Allied Irish holds crisis talks

Rusnak: Questioned by the FBI over the alleged multi-million dollar fraud

LONDON, England (CNN) -- Ireland's largest bank, Allied Irish Banks, are holding a crisis board meeting after an alleged $750 million trading currency fraud was uncovered.

The meeting at its Dublin headquarters was attempting to determine "the complexity of what is involved and why the systems did not work and whether some people didn't do their job," AIB Chairman Lochlann Quinn said.

The U.S. trader at the centre of the allegations, John Rusnak, has voluntarily met Federal Bureau of Investigation agents and federal prosecutors, his lawyer said.

The bank called in the FBI to help track down Rusnak. The bank alleges he disguised huge international exchange losses at AIB's U.S. subsidiary Allfirst with trades he never made.

MORE STORIES • Experts: Rogue trades hard to spot  • A rogue's gallery of trading  • Profile: Trader a 'churchgoing family man'  • Leeson: 'Rusnak was living a lie'    VIDEO A $750 million hit: CNN's Allan Dodds Frank reports (February 7) Play video (QuickTime, Real or Windows Media) Former trader Nick Leeson compares his part in the fall of Barings bank to the Allied Irish Banks case in an interview with CNN's Richard Quest (February 7) Play video (QuickTime, Real or Windows Media) Investigating the missing millions: Paul McGowan from Dolmen Butler Driscoe explains (February 6) Play video (QuickTime, Real or Windows Media)   EXTRA INFORMATION More business news from CNN.com Europe    QUICKVOTE Are banks doing enough to stamp out fraud? Yes No View Results

Allied Irish has suspended five executives, including 37-year-old Rusnak, and stopped almost all international exchanges at Allfirst.

But Rusnak's U.S. lawyer says he has not stolen any money and has not been charged by authorities.

"My client is not a fugitive," Bruce Lamdin told The Associated Press. "We hope that things will take their natural course from here. That's up to the U.S. attorney's office."

Officials at the U.S. Attorney's office said they were investigating Rusnak and the FBI confirmed that it was looking into missing money at Allfirst.

Rusnak has not appeared for work this week and bank officials said he would be dismissed if he did. Lamdin said Rusnak was in Baltimore, but is avoiding his home because of reporters and photographers camped outside.

Allied Irish chief executive Michael Buckley said in Dublin on Wednesday that it was unclear whether Rusnak had pocketed some or all of the missing money.

"We are hugely disappointed that our Allfirst control procedures failed to uncover this situation at an earlier stage," he said.

"The investigation now under way will determine not only how it arose but also how we can guard against any recurrence."

Bank officials described Rusnak as a married father of two who has worked at Allfirst since 1993. They said he was paid $85,000 a year, a modest amount for a currency trader with his experience.

He has been a "respected member of his local community," Buckley added.

"He has never given anybody any reason to believe from his performance and his job until now that he was an unusual individual in any way."

Indications of suspected fraudulent activity in the international exchange trading area at Allfirst were discovered during a management review within the treasury division of the subsidiary, Buckley said.

Allfirst launched a lengthy investigation with "intense attention" on Rusnak, he added.

When the probe reached a "crunch point" over the weekend, the trader disappeared, at which point AIB notified the FBI.

Buckley said the losses arose on a series of unauthorised transactions in a number of international currency contracts.

He termed the alleged fraud as "complex," where the trader required varying amounts of cash for different reasons at different times of the year.

Alarm bells

"Ultimately, it was the increase in the amount of cash that he was requiring that set off the alarm bells," Buckley said.

Despite the sizable loss, which will appear as a loss in the bank's 2001 earnings, Buckley said the group would show profits for the year totalling $347 million after taxes, or about $563.5 million before taxes.

Buckley: "One-off blow"

Before this charge, pretax earnings would have totalled $1.2 billion.

Buckley sought to allay fears that the bank would succumb to the same fate as British merchant bank Barings, which was brought to its knees after rogue trader Nick Leeson racked up $1.3 billion losses on Singapore's futures market

"We're a strongly capitalised bank, after this loss, by international standards," Buckley said.

"Our capital base is not a constraint on our development and particularly the achievement of our budgets for 2002."

He said the fraud would not affect bank customers "in any way." AIB will now launch an investigation to find out exactly how much money was involved and determine an appropriate course of action.