Officials Try to Determine How Trader Allegedly Rolled up $750 Million in Losses

A currency trader accused by his employer of losing or stealing $750 million met voluntarily with federal authorities, his lawyer said.

John Rusnak, 37, was not charged, and his lawyer said he is cooperating with authorities. Rusnak is in Baltimore, but avoiding his home because of the large contingent of media camped outside it, lawyer Bruce Lamdin said.

"My client is not a fugitive," he said. "We hope that things will take their natural course from here. That's up to the U.S. attorney's office." Lamdin said his client met voluntarily with the FBI and federal prosecutors Wednesday afternoon.

Investigators are looking into whether Allfirst, the U.S. subsidiary of Allied Irish Banks -- Ireland's largest bank -- had been defrauded. News of what could be the largest rogue-trading case since the mid-1990s sent Allied Irish and other European financial stocks tumbling amid security worries.

"We are hugely disappointed that our Allfirst control procedures failed to uncover this situation at an earlier stage," Allied Irish chief executive Michael Buckley said in Dublin. "The investigation now under way will determine not only how it arose but also how we can guard against any recurrence."

Officials at the U.S. attorney's office said they were investigating Rusnak, and the FBI confirmed it was looking into missing money at Allfirst.

Middle managers had confronted the trader by telephone last weekend when the magnitude of the options deals was discovered after several weeks of investigation.

Allied Irish's director for finance and risk, Gary Kennedy, said "alarm bells went off" when the trader didn't return calls Sunday night, then didn't arrive for work Monday morning.

Buckley said it was not clear whether Rusnak pocketed some or all of the missing money.

Five treasury workers at the bank have been suspended, including Rusnak. Allied Irish said people outside the bank may also have been involved.

The bank said the case involved forged purchasing records for options contracts, starting early last year and ending just after Christmas.

Currency dealers normally buy options contracts to hedge their bets on whether a specific currency will gain or lose value. If they buy a currency that loses value, the bank's losses would typically be offset by an option contract bet on a movement in the opposite direction.

But in this case, the bank said, Rusnak did not buy options contracts to hedge many of his foreign-exchange deals. It said he forged records of options purchases, either to conceal losses or skim the fees paid for the options.

Analysts said the amount of missing funds suggested the trader had bought phony contracts with a value of at least $750 million -- a huge sum for a bank largely involved in retail banking, not capital markets.

"How could such a large volume of activity be missed to create such a large profit? I don't know. It does seem bizarre," said John Kelly, an analyst at NCB Stockbrokers in Dublin.

Bank officials described Rusnak as a married father of two who has worked at Allfirst since 1993. They said he was paid $85,000 a year, a modest amount for a currency trader with his experience.

AIB's group treasurer, Pat Ryan, offered reassurances that the currency fraud won't affect customer deposits or the bank's financial health.

"Our capital base is very strong. It was able to absorb what happened. Their money is safe," he said.

On Wall Street, Allied Irish stock fell by about 16 percent Wednesday to close at $19.71. The price dropped by similar amounts on the Irish and London stock exchanges.

Allfirst employs about 6,000 people and has about 250 branches and outlets concentrated in Maryland and Pennsylvania.