Citibank axes two executives over link to AIB fraud
Two foreign exchange traders from American giant Citibank were suspended today in the wake of the report into the €486m loss suffered by Allied Irish Bank's US subsidiary.
The two men were known to have dealt with John Rusnak, the Allfirst trader blamed for the massive losses announced last month by AIB's Baltimore-based subsidiary Allfirst.
A report commissioned into the losses and published yesterday said the bank let the cash slip through its fingers because poor internal controls failed to spot ``tonnes'' of unusual trades by Mr Rusnak.
The bank has accused Mr Rusnak, a churchgoing father-of-two, of disguising his own losses in a ``carefully planned'' and ``meticulously implemented'' scheme - although it said the plan involved computer files labelled ``face docs''. Today Citibank confirmed it had suspended two traders who had dealt with Mr Rusnak, but said:
``The suspensions are for reasons unrelated to trading activity.''
The bank refused to comment on a report in the New York Times that the two had been
``inappropriately entertaining'' the Allfirst trader or discuss the details of the suspensions.
One of the two Citibank workers, Richard Marra, was a New York based foreign currency sales representative who had previously been employed with Merrill Lynch and had brought Mr Rusnak's business with him when he moved from the Wall Street firm.
The other, Joseph Craven, is based at Citibank's Singapore operation. Allfirst had agreements with Citibank and Bank of America called prime brokerages in which the bigger banks' names appeared on the deals done with other traders, rather than Allfirst.
The arrangement is common in the US as it gives the country's many smaller banks the chance to take part more easily in big-money deals.
A spokesman for Citigroup, the parent company of Citibank, told the Wall Street Journal there was ``nothing inherently wrong'' with the agreement. And a Bank of America spokesman said: ``All the checks and balances of our prime brokerage service performed properly with respect to the Allfirst account.''
The report into the loss said some of the trades made by Citibank and Bank of America on Mr Rusnak's behalf were not in accordance with market standards.
The report said they should be ``fully reviewed to ensure that no impropriety took place and to clarify fully whether the prime brokers or other dealers, or personnel at these firms, obtained any benefits in their dealings with Mr Rusnak other than full bid-offer spreads and market fees''.
New, more stringent checks and control procedures are being implemented at Allfirst while officials continue to investigate whether Mr Rusnak colluded with others outside the institution in covering up his massive losses.
Six Allfirst executives were sacked as a result of the AIB inquiry, carried out by former American banking regulator Eugene Ludwig, which found no hard evidence that any of the six conspired with Mr Rusnak. AIB group chairman Lochlann Quinn said they were effectively guilty of ``collusion by incompetence''.
Mr Ludwig pinned much of the blame on David Cronin, Allfirst's treasurer and the person responsible for overseeing its trading activities. Mr Quinn and AIB group chief executive Michael Buckley yesterday savaged Mr Cronin, saying he had ``betrayed'' AIB by reassuring Mr Buckley in May 2001 - eight months before the losses were exposed - that high volumes of trading by Mr Rusnak were nothing to fear.
Mr Buckley said: ``I feel absolutely betrayed by a person in a very senior position.'' Mr Quinn added:
``That is why he doesn't work for us any more.'' Mr Ludwig told the Wall Street Journal: ``The company's been mugged but there's no doubt the security guard, Cronin, was asleep at the switch.'' But today Mr Cronin's lawyer fired back and told the Wall Street Journal:
``The bank has done a great disservice to a highly principled man whose business acumen and sense of integrity and loyalty have served the bank's interest for many years.'' Mr Cronin was the only Irish executive in the Baltimore-based bank to be sacked, with the other five all Americans.
The five were Jan Palmer, senior vice-president of treasury operations administration; Robert Ray, senior vice-president of treasury fund management; Lawrence Smith, assistant vice-president of operations and financial analysis; Michael Husich, head of internal audit; and Lou Slifker, team leader of internal audit.
In addition, Allfirst chairman Frank Bramble and AIB group head of risk Pat Ryan are retiring early, although the bank stressed the retirements had been planned before the fraud was exposed.
