BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh
BBCi CATEGORIES   TV   RADIO   COMMUNICATE   WHERE I LIVE   INDEX    SEARCH 

BBC NEWS
 You are in: Business
Front Page 
World 
UK 
UK Politics 
Business 
Market Data 
Economy 
Companies 
E-Commerce 
Your Money 
Business Basics 
Sci/Tech 
Health 
Education 
Entertainment 
Talking Point 
In Depth 
AudioVideo 


Commonwealth Games 2002

BBC Sport

BBC Weather

SERVICES 
Friday, 8 February, 2002, 00:04 GMT
Crisis meeting over $750m bank fraud
AIB trader John Rusnak, the man at the heart of the fraud investigation
AIB: Still much to learn about trader John Rusnak's deals
Heads at Allied Irish Banks have, after a crisis meeting, given no fresh clues of how the bank's US division suffered a suspected $750m fraud.

Bank representatives had, before the meeting, said the session would help unravel "the complexity of what is involved and why the systems did not work and whether some people didn't do their job".

How the $750m was lost
Trader entered into large number of foreign exchange deals
He appeared to have offset risk with 'options' deals
Original deals proved bad, causing big losses
Options deals proved 'fictitious', providing no protection against the losses

Click here for full details
But emerging from the session, chief executive Michael Buckley merely restated his regret at the failure of security controls, and pledged to discover the truth behind the loss.

And bank chairman Lochlann Quinn, pressed on who was to blame, said: "I want all the facts, not some of them."

Earlier, lawyers for John Rusnak, the trader at the centre of the scandal, reaffirmed that he had voluntarily met FBI officials and denied theft.

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

"My client is not a fugitive," Mr Lamdin said, adding that the loss of the cash was "not a theft case".

Ireland's central bank has also revealed it is to send a delegation to the US to investigate the furore at a firm which had ranked as the country's largest commercial bank.

Leeson's shock

Although the losses at AIB's US subsidiary, Allfirst, have sparked comparisons with the collapse of Barings, the Irish bank has been at pains to point out that the blow it has taken, while heavy, will not be fatal.

The bank said it would still report a profit for 2001, despite writing off the $750m.


I find it exceptionally frightening because I know how basic the checks were that should have been done to catch me

Nick Leeson

In 1995, Singapore-based derivatives trader Nick Leeson caused the collapse of the British bank Barings by running up 830m ($1.17bn) in losses on unauthorised derivatives trades.

On Thursday, Mr Leeson told the BBC he was shocked that the Allfirst fraud hadn't been spotted.

"I find it exceptionally frightening because I know how basic the checks were that should have been done to catch me," he said.

"It is not a great advertisement either for the bank or the banking industry as a whole."

Theft denied

Mr Rusnak's lawyers 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".

What the bank doesn't know
Full sequence of events
Whether others were involved
Whether any individuals profited or it was just a 'right royal mess'
Why internal controls failed to spot the fraud

The comments came after AIB said it had called in the FBI to investigate what the bank described as "a complex and very determined fraud".

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.

'Right royal mess'

AIB's probe is focusing on how losses on foreign currency transactions were disguised with fictitious options trades.

In comments on Wednesday, AIB said Mr Rusnak had artificially entered a "very, very large number" of unauthorised transactions to offset losses he was making on real trades.

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

It said it did not yet know whether the losses were intended to be for the financial benefit of Mr Rusnak or others, or whether it was just "a right royal mess".

But it said initial signs were that internal and external collusion were involved.

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

AIB on Thursday confirmed that the deals concerned dollar-yen trading.


Japan's yen has fallen about 15% against the dollar in the past year.

Five suspended

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

Almost all foreign exchange trading at Allfirst has now been halted and five employees suspended, including the unit's treasurer but not the other foreign exchange trader.

AIB, which analysts say is now likely to become a takeover target, said it was unlikely to resume forex trading at Allfirst.

The bank's shares were hit hard on Wednesday, with 2.8bn euros ($2.4bn; 1.7bn) being wiped off AIB's market value.

This pushed it into second place among Irish companies, behind rival Bank of Ireland.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Gavin Hewitt
"John Rusnak has been talking to his legal team"
Former Barings banker Nick Leeson
"The incompetence here is shocking"
See also:

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


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories