Rusnak jailed for seven years
The affair, one of the biggest banking scandals in history, came to light last February, but it has taken until now for Rusnak to be put behind bars.
Rusnak, 38, whose currency portfolio had been regarded as a solid performer at AIB’s US subsidiary Allfirst Financial Inc until last February, was also barred for life from working for any federally insured banking institution.
Rusnak pleaded guilty to one count of bank fraud last October, admitting he devised a complex five-year scheme to collect salary and bonuses totalling €797,911 from 1997 to 2001 by hiding risky yen-dollar investments that went wrong and spun out of control.
Prosecutors do not believe Rusnak stole any of the hundreds of millions of euro lost to AIB.
A federal indictment handed down last summer charged him instead with creating the impression of profitable trading activity with phoney bank telex documents, high-risk option contracts and off-balance sheet accounts with other institutions including Citigroup, Bank of America and Merrill Lynch.
AIB fired six employees over the scandal and agreed in September to sell its troubled Allfirst unit to M&T Bank in a $3.1bn cash and stock deal that would give AIB a 22.5% stake in the resulting operation.
An internal investigation at AIB conducted by former US currency regulator Eugene Ludwig blamed Rusnak for fraud but also criticised AIB for lax management and faulty controls.
Three years prior to the discovery of the Allfirst scandal, officials at the AIB subsidiary were tipped off about Rusnak.
Colleagues of Rusnak warned in a memo written in 1999 that he was gambling too much of his bank’s money and exceeding risk limits.
The memo also said Rusnak was routinely overstepping his credit limit. It said Rusnak was exceeding the limits on his deals and putting $2-3m of the bank’s money at risk each day.
In early February, AIB’s chief executive Michael Buckley claimed the firm had no knowledge of Mr Rusnak’s losses until early 2002.
AIB Group’s attributable profit in 2001 amounted to €484m. However, it would have been €997m but for the fraud loss at Allfirst.
