US judge allows AIB lawsuit
Published 02/07/2015 | 02:30
A US judge has refused to dismiss Allied Irish Banks's lawsuit accusing Citigroup of helping rogue currency trader John Rusnak rack up a $691m (€623m) loss.
In a decision yesterday, US District Judge Deborah Batts in Manhattan said government-controlled AIB may pursue a variety of fraud claims against Citigroup in its lawsuit seeking $500m of compensatory damages plus punitive damages. She dismissed two other claims against Citigroup, the third-largest US bank by assets.
Mr Rusnak committed the fraud at AIB's Allfirst Bank in Baltimore, where he hid mounting trading losses for at least five years before they were revealed in February 2002.
The scandal was one of the largest involving rogue trading then on record. Mr Rusnak later pleaded guilty to one count of bank fraud, and served nearly six years of his seven and a half year term. He was released in January 2009.
AIB accused Citibank, Allfirst's prime broker, of furthering the fraud by engaging in Rusnak's sham transactions, including disguised cash advances and fake trades. As a result, Rusnak traded more than Allfirst permitted, and pretended he was making legitimate currency bets, AIB said. Citigroup countered that the evidence "does not come even close" to suggesting it contributed to Mr Rusnak's losses, fraudulently or otherwise. Judget Batts nonetheless found "credible" evidence the bank misled AIB about Rusnak's trades, and did not try to verify their legitimacy. Citigroup spokesman Scott Helfman declined to comment. Alan Levine, a partner at the Cooley law firm representing AIB, said: "We look forward to the trial."