Friday, Oct. 25, 2002 | 10:03 a.m.
BALTIMORE -- A former currency trader accused of hiding $691 million in losses at Allfirst bank pleaded guilty Thursday in one of the largest bank fraud cases in U.S. history.
Under the plea agreement, John Rusnak will serve 7 1/2 years in federal prison for making a series of fictitious currency trades to cover up the trading losses he suffered in the 1990s.
As part of the agreement, Rusnak, 37, also must cooperate with investigators in an ongoing probe.
"The investigation is continuing at this time," U.S. Attorney Thomas DiBiagio said Thursday. He said authorities had no other suspects but continued to look into the trading scandal because of its sheer size.
Rusnak was indicted in June in the biggest bank fraud case since Nick Leeson, a trader in Singapore for Barings Bank, lost more than $1 billion on futures trades, leading to Barings' 1995 collapse.
Rusnak allegedly ran up the losses at Allfirst Financial over five years, mostly from trading Japanese yen. While trying to recoup those losses, prosecutors say, he dug himself a deeper hole by taking ever-larger risks.
Prosecutors said Rusnak did not directly profit from the trading losses, but by manipulating Allfirst's computerized system for tracking trading activities, they said he was able to generate a record appearing to show profits for the bank between 1997 and 2001.
That appearance of profits earned Rusnak bonuses of more than $650,000. He collected about $433,000 of that amount before the fraud was discovered last winter, authorities said.
Whether Rusnak will pay anything to Allfirst, and if so, how, will be determined at a court hearing in January, authorities said.
Rusnak had faced a maximum sentence of 30 years in prison and a $1 million fine.
DiBiagio said the 7 1/2-year sentence, plus five year probation after his release, was stiff for white-collar crime.
Leeson served 3 1/2 years of a 6 1/2-year sentence before his release from jail in 1998. The Barings case had prompted banks worldwide to tighten internal checks, and Leeson expressed surprise earlier this year that the problems at Allfirst weren't discovered sooner.
Allfirst was under parent company Allied Irish Banks at the time Rusnak worked there. Last month, AIB, based in Dublin, announced a proposal to sell Allfirst to Buffalo, N.Y.-based M&T Bank Corp. for about $3.1 billion. AIB denied at the time that the fraud scandal had anything to do with the sale.
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