American investors launch AIB lawsuit

Allied Irish Banks is facing a class action from American investors over the alleged fraud that shot a $691m (£485m) hole in its accounts and sent its shares tumbling 23 per cent last month.

The lawsuit, which followed an approach to a Washington law firm by a holder of AIB's American depository receipts, was filed on Tuesday and alleges that AIB filed fraudulent accounts between 1999 and 2000.

The firm, Finkelstein, Thompson & Loughran, yesterday declined to indicate the level of damages being sought. Under US law, any claims would be calculated according to the difference between AIB's share price the day before the alleged fraud emerged and its average over the following 60 days. Speculation that Royal Bank of Scotland might acquire AIB has underpinned the company's share price in recent weeks.

Donald Enright, the lawyer handling the action, said shares and ADRs in AIB had yet to fully recover in value and their price was vulnerable to falling. "We have been examining and investigating the situation since the news first began to unfold. As the facts emerge, public perception of AIB may change," he said. It was hard to gauge the likely participation in the class action, he added.

The law firm's investigation is thought to focus on whether officers in AIB's Baltimore-based subsidiary, Allfirst Financial, properly monitored the actions of John Rusnak, the rogue trader who clocked up massive losses through risky foreign exchange trades. Mr Rusnak is being questioned by the Federal Bureau of Investigation.

AIB declined to comment yesterday on claims that Mr Rusnak was able to continue his trading activities thanks to a loan approved last year by its Dublin headquarters. A report into the affair is to be passed to the AIB board this weekend ahead of publication next week.