Thursday 22 March 2018

AIB and Citigroup settle litigation over rogue trader


Citigroup has settled long-running litigation in which Allied Irish Banks (AIB) accused it of helping rogue currency trader John Rusnak rack up a $691m loss.

US District Judge Deborah Batts in Manhattan on Thursday ordered the dismissal of the 12 and a half year-old case, in which government-controlled AIB sought $500m of compensatory damages plus punitive damages.

Settlement terms were not disclosed. The accord averted a trial scheduled to begin on January 25, over a fraud that was at the time among the largest to involve unauthorized trades.

Citigroup also resolved related claims against Buffalo, New York's M&T Bank, which in 2003 bought a majority of AIB's Allfirst Bank in Baltimore, where Rusnak worked.

Rusnak hid trading losses for at least five years before they were revealed in February 2002.

AIB accused Citigroup's Citibank unit, which was Allfirst's prime broker, of furthering the fraud by enabling Rusnak's sham transactions, including disguised cash advances and fake trades.

It said this let Rusnak trade more than Allfirst allowed, while pretending his currency bets were legitimate.

Citigroup countered that the evidence did not come close to suggesting it contributed to Rusnak's losses.

But in a June 30 decision allowing the case to continue, Batts found "credible" evidence the New York-based bank misled AIB, perhaps hoping to keep Rusnak happy and collect more fees.

A Citigroup spokeswoman and a lawyer for AIB said the banks are pleased to have settled. An M&T spokesman had no immediate comment.

Rusnak eventually pleaded guilty to one count of bank fraud, and spent nearly six years in prison.

AIB also sued Bank of America over its dealings with Rusnak, but dropped the lawsuit in January 2012.


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