|14 March 2002|
AIB sacks six executives over trading losses at Allfirst
|Irish bank AIB, which has been at the centre of one the biggest banking fiascos since Barings, has sacked six executives at their American subsidiary Allfirst.
The job losses were announced following the publication of US banking expert Eugene Ludwig's 30-day examination of the $691 million trading losses incurred at Allfirst.
AIB blames the alleged fraud at its Allfirst division on the actions of currency trader John Rusnak, who has already been dismissed. The bank has accused him of forging documents in order to conceal trading losses incurred between 1997 and 2001.
Six staff at Allfirst have been fired, including the head of treasury, David Cronin, and Lawrence Smith, John Rusnak's immediate superior. The retirements of both Frank Bramble, head of AIB's US operations and Pat Ryan, AIB's Group Treasurer, were announced in January and will take effect from June. Susan Keating will keep her job as Chief Executive Officer of Allfirst.
Eugene Ludwig's report found that John Rusnak was involved in the falsification of bank records and documents but that nobody inside or outside AIB had any knowledge that fraudulent trading was occurring at Allfirst. The report also found that supervision at Allfirst was weak and failed to monitor Mr Rusnak's trading over an extended period.
Mr Ludwig also found that there was a lack of appreciation at AIB Group level of the risks associated with hedge-fund foreign exchange trading.
Both AIB Chairman, Lochlann Quinn and Chief Executive Michael Buckley, offered their resignations to the board of AIB on Tuesday 12 March, but were asked to stay on, with full approval from the board.
AIB has appointed Eugene Sheehy - formerly managing director AIB Republic of Ireland - as CEO of AIB USA and Executive Chairman Designate of Allfirst. AIB has also said the positions of Chief Risk Officer and Head of Group Internal Audit will be filled by external appointees. All proprietary trading at Allfirst and AIB's Polish divisions will cease.
The FBI is conducting a criminal investigation into the losses at Allfirst.
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