Shareholders to sue AIB over Rusnak fraud

A shareholder lawsuit launched in New York accuses Allfirst Bank and its Irish parent company of failing to police a trader who allegedly squandered almost $500m (€570m).

The lawsuit blames Allfirst Bank and its Dublin-based parent, Allied Irish Banks, for the losses incurred by John Rusnak, 37, a Baltimore currency trader. Allfirst spokesman Philip Hosmer declined to comment today.

The lawsuit accuses the companies of ignoring indications that Rusnak was doing something wrong. It seeks unspecified damages and legal fees. Allfirst had ``adequate notice'' that a rogue trader would engage in unauthorised trading and that the losses could be high, according to the lawsuit, filed in US District Court in Manhattan.

Rusnak reportedly exceeded his trading limit for years without being stopped by managers at Allfirst. When losses mounted from bad bets on currency movements, he allegedly tried to hide the losses with phoney options contracts normally used to hedge risk.

Rusnak's lawyers have insisted their client did not personally profit. The FBI has interviewed Rusnak but filed no charges against him.