Rogue trader missing after $750m fraud
Allied Irish Banks (AIB) has named John Rusnak, a US citizen in his 40s, as the trader involved in a suspected $750m (£529m) fraud at its US subsidiary.
The Republic of Ireland's biggest bank in terms of assets said it had launched an investigation into foreign exchange operations at its US subsidiary Allfirst Financial and had asked the Federal Bureau of Investigation (FBI) to help track the rogue trader down.
Mr Rusnak was reported to have been co-operating with the investigation but later failed to report for work.
AIB said the fraud
Consisted of a very large number of trades
Was a sophisticated conspiracy
Probably involved internal and external collusion
Might have been for financial benefit of individuals or just a mess
"It's a heavy blow but not a fatal one," said chief executive Michael Buckley adding there was an important distinction between this case and the Nick Leeson affair.
"What Nick Leeson did was cause terminal damage to Barings. But an important point I want to make is that even when we write off that $750m, we will be making a profit after tax for 2001," said Mr Buckley.
In 1995, Singapore-based derivatives trader Nick Leeson ran up £830m ($1.17bn) in unauthorised trades that caused the collapse of the blue-blooded Barings bank.
Year-long fraud
AIB said it did not yet know whether the fraud at Allfirst was intended to be for the financial benefit of the individual or individuals involved or whether it was just "a right royal mess".
Shares in the bank, which has its primary listing in Dublin, initially fell almost 23% before recovering to be 14% down at 11.8 euros at 1100GMT.
The fraud was uncovered during a management review of the Treasury Division of Allfirst and is thought to have occurred over a 12 month period.
"This was a complex and a very determined fraud," Mr Buckley said.
AIB officials said initial signs were that internal and external collusion were involved.
John Rusnak
Age: Mid-40s
Wage: approx $85,000
Residence: Pennsylvania
Married with two children
Regular churchgoer
Source: Press Association
"There may have been collusion in terms of internal or external - we have no definite proof but we will carry on our investigation to determine what has happened," he said.
An initial investigation revealed the trader had "artificially entered" a "very, very large number" of unauthorised transactions "to offset losses he was making on real trades", he said.
Mr Rusnak, who had been with the bank for seven years, was at work on Friday but went missing over the weekend.
Damage limited
In the Irish Parliament, premier Bertie Ahern told AIB's 31,000 staff, 98,000 Irish shareholders and account holders not to worry.
"The capital base remains strong. There is no danger to AIB account holders of any loss of funds or indeed to the sovereignty of the bank," said Mr Ahern.
AIB is not under any serious pressure, though it will take some days to recover from this
Scott Rankin, Davy Stockbrokers
Analysts also believe the damage should be limited.
"The bank is not going to fail - they have plenty of capital," said Scott Rankin of Davy Stockbrokers.
"I think the market will regard it as a one-off item after the initial drop in price."
Business strong
AIB said the case would lead to a one-off reduction in its 2001 profits by 596m euros (£365m; $520m) after tax.
"The group's underlying business and profitability momentum is not impaired by this once-off blow," Mr Buckley said.
Buckley: "This was a complex and a very determined fraud"
Finance director Gary Kennedy said the capital position remained "extremely strong", at 8.6bn euros even after the losses from the fraud, and was more than enough to support the business.
The bank said it had taken action to ensure the loss would not get bigger.
Almost all foreign exchange trading at Allfirst has been halted and five executives, including the unit's treasurer, suspended.
"You can take it that going forward we'd be very reluctant at Allfirst to resume any significant proprietary trading in forex," Mr Buckley said.
Bank structure
AIB formed Baltimore-based Allfirst Financial in 1999 when it merged First Maryland Bancorp, which it bought in 1989, with Dauphin Deposit Corp.
AIB, with more than 350 Irish and UK offices, provides commercial and personal banking and insurance services.
Allfirst, one of the top 50 banks in the US, has almost 300 branches in Maryland, Pennsylvania, Washington, Virginia and Delaware. |
