Allied Irish Banks claims to have evidence of a wider conspiracy behind the €850 million fraud revealed at its US operation yesterday. Mr Lochlann Quinn, the bank's chairman, said last night that there was "considerable evidence of internal collusion in the fraud". Siobhan Creaton, Mary Canniffe and Brendan McGrath report.
Mr Quinn added that there was also some evidence of external collusion and forging of documents. "We have a lot of forged documents purporting to come from certain fax numbers that didn't exist, and we now know this was complicit in the fraud," he told The Irish Times last night.
The bank has identified one of the currency dealers at Allfirst, Mr John Rusnak, as the central figure in the fraud. But the FBI in Baltimore, Maryland, said last night there were no arrest warrants out for anyone in relation to the Allfirst case. "There is, as of now, no fugitive in relation to this case," a spokesman said.
The FBI is actively seeking Mr Rusnak, according to AIB. It was reported last night that the bank official had made contact with the FBI through his lawyer. The bank has suspended another four executives in its US treasury operation.
Mr Quinn and the other directors of AIB will hold a crisis meeting in Dublin today. They will seek an explanation from senior management as to how the $750 million fraud went virtually undetected at the small foreign exchange division in its US subsidiary. "I don't have that answer yet," said Mr Quinn last night. The board will concentrate on "establishing the complexity of what is involved and why the systems did not work and whether some people didn't do their job," Mr Quinn said.
The Allfirst treasury operation historically made profits of less tha $10 million. To generate the losses announced yesterday, the dealer would need to have done deals involving some $8 billion to $10 billion, said market sources in Dublin.
Mr Michael Buckley, AIB chief executive, yesterday described the fraud as "deliberate and complex". But he struggled to explain the extent of the loss, which relates to deals going back some 12 months. He said the bank had only become aware of the problem in recent weeks and had worked to establish the extent of the loss and would now start to find out the "how and the why". Mr Buckley was only made aware of the problem by the bank's US subsidiary on Monday evening. Mr Quinn heard on Tuesday morning.
Market sources said last night that the chairman of Allfirst, Mr Frank Bramble, and the chief executive, Ms Susan Keating, may now come under pressure. Mr Quinn said in an RTÉ interview last night that "when we get all the facts we will decide what to do". He ruled out a "knee-jerk reaction". Mr Bramble will be attending today's board meeting.
The fraud revelation had a devastating effect on AIB's share price yesterday. The shares fell by 20 per cent on the Dublin market before eventually closing down almost 17 per cent. Almost 52 million AIB shares traded and more than €2 billion was wiped off the bank's stock market value.
AIB believes the fraud will wipe out about 60 per cent of its profits in 2001.
The bank was preparing to announce pre-tax profits of €1.4 billion on February 20th. After tax, the loss will show up in its accounts as €596 million, the equivalent of 60 per cent of the after-tax profits of €997 million for last year.
The bank was adamant that the fraud would not affect its solvency. It has insisted it is "very comfortable" that $750 million is the total extent of the fraud and that mechanisms have been put in place to limit the losses. But the bank has also warned stockbrokers that $750 million may not represent "100 per cent" of the losses.
AIB will now investigate whether it has insurance to cover the cost of this fraud. Mr Quinn said last night that the bank would also off-set some of the losses against its tax.