Posted on 02/07/2002 7:10:04 AM PST by dead
Until 9.30am on Wednesday, Dublin time, the Allied Irish Bank was known in Ireland for its prudence, strong growth, sound management and careful control of risk.
Two hours later it was world famous as the bank that failed to notice while a junior employee went on a year-long gambling spree that cost it $US750 million ($1.474 billion).
At a hushed press conference, Ireland's largest retail bank admitted that it has become the biggest victim of "rogue trading" since Nick Leeson's $US1.4 billion losing streak brought down the venerable Barings Bank in 1995.
At the heart of the scandal is a United States citizen, John Rusnak (pictured left), 37, a father of two, school board member and regular churchgoer.
Rusnak was employed as a foreign exchange trader at Allfirst, an AIB subsidiary based in Baltimore, Maryland. With 6000 employees and 250 branches in the eastern US, Allfirst is one of the country's 50 leading banks.
Mr Rusnak's whereabouts remain unknown. His lawyer denies that he is a fugitive or that he stole any money, and said he had met FBI agents and prosecutors voluntarily in the Baltimore area on Wednesday afternoon.
Dubbed "Mr Middle America" by the Irish media, Mr Rusnak is described as a quiet, solid man who acquired a steady reputation in his seven years with Allfirst.
AIB's chief executive, Michael Buckley, said Mr Rusnak was employed first to provide foreign exchange to retail customers and second to trade in currency for the bank itself, seeking relatively small profits by buying and selling future options on various currencies.
His salary was said to be modest for a US forex trader $US85,000 ($167,000).
Unknown to management, however, about a year ago Mr Rusnak began to abandon the normal practice of minimising his risk by hedging each currency futures position the polite financial word for a bet with a complementary counter-bet.
Instead, AIB claims, he began to produce forged records of transactions that appeared to cover the mounting losses he was making on his real transactions.
He was like a losing gambler who forged a winning betting slip, then used it as security to borrow more money, in the hope of coming good.
It is still not clear whether Mr Rusnak made money himself from the massive deception or whether he was driven to fraud simply by the desire to cover his reckless losses.
AIB officials say the fraud was so elaborate they suspect collusion. Five other Allfirst employees have been suspended pending investigations.
The AIB says officials at its US subsidiary became suspicious several weeks ago when they noticed that the cash required to cover the bank's losing foreign ex-change bets was not being matched by money flowing in from profitable transactions.
After being confronted at the weekend, Mr Rusnak did not report for work on Monday.
The AIB's Mr Buckley said it was not until then that the parent company in Dublin was told. It immediately dispatched a team of executives to Baltimore, and the FBI was informed on Tuesday.
The chairman of AIB, Lochlann Quinn, told Irish television on Wednesday night that the bank still hoped to meet Mr Rusnak to discuss his activities. It would, he said, also like the opportunity to fire him.
Dublin banking analysts said that while the affair echoed the Barings scandal it was unlikely to ruin the AIB or its subsidiary, which are well capitalised and profitable.
The bank's shares, however, plunged 16 per cent after the revelation, leading to speculation that it could become a takeover target.
There are also fears that the scandal could be a long-term blow to the bank's credibility or even Ireland's.
(across the top of his skull)
BTW, are you as handsome in real life as you are on your profile page....?
Ya think?
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