Clean living: The man who cost AIB $691m

Rogue trader John Rusnak looks for redemption in the laundry business

John Rusnak was something of a star when he was in prison, he says. Fellow inmates sought out the man once dubbed "Johnny Ruz" by market traders over his hair-raising, multibillion dollar bets on currencies that ultimately cost AIB $691 million in 2002.

“A guy who has committed a white collar crime is like a celebrity in jail mainly because people want to figure out how they can commit that crime when they get out,” said the former trader who was at the eye of one of the world’s largest rogue trading scandals.

Heavy set and looking older than the image of the smiling all-American who hit the news headlines around the world 12 years ago, Rusnak has been free for six years having served time behind bars for what was at the time the biggest trading fraud since Nick Leeson gambled away hundreds of millions of pounds bringing down British bank Barings in 1995.

Sitting in the staff room of ZIPS dry-cleaning and laundry in Glen Burnie, a suburb of Baltimore, one of four outlets he runs in the area, the 49-year-old former trader is alive to the irony of his new venture. Neither is it lost on the lead investor backing Rusnak or his customers who recognise him from his notorious past at AIB’s US bank Allfirst.


The investor in the cleaning franchise jokes that he wanted to call the business “Rusnak’s Laundering Clothes & Money,” said the former trader. Some customers tease Rusnak, asking whether he is up to his old tricks, though laundering something else this time.

Rusnak was sentenced to seven and a half years in February 2003 and released in July 2008, his sentence reduced by 25 months for good behaviour and for participating in a drug and alcohol education programme. All told, he was in seven prisons, spending time locked up in New Jersey, Virginia, West Virginia and two facilities in Ohio.

Life inside

Inside, he used his expertise to teach fellow prisoners the basics of personal finance. He noticed that convicts spoke about “getting money on the street” but didn’t know how to keep it. He taught them how to use a chequebook, save money, repair their credit record and apply for a loan – the basics of managing money sensibly. Occasionally, for fun, he told them how financial markets worked.

“People were fairly friendly. They had a lot of time on their hands. They wanted to talk, they wanted to exchange stories, they wanted to hear about different things,” he said, referring to his telling them about his rogue trading activities.

“Usually I would tell people that that is not what I’m about anymore and I didn’t really do it to make money and I did it out of anguish. If they did understand it, they were usually pretty understanding. They still wanted to ask: what’s it like to work on Wall Street – what’s it like to live like that.”

The “that”, Rusnak recalls, was a crazy time. In the late 1990s and early 2000s, he lived a frenetic double life. He was an upstanding church-going, school board-serving family man in one part of his life but during his working hours behaved like an arrogant, abusive worker, who bullied those who dared to question him as he hid his heavy losses.

The fraud began in 1997 when he made a bad bet on the future value of Japanese yen using the bank’s money and made a big loss.

“Once faced with that [loss], my attitude, ego, mentality at the time said, ‘I can make it back and I am smart enough, I have the resources and I have got people around me so I will just grow the business and trade more and try to make it back’,” he said.

“That is like throwing bad money after good – it never works out so well. That’s what I did. It just snowballed. It got to a point where I was so numb to it that I would say that the majority of the money was lost in the last nine months when I was completely without any reason.”

The rogue trading continued over five years and, while chasing his losses, Rusnak fell deeper and deeper, taking ever-increasing risks. He was rumbled in January 2002 when other staff at Allfirst noticed suspicious confirmation dockets on trades and grew alarmed that his turnover in foreign exchange trading in December 2001 topped a whopping $25 billion, a multiple of what AIB was worth at that time.


When his losses were discovered, he went missing. The father-of-two, then 37 years old, had a Pauline moment when he confessed all to his wife in early February 2002, an admission that brought relief to them both, he says.

“She was glad that she knew what was going on with me. I wasn’t speaking with her or the kids or anybody really, and I think she thought that I hated her and wanted to divorce,” he said.

“When she found out what I was doing, obviously there was condemnation – she wasn’t happy about that. She was at least glad that it wasn’t that I hated her and wanted to be out of the marriage. It was something that we could deal with,” he said.

His wife’s support thereafter, she told him, was conditional on him coming clean and telling federal prosecutors everything.

Does he regret what he did?

“Oh yeah, awful,” he said. “I get encouragement from a lot of my friends now. I have a different set of friends with different values and different encouragement. People tell me now, ‘you have done what you can to make amends and continue on that track but try not to look back too much’ because I don’t want to spend my life in depression, sort of saying I am this awful person, I did this terrible thing. I definitely acknowledge it and feel terrible about it.”

After he was released, Rusnak chose to remain in Baltimore where he worked at Allfirst. He still meets many people affected by what he did. He cost a whole tier of senior managers at Allfirst their jobs but famously not AIB's then chief executive Michael Buckley whose offer to resign was rejected by his board.

Each time he meets a former colleague from Allfirst, Rusnak leads off with an apology. “Believe it or not, it is usually pretty warmly received,” he said. “There is a lot more compassion and forgiveness out there than I ever imagined.”

Rusnak accepts full personal responsibility for the losses he incurred but says his fraud reflected the level of management and oversight at Allfirst, and how the Irish wanted to run the US operation.

"People at AIB made an intentional choice to ramp up the trading at First Maryland [as Allfirst was known before 1999] without understanding the risks and without having proper risk structures in place," he said.

“It was my fault but it does speak to how they wanted to get things done. There were a lot of times when we interacted with the highest levels of that bank. It was pretty darn clear that there was something going on but they obviously had other things on their plate I suppose or just didn’t want to address it.”

Rusnak still thinks it “kind of odd” that people don’t really think about whether others were responsible or why this wasn’t addressed. “You don’t really hide $700 million or $800 million by yourself,” he said. “I don’t think there was really any accountability for anyone else besides me.”

Rusnak’s fraud was overshadowed six years later by the global financial crisis that exposed failures of oversight in a much more systemic way at banks across the world. He blames regulators for being too close to the bankers they are supposed to be regulating. That wouldn’t make sense in almost any other industry, he says.

Rogue trading

“It is true not just of the Irish economy or not just of AIB but really of the financial markets in general,” he said. “There are still guys getting indicted in foreign exchange for rate fixing. There are still rogue traders out there doing the exact same thing. It doesn’t make a lot of sense and you sort of think about what drives people to allow that kind of behaviour and it is this profit motivation at all costs, above sensible investing and restrictions.”

There are things Rusnak won’t take the blame for. About 1,100 people lost their jobs, roughly a fifth of Allfirst’s workforce, after AIB sold the company to US bank M&T. Rusnak says his fraud emerged in the due diligence for that merger so plans were afoot to sell the bank by the time his losses was detected.

“Those jobs were going to be lost one way or the other,” he said, adding that it’s unfair to say he was responsible.


Taking responsibility is a central part of Rusnak’s business philosophy now. As president of a company called Pilgrimage Development, he is overseeing the expansion of the ZIPS dry-cleaning franchise for investors from four to 20 stores and he almost exclusively hires felons or recovering drug addicts – “myself included,” he said.

The company’s mission is to give people a second chance, whether they are returning from incarceration or from drug and alcohol rehabilitation or have been thrown out of school or by their family. Rusnak tries to get people back on their feet, offering other “wrap-around services”, helping staff file taxes or get driving licences back, for example.

Staff have the option of availing of Bible studies too. Faith is a big part of Rusnak’s life. When he was locked up at the federal prison in Hazelton, West Virginia, the highest security prison in which he served time, he spent three months, 23 hours a day in a six-by-10 foot cell with only a Bible and a sudoku puzzle book to occupy him.

He had deep Christian beliefs as a child but that “slipped away in the midst of all the sin and financial markets and my own issues with pride and who I thought I was”. His faith is “foundational” for him now.

Rusnak has learned from his mistakes and insists his staff are up-front in his new business.

“The biggest thing that we tell everybody is transparency. If you screw something up, nobody gets fired from their mistakes so just tell somebody as soon as possible,” he said. “Bad news rarely gets better with age. If you mess something up, just tell somebody about it and you won’t get fired for it. You are going to get fired for hiding a mistake – I am little sensitive to that obviously.”

Rusnak says the investors in the dry-cleaning business – one the owner of a Baltimore restaurant he knew from his days at Allfirst – felt he had made his biggest mistake and trusted him to run what is a small investment relative to their overall portfolio.

Much like the return investors expect, Rusnak must pay for his past sins. He paid $1,000 a month on a court-ordered plan after leaving prison and is waiting to hear from the US Department of Justice on his proposal to continue making payments. He reckons he will work until he is 70 and is content to pay “whatever is reasonable”.

He was once offered money to speak alongside fellow rogue trader Leeson, a regular on the speaker circuit, but turned it down. He is focused on ZIPS. A little of the old Rusnak emerges when talk turns of the return the business could make on the simple $1.99-for-every-item-cleaned model, if it were to grow significantly, to New York say.

“I still struggle with some of the same sin and temptation. I’d love to build a thousand of these stores and make a million dollars,” he said, laughing. “I still think about that. It is just not my primary motivation and I have friends around to keep my motivation in check. My primary motivation now is to return money to investors and then also to create these second chances for guys. That’s something I can do and hopefully I can build something successful and be proud of that.

"But I know that a lot of that pride, a lot of that ego, a lot of that arrogance is still there. Unfortunately God is still working on me." John Rusnak: From trading to jail to dry cleaning 1993 John Rusnak is hired by AIB's US bank First Maryland (later renamed Allfirst) from Chemical Bank in New York to work as a foreign exchange trader

1997 Rusnak sustains big losses trading on Japanese yen but doesn’t disclose it and instead tries to earn the money back by continuing to trade, hiding his losses using fraudulent options contracts

1999 The manager to whom Rusnak directly reported leaves and is not replaced, leaving another senior member of staff in charge of him; Rusnak’s trading loss totals $89.8 million at the end of the year

2000 Rusnak’s loss rises to $301 million by the end of the year

2001 Rusnak is trading instruments notionally running to as much as $4 billion in a day, well in excess of his trading limits. His loss balloons to $674 million by the end of the year

December 2001-January 2002 Staff at Allfirst discover fake trading records and become alarmed at the scale of Rusnak’s trading. During his five years of trading, he earned $859,000, including about $433,000 in bonuses for appearing to look like he was making the bank money.

February 2002 Rusnak goes missing and Allfirst report his losses to the police and senior AIB management in Dublin. AIB puts the final loss to the bank at $691 million.

January 2003 Rusnak is sentenced to seven and a half years in prison in a plea deal with prosecutors

February 2003 Rusnak starts his prison sentence July 2008 Rusnak is released from prison

2011 Rusnak starts running ZIPS Dry Cleaners for a Baltimore businessman and other investors

2014 Rusnak manages four ZIPS outlets in the Baltimore area, managing 60 staff, many of whom are recovering addicts or felons

Simon Carswell

Simon Carswell

Simon Carswell is News Editor of The Irish Times