(COMTEX) B: Ireland's biggest bank accuses U.S. trader of stealing dlrs
B: Ireland's biggest bank accuses U.S. trader of stealing dlrs 750 million in
options scam
BALTIMORE, Feb 06, 2002 (AP WorldStream via COMTEX) -- Ireland's biggest bank
has accused a currency trader at its Baltimore subsidiary of stealing dlrs 750
million in what could be the largest such scam since a rogue employee brought
down England's Barings Bank in the mid-1990s.
John Rusnak, 37, is suspected of defrauding Allfirst, the U.S. subsidiary of
Allied Irish Banks where he worked in the treasury department. He was not
charged by authorities, but lawyers said he met voluntarily with the FBI and
federal prosecutors Wednesday afternoon.
"My client is not a fugitive," attorney Bruce Lamdin said. "We hope that things
will take their natural course from here. That's up to the U.S. attorney's
office."
News of the scam sent financial stocks lower across Europe, led by Allied Irish.
Analysts said if such a conservative, well-run bank could suffer such a breach
of security, almost any bank could.
Five treasury workers at the bank have been suspended, including Rusnak. Allied
Irish said people outside the bank may also have been involved in the scam.
"We are hugely disappointed that our Allfirst control procedures failed to
uncover this situation at an earlier stage," Allied Irish chief executive
Michael Buckley said in Dublin. "The investigation now under way will determine
not only how it arose but also how we can guard against any recurrence."
Buckley said it was not clear whether Rusnak pocketed some or all the missing
money.
Bank officials described Rusnak as a married father of two who has worked at
Allfirst since 1993. They said he was paid dlrs 85,000 a year, a modest amount
for a currency trader with his experience.
Officials at the U.S. Attorney's office said they were investigating Rusnak and
the FBI confirmed that it was looking into missing money at Allfirst.
Rusnak has not shown up for work this week and bank officials said he would be
fired if he did. Lamdin, the attorney, said Rusnak is in Baltimore, but is
avoiding his home because of the reporters and photographers camped outside.
The case has stirred memories of Nick Leeson, the Singapore trader who destroyed
Barings Bank by piling up dlrs 1.4 billion in concealed losses. The case
prompted banks worldwide to tighten internal checks and balances.
(COMTEX) B: Ireland's biggest bank accuses U.S. trader of stealing dlrs
B: Ireland's biggest bank accuses U.S. trader of stealing dlrs 750 million in
options scam
BALTIMORE, Feb 06, 2002 (AP WorldStream via COMTEX) -- Ireland's biggest bank
has accused a currency trader at its Baltimore subsidiary of stealing dlrs 750
million in what could be the largest such scam since a rogue employee brought
down England's Barings Bank in the mid-1990s.
John Rusnak, 37, is suspected of defrauding Allfirst, the U.S. subsidiary of
Allied Irish Banks where he worked in the treasury department. He was not
charged by authorities, but lawyers said he met voluntarily with the FBI and
federal prosecutors Wednesday afternoon.
"My client is not a fugitive," attorney Bruce Lamdin said. "We hope that things
will take their natural course from here. That's up to the U.S. attorney's
office."
News of the scam sent financial stocks lower across Europe, led by Allied Irish.
Analysts said if such a conservative, well-run bank could suffer such a breach
of security, almost any bank could.
Five treasury workers at the bank have been suspended, including Rusnak. Allied
Irish said people outside the bank may also have been involved in the scam.
"We are hugely disappointed that our Allfirst control procedures failed to
uncover this situation at an earlier stage," Allied Irish chief executive
Michael Buckley said in Dublin. "The investigation now under way will determine
not only how it arose but also how we can guard against any recurrence."
Buckley said it was not clear whether Rusnak pocketed some or all the missing
money.
Bank officials described Rusnak as a married father of two who has worked at
Allfirst since 1993. They said he was paid dlrs 85,000 a year, a modest amount
for a currency trader with his experience.
Officials at the U.S. Attorney's office said they were investigating Rusnak and
the FBI confirmed that it was looking into missing money at Allfirst.
Rusnak has not shown up for work this week and bank officials said he would be
fired if he did. Lamdin, the attorney, said Rusnak is in Baltimore, but is
avoiding his home because of the reporters and photographers camped outside.
The case has stirred memories of Nick Leeson, the Singapore trader who destroyed
Barings Bank by piling up dlrs 1.4 billion in concealed losses. The case
prompted banks worldwide to tighten internal checks and balances.
Allied Irish insisted the damage is not comparable.
"It is a heavy blow, but I want to make the point very clearly that it's a blow
we will recover from," Buckley said.
Allied Irish said the scam involved forged purchasing records for options
contracts, starting early last year and ending just after Christmas.
According to Buckley, midlevel Allfirst managers confronted Rusnak by telephone
last weekend when the magnitude of the forgery was discovered. Allied Irish said
"alarm bells went off" when the trader did not return calls Sunday night, then
failed to arrive for work Monday.
Currency dealers normally buy options contracts to hedge their bets on whether a
specific currency will gain or lose value. If they buy a currency that loses
value, the bank's losses would typically be offset by an option contract bet on
a movement in the opposite direction.
But in this case, the bank said, Rusnak did not buy options contracts to hedge
many of his foreign-exchange deals. It said he forged records of options
purchases, either to conceal losses or skim the fees paid for the options.
Analysts said the amount of the missing funds suggested the trader had bought
phony contracts with a value of at least 1,000 times that amount, or dlrs 750
billion. This is a huge sum for a bank largely involved in retail banking, not
capital markets.
"How could such a large volume of activity be missed to create such a large
profit? I don't know. It does seem bizarre," said John Kelly, an analyst at NCB
Stockbrokers in Dublin.
Ireland's finance minister, Charlie McCreevy, said worldwide confidence in the
nation's long-thriving economy had taken a blow. Earlier this week, another
Irish bellwether, Elan Pharmaceuticals, drastically revised its earnings
forecasts and saw its stock plummet following a report that raised allegations
of deceptive accounting to conceal losses.
The revelation also added to Enron-sparked fears of sloppy accounting.
On Wall Street, Allied Irish stock fell by about 16 percent Wednesday to close
at dlrs 19.71. The price dropped by similar amounts on the Irish and London
stock exchanges.
Allied Irish first invested in U.S. banks in 1983 with a minority stake in First
Maryland Bancorp. It eventually took control and merged First Maryland with
another American bank to create Allfirst.
Allfirst employs about 6,000 people and has about 250 branches and outlets
concentrated in Maryland and Pennsylvania.
---
EDITOR'S NOTE - Associated Press Writer Shawn Pogatchnik contributed to this
report from Dublin, Ireland.
---
On the Net:
Allfirst: allfirst.com
By JAIME HERNANDEZ
Associated Press Writer
Copyright 2002 Associated Press, All rights reserved
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Eds: SUBS 8th graf to CORRECT lenght of time Rusnak had worked for Allfirst
AP Photos
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