Class action to be filed against AIB, Allfirst

Lawyers in a US class action case against AIB and Allfirst bank are to file their complaint next month following a recent court ruling in New York.

The case being taken against the banks and a number of executives arises from the John Rusnak fraud scandal, with the plaintiffs alleging the banks issued public filings and other statements that were false in the lead-up to the Rusnak fraud being disclosed.

US District Judge Deborah Batts ruled in December to accept that two class action suits be consolidated into one and that a Mr Manuel Feder be accepted as the lead plaintiff.

The decision had been awaited for some time.

She ruled that a consolidated complaint from the plaintiffs should be filed within 60 days, and that a reply be filed by the defendants within 30 days of its receipt.

As well as the two banks, the defendants include: Mr Frank Bramble; Ms Susan Keating; Mr Robert Carpenter; Mr David Cronin; Mr Jerome Evans; Mr Maurice Crowley; and Rusnak.

In February 2002 it was disclosed that fraudulent trading by Rusnak had cost AIB's US subsidiary, Allfirst, €691 million. Rusnak has since been jailed for fraud.

A legal firm based in Washington DC, Finkelstein, Thompson & Loughran, has been accepted as lead counsel for the class action suit.

Mr Feder purchased 3,000 AIB shares in May 1999, according to the New York judge.

He sustained $19,843 (€15,168.78) in "losses" on his shares, making his the largest loss of those allegedly suffered by the plaintiffs taking the suit.

Under US law, should the suit be successful other persons who are in a similar position to Mr Feder would be entitled to damages from the defendants.

The legal firm is understood to have only a small number of plaintiffs, but if the case succeeds the cost to the banks could run into a number of million dollars.

Plaintiffs do not have to have actually sold shares to be entitled to damages, according to sources.

They need only show that they purchased their shares in the US in a particular period prior to February 2002 and when the price was higher than the average price of the share in the 90-day period after the Rusnak fraud became public knowledge.

The judge who is taking the case is also scheduled to hear a case where AIB is suing Bank of America and Citibank for $500 million. AIB is alleging that the US banks concealed a website that would have allowed Allfirst gain access to Rusnak's fraudulent trading.

AIB is accusing the US banks of helping to undermine Allfirst's controls and is alleging that they altered trade confirmations to cover up fake trades.

The US banks have said the suit is "without merit".