More Allfirst bank officials may face suspension following the discovery by the bank that fraudulent trading activity has been going on for five years, rather than one year as first stated.
A spokesman for Allfirst in Baltimore did not rule out disciplinary action against current or former executives at the bank's treasuries department which oversees foreign currency trading. "It depends on what they find" as the investigation unfolded, he said. "There were various people in that department so it would really be part of the investigation to discover who else might be in the line of responsibility going back to 1997.
Three executives, including Mr David Cronin, executive vice president and treasurer at Allfirst, have been suspended with pay since February 6th when the massive losses incurred by trader John Rusnak were announced. Contacted by the Irish Times at his home in a Baltimore suburb yesterday, Mr Rusnak refused to enlarge on AIB's claim that the alleged fraud began in 1997. He had "no comment, none at all," he said. The Allfirst spokesman, Mr Phil Hosmer, also said yesterday that the situation regarding bank deposits was "stable".
Earlier in Dublin AIB chief executive Mr Michael Buckley said that about $200 million of Allfirst's $12 billion in deposits had been lost to other banks since the scandal erupted but that some was coming back.
Mr Hosmer said: "We've been very pleased with the response from our business customers and our regional customers. It's been stable over all. We've seen no grossly unusual activity among our customers."
The transfer of millions in deposits was confirmed by Mr William Knott, head of rival bank Wachovia, a
nd Mr Edwin Hale, chief executive of First Mariner. "I hate to see them lose money through this trader, we don't want to get their business that way," said Mr Carl Presser, manager of a branch of Mercantile Bancshares located beside Allfirst's Baltimore HQ . AIB group finance director, Mr Gary Kennedy, told analysts yesterday that the bank's focus over the next six months would be to repair the damage at Allfirst, the 46th biggest US bank, and to rebuild the business model "to make sure that customer confidence does not subside". After the announcement yesterday that Mr Rusnak's phoney trades dated back to 1997, the bank will have to restate profits for the last five years. It announced a loss of $36 million in 2001 due to the fraud. The president and chief executive of Allfirst, Ms Susan Keating, said yesterday that the suspected fraud "dealt a heavy blow to what was otherwise a good improvement in our core banking perfomrance in 2001," but that revenue growth from core banking business and our strong asset quality were "encouraging, given the weakened economy."
Allfirst also disclosed that it took a full week for the bank to finally establish that its losses amounted to $691.2 million, rather than $750 million. By Friday February 8th, "all open foreign exchange trading positions were either closed or hedged, and no further income statement exposure is expected," the AIB-owned bank said. The investigation had begun the previous Sunday when Mr Cronin began checking positions with Asian banks. Since then Mr Rusnak has been at home and apparently not cooperating with the bank. The FBI said that no charges are expected this week in their criminal inquiries.
