Heads roll in AIB 'rogue trader' scandal

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Six executives at Allied Irish Banks' US subsidiary, where a trader stacked up losses of nearly £500 million, will be sacked, it was announced this morning.

In addition, Allfirst chairman Frank Bramble is to retire early, although AIB stressed he had not been involved in the fraud.

The disclosures came in a report following a month-long investigation by leading US banker and troubleshooter Eugene Ludwig.

It details that trader John Rusnak had "carefully planned" and "meticulously implemented" the fraud over a lengthy period of time, and manipulated weak controls in Allfirst's treasury department.

But the report also blames senior management for not appreciating the risks associated with Mr Rusnak's trading style.

Those whose heads will roll at Allfirst are David Cronin, executive vice president and treasurer of Allfirst, 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.

However, the report said it believed no-one at Allied or Allfirst, outside the Allfirst treasury group, had any knowledge of fraudulent trading activity.

Mr Ludwig said: "We believe we do understand the fraud and where it led. Our report is critical of certain internal controls at Allfirst and a number of individuals in these structures, particularly at Allfirst Treasury.

"We have made some strong recommendations in that regard. I am cheered that the AIB and Allfirst boards and managements are adopting those recommendations.

"It is also important to recognise that Allfirst and AIB are financially healthy, solid organisations and they are fully capable of dealing with the loss and implementing our recommendations to strengthen their respective control structures while maintaining strong capital levels."