HARTFORD (Bloomberg) — American International Group Inc.'s derivatives unit, which brought the firm to the brink of failure by betting on subprime loans, was sued by two ex-vice presidents who said a "boys club" culture discriminated against women.

Susan Potter, 56, alleged that Joseph Cassano, the ex-head of AIG Financial Products, said he prefers young workers with "curb appeal" to those who look like his aunt. A managing director appointed to handle sexual harassment complaints said AIG should replace some staff with young and attractive workers, according to the complaint filed on Monday in federal court in Connecticut.

Potter and Deonna Taylor, 62, said managers misled them about salary caps, paid younger and male employees more for similar work and fired them in retaliation for filing discrimination charges. Cassano ran Financial Products until March 2008 when AIG reported a $5.29 billion net quarterly loss fueled by his unit's bets. The lawsuit is "disappointing" because Cassano, who isn't named as a defendant, treated staff fairly, his lawyer said yesterday. AIG denied any wrongdoing.

Cassano, 54, is facing criminal and civil probes into whether he misled investors about losses from swaps tied to subprime mortgages. Cassano, whose unit managed $2 trillion in derivative trades tied to bonds, currencies, commodities and stocks, told investors in December 2007 that "it is very difficult to see how there can be any losses" on contracts tied to home loans.

"AIG denies it discriminated or retaliated against these plaintiffs," said Mark Herr, a spokesman for the New York-based insurer. "AIG prohibits discrimination on the basis of age, sex or any other protected category and is committed to providing employees with a workplace free from discrimination and retaliation."

Financial Products "had many capable women at all levels, including in senior management, who thrived under Joe's supervision, including these plaintiffs," said Jim Walden, a lawyer for Cassano at Gibson, Dunn & Crutcher LLP in New York. "That they would now turn around and accuse Joe of tolerating, let alone encouraging, chauvinism is disappointing indeed. Joe Cassano hired, promoted, and supported employees based on a single criteria: merit."

The law firm provided copies of e-mails from the women, including one from Potter to Cassano in 2002 in which she thanked him for a "wonderful bonus" and one from Taylor in 2008 in which she thanked him for "a career opportunity."