hunting for whistle-blowers and is subpoenaing company e-mails and internal documents to see if the facts match the company rhetoric. Contacted by ABC News, AIG declined to comment on the matter.
"The government wants to know whether what people were seeing inside AIG was the same as what they were telling the American people," former Justice Department prosecutor and current George Washington University law professor Stephen A. Saltzburg told ABC News.
A key target is the AIG Financial Products group -- the unit that presided over the company's meltdown -- now scheduled to receive some of the $165 million the company has set aside for bonuses.
"The people who caused the problem are being rewarded for their bad behavior," said Saltzburg.
He added, "I don't know we've ever seen a situation like this where the government is bailing out companies too big to fail and also investigating them at the same time for criminal activity."
So far, the investigation hasn't stopped AIG from doling out huge bonuses, but if the investigation uncovers wrongdoing, some company officials could end up behind bars.