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To: long-gone who wrote (83313)	3/15/2002 10:56:29 PM
From: long-gone	Respond to of 117020

Allied Irish Probe Includes Outside Banks Fri Mar 15, 5:37 PM ET By Mary Kelleher and Thomas Atkins NEW YORK/FRANKFURT (Reuters) - Allied Irish Banks is putting its own house in order. Next, it will go after other major banks. After putting out a report damning its U.S. treasury arm in a $691 million trading loss scandal, the Dublin-based bank on Thursday said it will investigate whether other banks exploited its own lax controls. "This would allow AIB to find out more information, like how the trades were done and in fact if there was any collusion involving employees of the counterparties involved," said Ray Soifer, a former banking analyst who runs a consulting firm, on Friday. AIB's inquiry may prove futile as the dealings were not that unusual in the interbank market, where financial institutions deal directly with one another, bankers say. An internal AIB investigation also said the trader who allegedly racked up the losses, John Rusnak, acted alone. Still, AIB will probe whether other banks ignored tell-tale signs involving alleged rogue trades by Rusnak, who worked at AIB's U.S. securities unit Allfirst and is at the center of the probe. "There's certainly reason that those relationships ought to be explored in terms of their interplay in the fraud and I'm sure that the company will be following up vigorously," said independent investigator Eugene Ludwig, a former U.S. comptroller of the currency, on Thursday. Indeed, AIB Chief Executive Michael Buckley on Thursday vowed to pursue the role played by Allfirst's trading partners. Two of the biggest banks listed in the report are Citigroup and Bank of America Corp. , which are described as having special accounts with Rusnak. Both had prime broker deals with Allfirst. Such brokers carry out and settle trades for other institutions and provide reports that detail positions. CITIGROUP SUSPENDS TWO TRADERS Citigroup last month was believed to have received a subpoena related to the AIB probe, while Bank of America also received one, another source close to the matter has told Reuters. Citigroup said on Friday it suspended two foreign exchange salesmen at the same time as the AIB probe. "Two foreign exchange salespersons were suspended in early March for reasons unrelated to trading activity," a Citigroup spokesman said, declining to comment further. The two men, Richard Marra in New York and Joseph Craven in Singapore, had dealings with Rusnak, but the suspensions related to their entertainment habits, a source close to the matter said. Rusnak reportedly traded with Marra when Marra was at Merrill Lynch and Co. and Rusnak moved his business to Citigroup when Marra switched jobs. Citigroup and Bank of America have said they cooperated in the probe. OUTSIDE INQUIRY MAY BE FUTILE Financial products such as the currency options Rusnak supposedly used as synthetic loans are not so unusual, one banker with knowledge of Rusnak's dealings said. "In the interbank market there are certain assumptions that the other guy knows what he's doing. And if somebody calls you up looking for a deep-in-the-money deal, that's not likely to raise alarm bells right off," the banker said. "He probably said he was doing this to offset another position. What are we supposed to do, go and see if it's okay with his management? You could disrupt a relationship that way." Legally, AIB's efforts might hinge on whether it uncovers collusion between Rusnak and his counterparties, but even that would depend on what was uncovered, Soifer said. HEFTY FEES Ludwig said "unusual" trades should be fully reviewed to ensure that no impropriety took place and to clarify whether the prime brokers or other dealers benefited beyond the normal bid-offer spreads and market fees. "There are instances uncovered during the investigation where we found transactions with prime brokers that were off-market or not in accordance with market standards," Ludwig wrote in the report. So-called off-market transactions are those conducted at a price varying significantly from the current market price. "It appears that these digressions may have helped Mr. Rusnak conceal his positions and/or his losses," Ludwig said. story.news.yahoo.com