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Thursday, 7 February, 2002, 04:49 GMT
FBI quiz $750m rogue trader
John Rusnak, the trader at the centre of a suspected $750m (529m) loss at Allied Irish Banks' US subsidiary, has voluntarily met the Federal Bureau of Investigation, his lawyers said.

Mr Rusnak, who was earlier thought to have been on the run, was in fact with his family and in talks with federal authorities in Baltimore, his lawyer Bruce Lamdin said.

John Rusnak
Age: 37
Wage: approx $85,000
Home: Baltimore, Maryland
Married with two children
Regular churchgoer

"My client is not a fugitive. We hope that things will take their natural course from here. That's up to the US attorney's office," he said.

Mr Rusnak's lawyers also denied allegations that the 37-year-old churchgoing father of two had stolen any money from his employers.

David Irwin, also representing Mr Rusnak, said: "If they're claiming that he stole money, that won't pan out. I'd be surprised if they ever came up with evidence that he stole money".

The surprise turn of events came after AIB announced it had called in the FBI to investigate what the bank described as "a complex and very determined fraud" at its US subsidiary Allfirst.

AIB foreign exchange trader John Rusnak
Mr Rusnak was well thought of

Allfirst alerted the FBI after Mr Rusnak, who had been helping with an internal enquiry into the trading losses, failed to report for work on Monday.

The FBI has not issued a warrant for Mr Rusnak or filed any charges.

The AIB probe centred on how losses on foreign currency transactions were disguised with fictitious options trades.

'Not like Leeson'

Earlier, AIB hastened to reassure customers and investors that the company remains on track to make a profit this year.

"It's a heavy blow but not a fatal one," said AIB chief executive Michael Buckley, adding that 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.

AIB said it did not yet know whether the losses at Allfirst were 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 later on Wednesday.

The losses were uncovered during a management review of the treasury division of Allfirst and is thought to have occurred over a 12 month period.


AIB is not under any serious pressure, though it will take some days to recover from this

Scott Rankin, Davy Stockbrokers

Mr Rusnak was one of just two foreign exchange traders employed by Allfirst. He had worked with the bank for 7 years.

Allfirst president Susan Keating said he had been considered a solid performer.

"He was an employee, at least until Monday, of good standing," she said.

AIB officials said initial signs were that internal and external collusion were involved.

"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.

AIB chief executive Michael Buckley
Buckley: 'complex and determined fraud'
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.

Damage limited

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."

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.

The bank said it had taken action to ensure the loss would not get bigger, adding that it did not know whether it would be possible to recover any of the missing cash.

Almost all foreign exchange trading at Allfirst has been halted and four executives, including the unit's treasurer, suspended.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Nick Bryant
"His lawyers reject allegations that he has stolen any money"
Former Barings Bank trader Nick Leeson
"The mid-management and senior management have obviously failed in their roles"
The BBC's Max Foster
"Tighter regulations may not prevent the next rogue trader"
See also:

22 Jun 99 | The Economy
How Leeson broke the bank
22 Jun 99 | The Economy
Leeson scandal 'could happen again'
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