AIB heads roll over 'fraud' report

March 14, 2002 Posted: 7:01 AM EST

DUBLIN, Republic of Ireland (CNN) - Allied Irish Banks has sacked six staff at its AllFirst business in the U.S. where John Rusnak racked up losses of $691 million.

The dismissed staff were all involved in supervising Rusnak, who ran up the losses on unauthorised currency trades.

The decision was announced on Thursday after two days of meetings to discuss the findings of an independent investigation into how AIB, Ireland's biggest bank, became the victim of the suspected currency fraud.

U.S. banking expert Eugene Ludwig, appointed to investigate AllFirst and Rusnak's activities, stated in his report that "the fraud was carefully planned and meticulously implemented... over a lengthy period of time and involved the falsification of key bank records and documents."

Ludwig told CNN that Rusnak acted alone and was "incredibly devious" in planning and implementing "what were essentially foreign exchange bets."

But he added that Rusnak's supervisors in the U.S. should have been monitoring his activities more closely. "They were clearly fooled," he said.

AIB Chief Executive Michael Buckley and Chairman Lochlann Quinn -- who have acknowledged that the losses extended back to 1997 -- offered to resign on Tuesday, but the bank's board rejected that proposal and chose instead to "reaffirm" its confidence in both men.

Susan Keating, the chief executive of AllFirst, will keep her job. Many analysts had expected her to take the blame with other executives of the Boston, U.S.-based subsidiary.

AllFirst Chairman Frank Bramble, whose retirement was agreed in January, will retire on June 1.

Those directly responsible for overseeing Rusnak's activities are to be sacked, said AIB. They include, David Cronin, Executive Vice President and Treasurer of AllFirst, Robert Ray, Senior Vice President, Treasury Funds Management AllFirst, Lawrence Smith, Assistant Vice President, Operations and Financial Analysis, AllFirst Treasury, Michael Husich, Head of Internal Audit, AllFirst, and Lou Slifker, Team Leader, Internal Audit, AllFirst.

On Thursday, following the release of the 57-page report, AIB attempted to allay concerns about its business operations and said it would move quickly to fix the problems that led to the fraud.

"AIB has already begun the task of undoing the damage caused by the fraud perpetrated at Allfirst," Quinn said in statement. "We have learned lessons from the serious breakdown in our controls, which has enabled these losses to occur."

Rusnak's suspected fraud has caused concerns over the ability of financial institutions to control risk-taking by traders. AIB's losses have drawn comparisons with Nick Leeson who brought Britain's Barings Bank to its knees in 1995.

Rusnak, a 37-year old father-of-two who worked for AIB's treasury business, has already been fired but has denied stealing any money and so far has not been charged with any crime.

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