Investigators in Britain and Ireland will tomorrow attempt to unravel the financial accounts of a London-based Merrill Lynch currency trader after uncovering what they suspect is a £284m black hole caused by a financial "irregularity".
Sources at Bank of America, which bought the beleaguered New York investment bank last year in a £28bn deal to stop it going bankrupt, said yesterday that one of the "entities" involved in suspected irregular dealing was in Ireland.
Alexis Stenfors, 38, who has worked at Merrill since 1995, had claimed to have made a profit on his trades of £85m for 2008. The Bank of America suspects that the correct figure is in fact a loss of nearly £300m.
The investigation adds to pressure on Merrill, which is also being investigated in the US for its payment of bonuses to chief executives in the days before the Bank of America takeover on 1 January.
Yesterday it was reported that the Attorney General of New York, Andrew Cuomo, had asked a judge to stop Bank of America in its attempts to "stymie" his investigation.
"We respectfully request that the court reject Bank of America's continued efforts to stymie the attorney general's investigation," Mr Cuomo said in a letter on Friday.
He is attempting to force the bank to reveal the identities of some of the employees who received bonuses. The bank is refusing on the grounds that "private information" should not be made public.
Bank of America sources added yesterday that while they were poring over the Merrill Lynch books it was impossible to stop rogue traders.
"If somebody sets out to do something wrong, all the company can do is make sure we have controls and procedures in place to spot it. The controls at Bank of America are very good, which is why this has come to light. We're working with the Financial Services Authority and we're looking at the transactions. We believe that the losses are under control but we are in the middle of investigating. We are not accusing anybody until they are proven guilty so we are trying to find out what this individual did or didn't do."
Sources at the investment bank denied reports that other individuals were under investigation, but said there had definitely been a loss. "I think this was thrown up by a routine check, so there would be no need to extend the investigation," the sources said. "But there has definitely been a loss, although I don't know about the numbers. We conduct regular investigations, but from what I can gather it's just this one guy."
While the loss is significant, it is far from matching the record losses of £4.4bn by Jérôme Kerviel at Société Générale in 2007 or the £827m lost by Nick Leeson, bringing down Barings Bank in 1995.
Investigators stressed that the three-week-old investigation had yet to be completed and allegations that the employee, Mr Stenfors, was a "rogue trader" were not yet proven. Mr Stenfors has commented only to say the irregularity was a "misunderstanding". His lawyer added that he is co-operating with the inquiry.Reuse content