Trader suspected in $750-million (U.S.) fraud
Associated Press
Allied Irish Banks PLC — the biggest company on the Irish stock exchanges — said Wednesday a missing foreign-exchange dealer at its U.S. subsidiary is suspected of stealing $750 million (U.S.).
The massive loss sent the bank's shares tumbling on European exchanges.
The suspected fraud at the Baltimore-headquartered Allfirst Bank would be the biggest connected to a rogue trader since Singapore dealer Nick Leeson destroyed Britain's Barings Bank by piling up $1.4-billion in concealed losses in the mid-1990s.
The Allfirst trader wasn't identified by name but is a Pennsylvanian father of two in his mid-40s on a salary of $85,000, AIB chief executive Michael Buckley said.
"We've had a fairly sophisticated fraud done on the basis of conspiracy, with the possibility of internal and external collusion that got round some of the control mechanisms in place," Mr. Buckley said.
Mr. Buckley said middle managers had confronted the trader by telephone last weekend when the magnitude of phoney options deals was discovered after several weeks of investigation. Officials said the bogus trades dated back to early 2001 and included one shortly after Christmas.
Allied Irish's director for finance and risk, Gary Kennedy, said "alarm bells went off" when the trader didn't return calls Sunday night, then didn't arrive for work Monday morning.
But it wasn't until Monday night that Allfirst executives alerted their Dublin bosses, who in turn sent over senior AIB managers, suspended several Allfirst staffers and asked the FBI to hunt down the trader.
The FBI visited the man's Pennsylvania home but only his wife was at home, Mr. Buckley said.
AIB insisted its finances remained secure, but the revelation increased fears of sloppy accounting in major businesses and dragged down shares of most leading British and Irish banks on the London and Dublin stock exchanges.
AIB shares were trading down 13.7 per cent at midday, rebounding from much steeper falls earlier.
AIB is the biggest company on the Irish exchange, accounting for 12 per cent of the total market's value. Its shares suffered similar losses on the London Stock Exchange.
London banks immediately suspended foreign-exchange dealings with Allied Irish as the Dublin-headquartered bank struggled to explain how its auditors could miss such a large-scale fraud.
Analysts said the scale of the fraud would cripple AIB's longstanding ambition to develop its U.S. operations, the group's largest risk outside Ireland.
AIB first invested in U.S. banks in 1983 with a minority stake in First Maryland Bancorp. Allied Irish eventually took control and merged First Maryland with another firm, Dauphin Deposit Corp., which it bought in 1997, to create Allfirst.
Allied Irish said Allfirst, which employs about 6,000 people, is one of the 50 largest banks in America and has about 250 branches and outlets concentrated in Maryland and Pennsylvania. |
