A top American banker has been named to lead an investigation by Allied Irish Bank’s into the alleged fraud of up to 750 million dollars through Alllfirst Finance Inc, one of AIB’s US subsidiary companies.
After an emergency meeting last week, AIB directors said they would request an imminent independent figure to direct an investigation of the fraud and report back to them. Mr Eugene A Ludwig, a former comptroller of the US Currency and current managing partner of the Promontory Finance Group has been named as the person to lead the inquiry.
The 860 million euro deficit was announced last week at Allfirst Finance Inc, of Baltimore, Maryland, and the man at the centre of the affair, foreign exchange trader John Rusnak, has since been questioned by America's Federal Bureau of Investigation.
The loss, while not threatening AIB’s viability, may have exposed the group to the possibility of a hostile take-over bid by a British or other foreign concern.
Ludwig will take charge of the AIB investigation and must report back directly to the board within 30 days.
AIB said his brief is to:
- Ascertain all the facts concerning foreign exchange activities in the treasury operations of Allfirst that led to the loss.
- Describe the policies and controls applying to those operations during the period of the activities involved
- Reporting on the manner in which the policies and controls operated - or may have failed to operate
- And make recommendations on ``necessary and desirable'' improvements.
The AIB chairman, Loclann Quinn last week said there was "considerable evidence'' on collusion over the affair. He described Mr Ludwig as an eminent banking expert.
He said: "We are extremely fortunate to have found a man of such skill and expertise, with great knowledge of the banking system, to head up our investigation.''
Mr Ludwig was appointed to the currency post in Washington by former President Bill Clinton, and is credited with restoring the financial health of America's national banking system.
The Irish bank's chief executive, Michael Buckley, confirming the massive loss last week repeatedly maintained it was the result of a fraud and that the FBI had been called in.
Subsequently, lawyers for the Allfirst trader - regarded as Mr Middle America by neighbours - claimed that their client was not guilty of any fraud and had not gone on the run.
Analysts said today that while AIB had followed up on their promise of an independent investigation, buy-out bid speculation would not go away.
One said: ``When a bank is hit by a blow like this, it raises obvious question marks about its management and future.''
Potential contenders for a take-over are reckoned to include the Royal Bank of Scotland, as well as other major names in the European financial arena.