Citibank and AIB likely reached the same verdict: keep the Rusnak case out of court
Blushes have been spared all round this week at AIB and Citibank. The pair were gearing up for a courtroom drama scheduled to start later this month, after AIB sought at least $872m (€796m) in damages and other fees from the US group for its alleged role in effectively assisting rogue trader John Rusnak to cover up $691m of illicit losses at then AIB subsidiary Allfirst.
It was a charge Citibank had strenuously denied.
The fraud by Mr Rusnak had been going on for some time, as he sought to cover up losses he'd made by failed bets on the Japanese yen.
When his activities came to light in February 2002 it was explosive, with news outlets around the world zoning in on what was at the time one of the worst rogue trading cases ever.
Up to then, Mr Rusnak had been a pillar of the Baltimore community in Maryland, where he lived with his wife and two children.
Recently, the Sunday Independent revealed the shock of his exposure as a rogue trader amongst colleagues and people at Citibank who had professional dealings with him.
"It's like, you know, it's just, you know, the guy you know it's like you look at him like this is f**king crazy man, you know he's the, you know, the treasurer at his kids' catholic school and his wife runs the youth group at the church, you know the list goes on and on," one Citibank employee at the time told a colleague over the phone.
AIB sold the Allfrst subsidiary to M&T Bank in the US in 2003, the same year that it initiated proceedings against Citibank, which had acted as Allfirst's prime broker.
Citibank had hired crack US lawyer Ted Wells to defend it in the case, but the person who would have been the star witness - John Rusnak himself - wasn't going to be in court. He'd been celebrating his wedding anniversary with his wife at the luxurious Waldorf Astoria hotel in New York when he was served with a subpoena by Citibank to give evidence at the case.
But in recent weeks he had said he would plead the fifth amendment, where he can refuse to give evidence that might incriminate him.
Citibank had intended to probe Mr Rusnak on "the nature, scope and extent of his activities at First Maryland and Allfirst and the involvement and knowledge of others in them" as well as his "guilty plea and co-operation agreement with the US government".
Mr Runsak pleaded guilty in 2002 to bank fraud and served over six years in prison.
The judge who had been slated to hear the case, Deborah Batts, had upheld Mr Rusnak's decision to plead the fifth amendment, and said that in any event the subpoena was unenforceable.
Mr Rusnak, who now runs a dry-cleaning business in Baltimore and is involved in charity work, had also pleaded that he would not even be able to afford legal representation if he'd been forced to give evidence.
On Thursday, Mr Rusnak said he welcomed the closure of the case and that he was relieved "old sins" would not have to be dredged up again.
In fact, AIB and Citibank probably came to the same conclusion.
The trial was expected to last up to four weeks, and it's likely that neither bank would have emerged without at least some reputational bruising.
That might not have been all that pleasant for AIB, as the State-owned bank eyes a full stock market flotation later this year.
And despite the huge amount AIB had been seeking, it's quite likely the settlement thrashed out between the two sides over the past couple of weeks is for an amount significantly less than what AIB had intended to seek in court.
The fact that AIB was not poised to issue an announcement to the stock exchange (its shares are still listed on the Enterprise Securities Market in Dublin) following the settlement, indicated that the sum of money involved for dropping the case was not material.
Precisely how material it would have needed to be in order to be notified isn't clear, but regardless it wouldn't be beyond the realms of speculation to assume AIB might only have received a small fraction of the amount it had claimed.
For all concerned, this closes the book on one of the most high-profile events and cases ever involving an Irish company.
AIB will release its full-year results on March 3, while Mr Rusnak can go back to his life in Baltimore without the certain intrusion that the trial would have brought.