Allied Irish, Citigroup settle litigation over rogue trader
By Jonathan Stempel
NEW YORK (Reuters) - Citigroup Inc (C.N: Quote) has settled long-running litigation in which Allied Irish Banks Plc (ALBK.I: Quote) accused it of helping rogue currency trader John Rusnak rack up a $691 million loss.
U.S. District Judge Deborah Batts in Manhattan on Thursday ordered the dismissal of the 12-1/2-year-old case, in which government-controlled AIB sought $500 million of compensatory damages plus punitive damages.
Settlement terms were not disclosed. The accord averted a trial scheduled to begin on Jan. 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 Corp (MTB.N: Quote), 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. Continued...