Say it Ain't So, Joe

Once in a while, you can still hear someone complain that CEOs and power players in the corporate world always seems to walk away from disaster and scandal while the regular folks end up suffering and going to jail. Actually, nothing could be further from the truth. Just ask former WorldCom CEO Bernie Ebbers or former Tyco CEO Dennis Kozlowski, who received long prison sentences in the wake of the telecom bust. Or ask the guys from Enron. This common misperception about the wheels of justice stems in part from the fact that it takes a long time to build a criminal case. The scandal breaks one day, but it's months or years before the people at the top are truly held accountable. (The justice system moved faster in Bernie Madoff's case, but he's special.)

In the case of Joe Cassano of AIG, the process of building a case is 18 months old and counting. The Wall Street Journal reported that federal prosecutors in Brooklyn may soon empanel a grand jury to weigh the possibility of an indictment. The WSJ also reported that the SEC and the Justice Department are looking into whether Cassano committed securities fraud by overstating the value of mortgage-related contracts and failing to make disclosure to AIG auditors. Cassano, who led the AIG Financial Products unit, brought AIG to the brink of failure, putting pressure on the entire global financial system.

The Cassano case will be important for several reasons. Securities law is often murky, and the line between fair play and foul is often clarified by big cases, such as the insider-trading prosecutions of the 1980s. If charges are brought in the Cassano case, they could help clarify where prosecutors think that line ought to be drawn when it comes to the financial crisis of the last two years. Once that line is drawn, some people will find themselves on the wrong side, staring into the void. Cassano could be just the beginning of a series of high-profile prosecutions in the financial sector.