By Andrew Bushe
DUBLIN — The findings of a probe by a top U.S. banker into the massive fraud at Allied Irish Banks were presented Tuesday to at specially convened board meeting of the group and its U.S. subsidiary, Allfirst, in Dublin.
The future of top banking executives, both in Dublin and Baltimore, where Allfirst is based, is hanging on the conclusions of the investigation by Eugene A. Ludwig, who served as U.S. currency comptroller during the Clinton administration.
Ludwig is personally presenting the findings from his 30-day investigation into the $691 million fraud into what is expected to be an unprecedented two-day joint meeting of the boards.
“The findings, conclusions and recommendations of the Ludwig Report will be published by the AIB Board following their deliberations.
“Details of the actions the AIB Board will take as a result of the investigation will also be released at that time,” AIB said in a statement.
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Ludwig’s report will focus on how a rogue trader bypassed controls for as long as five years and managed to run losses that were almost 300 times in excess of his risk limit.
The findings will have implications for the future of the country’s biggest bank, which could face a takeover bid.
Bank of Ireland has expressed an interest in a merger but made no formal approach. A link-up of the two biggest banks would raise obvious regulatory and competition issues for both the Irish government and the EU.
There have also been reports that two of Britain’s top four banks, Royal Bank of Scotland and Barclays, may be considering a bid but have been waiting to see Ludwig’s conclusions and what action is taken on foot of them.
The scandal was first revealed on Feb. 6 when AIB claimed an Allfirst foreign exchange trader, John Rusnak, 37, used forged documents to conceal $750 million in losses.
Initially, AIB said the losses were built up in 2001 and early this year. However, on Feb. 20, AIB cut the initial estimate of the losses but revealed they arose from trades that dated as far back as 1997.
The five-year run of increasing losses in thousands of transactions has raised fundamental questions about control mechanism within the U.S. bank and oversight of the subsidiary from AIB’s headquarters in Dublin.
Rusnak, who has denied through his lawyer that he has stolen any money, has not been charged with any offense. He continues to live in his suburban home and has been interviewed by the FBI.