BUSINESS: It is hard to believe that's it's barely over 10 months since we first heard the name of John Rusnak, the currency trader who almost broke AIB's US subsidiary, Allfirst. Rusnak had spent five years clocking up massive losses from his trading desk in Baltimore. $700 million minus the small change.
That's seven with eight zeros after it. It was the fourth-largest financial trading scandal in history. The rogue trader pulled it off under the noses of his bosses, superiors and supervisors.
AIB has always claimed that Rusnak was a devious and complex fraudster. It's a version of events from which they dare not stray. Any other version might result in allegations of negligence on the part of the bank.
Panic at the Bank: How John Rusnak Lost AIB $691,000,000, by Siobhán Creaton and Conor O'Clery, attempts to tell the story of what occurred. It pieces together a lot of the facts that were already in the public domain about the Allfirst debacle. It then fleshes out these facts with other information that the two Irish Times journalists dug up themselves.
The book is written in the style of The Irish Times. Events are never dramatised. There's no editorialising, no over- interpretation, no attempt to engender any element of suspense. Instead, the facts that are known about the scandal are laid out and left to speak for themselves. It is a careful and thorough piece of work that leaves the reader with a lingering taste for more.
Creaton and O'Clery have outlined a litany of occasions when even the most incompetent of managers should have been able to twig what Rusnak was up to. The trader worked in a small dealing room. He had been given strict trading guidelines. Two and a half million dollars was the most he was allowed to play with to make money for the bank on the foreign exchange markets.
Yet as far back as 1997, signals should have been detected. AIB's currency options trading was running at $1 billion. Rusnak was accountable for 95 per cent of the bank's foreign exchange options risk. He was turning over about 100 transactions per day and 80 per cent were gambles. AIB managers should have known.
There are many more examples in the book of situations in which alarm bells should have sounded. So many, in fact, that the management shenanigans at Allfirst and AIB look to have been positively farcical.
Nick Leeson, the rogue trader who destroyed Barings Bank in 1985, lost £850 million sterling in circumstances similar to those at Allfirst. He said of Rusnak's fraud that it may have been devious - as the bank has claimed - but that it certainly was not complex, which is what AIB wants the world to believe. According to Leeson, who, one must accept, is among the world's leading experts on these matters, Rusnak's fraud was simple.
There is no doubt about it, the Allfirst trader is a fraudster. He had a file of fake documents on his computer that he printed off to obtain false verifications for trades he never engaged in. He drove a coach and four through the bank's settlements systems and ran rings around the back office staff whose job it was to verify his trades. On one occasion, he even rented a mailbox in New York, from where he sent a fake verification to himself in yet another successful attempt to escape the detection net that was closing in on him.
But there can be no mistaking, either, that others at the bank ought to have stopped him long before they did.
Creaton and O'Clery make reference to the case of Joseph Jett, a rogue bond trader with US securities firm Kidder Peabody. Jett was fired in 1994 for losing $350 million, but cleared of fraud because those above him were found to have been aware of his trading practices. Rusnak's bosses did not know of his fraud, but it is obvious from the book that they ought to have known of his extraordinarily heavy trading.
On October 24th, Rusnak pleaded guilty to bank fraud and was sentenced to seven and a half years in prison. He has been fully co-operating with US Federal investigators and, as Panic at the Bank makes clear, there is no suggestion that he ran off with any of the money. His version of events has yet to be heard. The same is true of his direct bosses, David Cronin and Bob Ray. Those versions are sure to be riveting.
• George Lee is economics editor at RTÉ
Panic at the Bank: How John Rusnak Lost AIB $691,000,000. By Siobhán Creaton and Conor O'Clery. Gill and Macmillan, 181pp. €10.99