Irish fear the worst from Allfirst

February 07, 2002|By Tom Mudd

DUBLIN - As I drove my son to school yesterday, everybody was talking about the revelation that a trader at Allfirst had allegedly defrauded the company of $750 million, possibly more. Talking is one of the things you do when you're afraid.

That fear exists here because Allfirst is owned by Allied Irish Banks PLC, and AIB branches are as ubiquitous here as Blockbuster Video stores are there. AIB is simply everywhere. And most of the money my wife and I have in the world is lodged in AIB vaults.

When I told her about the fraud, she gasped. "What about our money?"

That seems safe enough, but not so safe are the paper fortunes of Irish stockholders, which have taken a battering in the last year. The latest reason was AIB, whose shares lost 16 percent in trading on the Irish Stock Exchange yesterday. Before that came Elan Corp. PLC, whose stock price staggered after allegations of Enron-style accounting. It stumbled again after Elan announced disappointing revenues and revealed that testing of an anti-Alzheimer's drug was being halted.

Between them, AIB and Elan accounted for more than one-third of the value of the index of the top stocks in Ireland.

All this comes after 2001.

It was a little better here than in the United States, but not much. In Ireland, they had to cancel the St. Patrick's Day parade because of foot-and-mouth disease. Even though the disease never took hold on this island, its specter alone was enough to scare off tens of thousands of tourists. In August, when tour buses full of Americans normally jam the roads in the picturesque west of the country, you barely saw any. And after Sept. 11, virtually the only American accent to be heard in Ireland was my own.

Which was devastating, because tourism is one of Ireland's economic staples. Another is farming, which suffered an equally powerful blow when foot-and-mouth struck Britain. The third staple is technology. According to one set of figures, Ireland recently surpassed the United States as the world's top exporter of software.

In Ireland's case, a company called Baltimore Technologies, once the Princess Di of the Irish business pages, has ended up only slightly better off than the one-time Princess of Wales. Once valued - according to the markets, anyway - at something like $7 billion, it now has a market capitalization of just $140 million or thereabouts. And Baltimore is on its third CEO in a year.

Just as there's a sudden, Enron-born fear in America that we might not be able to trust corporations to tell the truth about their financial situations, there's fear here that many a person's newfound wealth might have disappeared. And it's harder to take in a country that didn't have much to begin with.

The past eight or nine years have seen this damp and relentlessly green island become the envy of Europe. It was racking up double-digit growth numbers year after year. It was winning endless foreign investment. People who bought houses for $100,000 in 1994 were able to sell them for $400,000 in 2000.

As a result, talk here was as go-go as anything you ever heard in the States during the Reagan years. There was a Gordon Gekko in a shiny new BMW honking his horn at you at just about every intersection. Every dinner party revolved around who bought which stock for how much and how much he or she made from it.

Now there's a sense that all this wealth that was supposedly created could go up in smoke the way Enron did, the way Elan did. There's a fear that it could all have about as much reality to it as the offsets Allfirst's John Rusnak allegedly created to hide his disastrous trades.

The people here were awash in delight during the economy's glory days. They were spending and spending, releasing something like 800 years of pent-up demand. This has been a poor country for centuries, but it finally seemed to be coming into its own, to be reaping the rewards of all the hard work its people have done in places like America and England and Australia.

The result of the newfound wealth is that people here bought the hype. They invested in Baltimore Technologies. They invested in a bank they all knew, which happened to have a subsidiary in Baltimore. They invested in Elan.

And, overnight, their wealth has disappeared.

This is just a big story in America. In Ireland, it might be the end of a lovely, warm, cozy dream and the beginning of a bad one, one the people here know too well.

Tom Mudd, a Towson native, is an American journalist living in a suburb of Dublin.

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