FBI hunts new 'rogue trader' after £530m bank fraud

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A regular churchgoer from Baltimore was being pursued by the Federal Bureau of Investigation last night after Ireland's largest bank was defrauded of $750m (£530m).

The revelation that Allied Irish Banks (AIB) had fallen victim to a scam similar to the one that ruined Barings Bank in 1995 wiped £1.2bn from its stock-market value and stunned a financial worldstill recovering from the collapse of American energy giant Enron.

John Rusnak, an employee of AIB's Allfirst Financial subsidiary, who was known as Mr Middle America and said to have earned about £60,000 a year, is alleged to have run up losses over an 18-month period to December in what the company called a "complex, determined fraud done on the basis of conspiracy".

After apparently going to ground, Mr Rusnak appeared yesterday at his home in an upmarket Baltimore suburb, where he lives with his wife and two children. In the company of a man who may have been his lawyer, he stayed briefly and declined to comment. When he left, his wife, Linda, told The Independent: "You've got what you wanted. You've got a lovely picture of my husband. Will you now please leave our home."

Last night, there were reports Mr Rusnak was being questioned by the authorities. It was unclear if anyone at the bank had gained personally from repeated rogue trading, or if the massive losses were the result of incompetence.

Mr Rusnak bought foreign currencies that later fell in value and tried to cover up the trades by setting up fictitious deals that appeared to offset the loss-making contracts.

AIB said it would have been hard to violate company controls in this way without internal and external collusion, and has suspended five staff at Allfirst responsible for monitoring Mr Rusnak's activities. Suspicion was aroused when he requested additional funds for his trading activities last month. Allfirst executives decided to suspend him on Monday morning.

Michael Buckley, AIB's chief executive, said. "This guy was not in any sense a star trader. Until this event he was regarded as a steady trader. He wasn't earning massive bonuses." AIB assured its shareholders the losses were unlikely to exceed $750m, a figure that could easily be covered from its reserves. There was no danger of collapse. "It's a heavy blow, but it's a blow we can sustain," Mr Buckley said.

The bank's annual profits will sink by 60 per cent to 596m euros (£363m). Shares in the company fell as much as 23 per cent in early trading, but closed down 17 per cent, leaving the bank valued at £6.1bn. The FTSE 100 index fell to a seven-week low of 5,073.8.