Rusnak, John (1964–)

A FORMER TRADER for Allfirst Bank (a U.S. mid-Atlantic regional bank known in 2004 as M&T Bank), John Rusnak pleaded guilty to bank fraud on October 24, 2002, in connection with the $691.2 million the bank lost through his foreign-currency trading.

Rusnak, hired by Allfirst as a trader in 1993, suffered trading losses buying yen for the bank in 1997. He then began to hide some losses, and the size of reported losses by using fictitious options and changing the currency exchange rates which came into the bank's trading system. False trades disguised the fact that Rusnak was also trading over his limit and taking risks that were too high. The 2002 Ludwig Report on the incident found that Rusnak broke rules that should have offered safeguards, and that he manipulated personnel who should have been supervising and checking on his activities.

Among other points, the report also determined that the bank's internal auditing was deficient and Rusnak's supervisors were not sufficiently experienced or competent to supervise him. Trading was done with Allfirst's funds rather than that of bank customers so it was Allfirst itself that took the losses. Rusnak earned performance bonuses of more than $650,000 beyond his salary due to the appearance of profitable trading.

In January 2003, Rusnak was sentenced as part of a plea agreement to 90 months (7.5 years) in prison and ordered to pay restitution to the bank or its successor. The judge also ordered that during the five years he was on probation following the incarceration, Rusnak enter substance abuse and gambling programs, and pay $1,000 per month restitution. Unless the federal government gave permission, Rusnak was also forbidden to ever work at a bank. Also dismissed by Allfirst were co-workers, supervisors, and managers who did not notice the fraud and losses.