WESTPORT, Connecticut / NEW YORK (Reuters) - Joseph Cassano has come home to face the music.

The former AIG executive closely associated with one of the most sensational collapses in corporate history, recently slipped back into the United States.

Under intensifying investigations by the FBI and other agencies, the 54-year-old Cassano had until recently been living in London.

It was from there that he ran the AIG Financial Products business that triggered most of the insurer's massive losses and threatened to crash the global financial system until the US government stepped in with a $182 billion bailout.

But now he and his wife, Ellen Hooker, have left the posh home originally leased for him by American International Group Inc in the tony Knightsbridge area of London, close to Harrods department store, and returned to live in his clapboard house in bucolic Westport, Connecticut.

It is a short drive away from the financial products unit's US offices in Wilton and is in an area that only six months ago was the scene of protests outside the homes of AIG executives (though not Cassano's) by activists angered at the company's decision to grant them $165 million in bonuses.

Populist outrage at the bonuses, much of which were eventually returned, even led to death threats being made to some of the executives.

The return of the former executive, who was described by the author Michael Lewis in an article in Vanity Fair in August as being "as responsible for a series of disastrous trades as a person in a big company can be", will surprise some.

There had been speculation he would remain in London to hide from criticism in the United States and to distance himself from the investigation.

But his attorney, Joseph Warin, says Cassano, who has not been working since the ending of a $1 million-a-month consulting agreement with AIG around the time of last September's bailout, always intended to return to the US.

"Despite what you have read, Joe owns no house in London. His house is here and it is where he lives. He is not ducking anyone," said Warin.

Cassano was among a group of traders from investment bank Drexel Burnham Lambert to join AIG and set up the financial products business in 1987 and he took control of the operation in 2001. Drexel Burnham collapsed in 1990 after it was enveloped in a securities scandal related to its dominance of junk bond trading.

He is fully cooperating with all investigations into the losses at AIG Financial Products, according to his attorney.

"We are working hard to make sure they (prosecutors), have all the facts," Warin said. "When all the facts are known, we are confident that the authorities will see that his actions were appropriate."

On recent visits to Cassano's house, which is about an hour's drive from AIG's Manhattan HQ, there was little sign that it is the residence of a man who received hundreds of millions of dollars in compensation from the company over the 21 years he was there.

The home, which the bespectacled Cassano bought in 1993 for about $750,000, according to real estate records, is most notable for how modest it is compared with some of the far grander houses nearby. The records show it only has two bedrooms, although it does have four bathrooms, an in-ground pool, a bathhouse and two fireplaces.

Instead of the flashy BMWs that dot the driveways in the town, which is part of an area known as the "Gold Coast" because of the area's prosperity and concentration of hedge funds, the couple still makes do with the his-and-her Jeep Cherokees they bought 12 years ago and which are parked out front.

When a reporter came calling last Wednesday, his wife answered the door, although there was clearly a man who appeared to be Cassano beside her, but partially hidden behind the door.

The 61-year-old Hooker, who has short blond hair and was wearing a button-down shirt and a gold chain, was wary but polite and said Cassano was "not available right now" but may be in touch. Later, through his lawyer, Cassano declined the interview request.

More than a year after AIG was rescued by taxpayers, the investigation into any criminal wrongdoing at AIG is still inching along.

A law enforcement source briefed on the US probe remarked on the difficulty and complexity of the case, but said the investigation had "moved forward".

"It is an intense case," said the source, who asked not be identified because of the ongoing investigation. "There have been a lot of interviews and a lot of documents to review."

The probe involves a range of investigators — prosecutors in the Eastern District of New York in Brooklyn, teams of agents from the FBI, the US Postal Inspection Service and the Securities and Exchange Commission.

The director of Britain's Serious Fraud Office, Richard Alderman, said the SFO has been collaborating in the US case with federal, state and city agencies.

The SFO opened its own investigation into Cassano's financial products unit in February because much of the action took place at AIG's Curzon Street offices in London's Mayfair district, an area that is home to many hedge funds.

"I don't think they get any more difficult than AIG," Alderman said in reference to the investigation in an interview during a visit to New York last week.

"It's hugely difficult to understand what AIG were doing; to understand the products that were being put together; to try to understand who knew what and whether or not the people who were selling them understood what was in there and whether or not they made false representations to others; what management in the offices knew about the product."

Alderman added the investigation is "not going to be easy, it's not going to be quick".

Cassano, the son of a cop from Brooklyn, is seen by many as being at the centre of a disaster that could have led to the meltdown of many major financial institutions without the government rescue.

AIG Financial Products wrote a form of insurance, known as credit-default swaps, on the bonds created out of the subprime home mortgage loan market during the US housing boom.

The only problem was that, when the loans began to sour and the bonds lost value, the banks that had taken out the insurance demanded collateral from AIG — money it just did not have — in the insurance industry's equivalent of a run on a bank.

The sums may be enormous and the anger may be deep whether among the public or government officials, but that does not mean prosecutors will find it easy to make a case against Cassano or anyone else at AIG.

Since the financial crisis began two years ago, the US authorities have struggled to bring cases against those who may have helped to cause it. Two former hedge-fund managers at Bear Stearns have been charged with misleading investors about the financial health of their fund, but there have been precious few other cases.

Much will depend on whether evidence shows investors were deliberately misled or if Cassano and others can show they were as shocked as anyone by the blow-up.

At an investor meeting in late 2007 Cassano estimated market-value losses on the credit-default swaps could be as high as $1.1 billion. Over the course of the next year, AIG took write-downs of more than $40 billion on these securities and had to put up billions more in collateral to counterparties.

When former AIG CEO Maurice (Hank) Greenberg set up AIG Financial Products he was keen to get into the business as a means to diversify the company's earnings to insulate it from the highs and lows that are a trademark of global insurance markets. But what started out as a small sideline grew by the middle of this decade into a business whose bets far exceeded AIG's total capital.

Cassano was portrayed as dictatorial and bullying, and described as a "cartoon despot" in the Lewis article, but is clearly now trying to keep a low profile.

His return to Westport has gone largely unnoticed and few seem to know they have such a "financial crisis celebrity" in their midst.

Tom Henry, editor of weekly newspaper the Westport Minuteman, said he was aware of Cassano, but that was about it.

"It has gone by our radar, but up to now we have not written about him," he said.

A shopkeeper at Longshore Country Club's golf shop, adjacent to where Cassano lives, said he never encountered him, and at a cafe close to the town's railroad station, Cassano's name also rang no bells.

His name, though, should ring bells at a number of non-profits. The couple has donated tens of thousands of dollars to charities each year, including to Brooklyn's Prospect Park and Botanic Garden, as well as Cassano's alma mater, Brooklyn College.