His tenure ended in controversy in March 2002 following the rogue trader scandal at AIB’s US subsidiary, Allfirst, which cost the group e691 million.
The timing of his departure appeared to suggest AIB was holding him responsible for not spotting the rogue trading. Yet prior to his departure, a senior executive of the group had already told the Sunday Business Post that Mr McErlean was responsible only for Britain and Ireland, and therefore bore none of the blame for the Allfirst debacle.
Mr McErlean launched a legal action against AIB in a bid to get his job back, claiming the bank was scapegoating him for Allfirst. He also contended that AIB’s decision to remove him represented a disciplinary sanction taken without any complaint or charge against him, thereby breaching the principles of natural justice.
The case was settled out of court, and Mr McErlean signed a confidentiality agreement. AIB agreed to waive the agreement temporarily for yesterday’s committee hearing in order for Mr McErlean to testify.
Other than saying Mr McErlean’s contract was due to end in 2002 anyway, AIB never gave an explanation as to why he was not allowed continue in the post.
The previous year, in the summer of 2001, Mr McErlean had been heavily involved in a branch-wide special audit into overcharging by the bank.
The report was sent both to AIB senior management and the Central Bank. Mr McErlean presented the committee yesterday with a November 2001 letter from the Central Bank to him confirming that it had received the report.
In May 2002, Mr McErlean met with the then Financial Regulator, Dr Liam O’Reilly.
Mr McErlean informed the regulator that AIB had failed to commence the process of repaying those customers who had been overcharged.
A second meeting with the regulator took place in October 2002, but what occurred at this meeting is disputed. The regulator claimed that Mr McErlean had withdrawn the allegations that he had made at the previous meeting. But Mr McErlean insisted he had done no such thing.
In 2004, it emerged that AIB had been overcharging foreign exchange customers after a whistle-blower contacted RTÉ.