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Expert: Allegation That Cassano Blocked Auditor Is "Analogy To Obstructing Justice"

These allegations -- and others, in which Cassano also limited the involvement of the firm's outside auditor, Pricewaterhouse Cooper -- are contained in an investor lawsuit filed in Delaware chancery court, which names Cassano and AIG's board as defendants.

The suit also charges that Cassano should be held liable for pushing "excessively risky" credit default swaps "in order to enrich himself." But according to Lyman Johnson, an expert in securities law at Washington & Lee University Law School, its the effort to obstruct the auditors that could be most damaging.

"If [Cassano] was deliberately interfering with the standard internal controls mechanism...then that's a much more culpable misdeed than simply making bad business decisions," Johnson told TPMmuckraker, adding "If it's not a red flag, it's a pretty serious yellow flag."

Stressing the seriousness of interfering in this way with internal controls, Johnson called it "a civil analogy to obstructing justice."

And he added that the charge was reminiscent of both the Enron and WorldCom cases, in which key accounting details were alleged to have been withheld from outside auditors.

Those, of course, were cases of criminal wrongdoing. So it's worth noting that what little we know about the criminal probe of AIGFP suggests that investigators are more focused on the issue of whether Cassano and others gave false statements to investors about the company's exposure to losses, than on the issue of obstructing auditors. Still, that fact may be doing little to help Cassano sleep at night.

Neither St. Denis, nor Cassano's lawyer, Joseph Warin, immediately returned calls from TPMmuckraker.