Allfirst president to step down

Keating is 9th executive to leave since currency trading scandal surfaced

Chairman Sheehy to succeed her

July 18, 2002|By Bill Atkinson | Bill Atkinson,SUN STAFF

Susan C. Keating, president and chief executive of Allfirst Financial Inc., which lost $691.2 million in a currency trading scandal, will leave the bank at the end of the month, Allfirst's Irish owner said yesterday.

Keating, 51, will be replaced by Eugene C. Sheehy, an Allied Irish Banks PLC banker who was named Allfirst chairman weeks after the losses were discovered. The change will tighten the Dublin bank's control of its U.S. banking unit.

Keating becomes the ninth Allfirst executive to step down, retire or be fired since the scandal became public in February.

Neither Keating nor Sheehy was available for comment yesterday.

Philip H. Hosmer, a spokesman for the Baltimore-based banking company, characterized Keating's departure as a "mutual separation."

"It was mutually agreed based on philosophical differences about the future direction of Allfirst," Hosmer said. "It has been based on an ongoing strategic review, and there have been discussions and debates between Susan and Eugene and they came to a mutual separation."

Hosmer declined to be specific as to the nature of the differences but said they were "strategic and long-term and about the best way to move the company forward."

In a company statement, Sheehy said Keating's "deep organizational knowledge and key insights into our business have been vital to our consideration. We agree on most issues but have debated some aspects of the best way forward for the company."

Keating's departure will come three months after Frank P. Bramble, Allfirst's former chairman and a Keating backer, retired. Bramble, 54, has taken a job at MBNA Corp., the giant Delaware credit card issuer.

The announcement did not surprise Baltimore bankers and industry consultants. Some thought Keating would leave later in the year, but others said they expected her departure at any time in the wake of Allfirst's staggering losses.

Allfirst and Allied Irish officials blame the losses on John M. Rusnak, an Allfirst currency trader who was fired along with six co-workers and supervisors who failed to detect the losses for five years. Rusnak was indicted on federal bank fraud charges last month.

An internal investigation led by Eugene A. Ludwig, a former U.S. comptroller of the currency hired by Allied, also criticized lax management at Allfirst.

The bank's internal controls were riddled with weaknesses, Ludwig's report said, and there were employees who were inexperienced, poorly trained, poorly supervised and in some cases lazy. Two senior managers either ignored foreign exchange trading or had limited knowledge of it, the report said.

The scandal, which dominated Irish newspapers and television news, threw Allied into turmoil. Speculation mounted: that Allied CEO Michael Buckley would be fired, that the company was a takeover target, that it would sell Allfirst. The huge losses slashed AIB's profits in half last year.

For its part, Allfirst lost $100 million in deposits in the weeks just after disclosure of the losses. Though the bank said it did not know how much of that was the result of the scandal, it launched a television ad campaign in April aimed at assuring the public of its reliability.

"I think it [Keating's departure] has been absolutely anticipated," a former Allfirst official, who requested anonymity, said yesterday. "It was just a matter of when. It was a timing issue."

Bert Ely, a banking consultant in Alexandria, Va., said he was not surprised by the action.

"When you have a big loss like that, the senior people in the chain of command are quite likely going to be fired along with people further down," he said. "This is some of the unfortunate fallout of the Rusnak caper."

Another former Allfirst senior executive said Keating's departure could satisfy angry shareholders in Ireland.

"I think there is a lot of ill will in Ireland toward the Allfirst group," he said. "I think AIB will score big points over there with their constituents. It is this whole idea of accountability. They [the critics] got what they wanted: Frank is out, Susan is out and their man is running the show."

In addition to Bramble and the departing Keating, five other top managers have left Allfirst. Four were fired: David M. Cronin, executive vice president and treasurer; Robert F. Ray, senior vice president of treasury funds management; Jan N. Palmer, senior vice president of investment operations; and Michael Husich, head of internal audit. Brian L. King, the Allfirst executive in charge of its risk assessment group, retired in May.

Two other employees, Larry Smith, a clerk in the operations unit, and Lou Slifker, of the internal audit unit, also were fired.

Rusnak, 37, who lives in Mount Washington, has cooperated in an FBI investigation. Last month, he pleaded not guilty to seven charges of bank fraud and making false entries in bank records. He is scheduled for a jury trial Feb. 10. Legal experts and his attorney have suggested a plea agreement is likely.

Keating, who had worked with Bramble when he headed MNC Finanical Inc., joined Allfirst in 1996 as an executive vice president and quickly rose through the ranks. In July 1997, she was named president and chief executive officer of Dauphin Deposit Bank and the York Bank, which are Allfirst subsidiaries.

In January 1999, she was named president and chief operating officer of Allfirst Financial; a year later she was appointed its chief executive.

One of the highest ranking women bankers in the country, Keating made $675,000 last year and did not receive a bonus. She made $600,000 in salary in 2000 and received a $336,000 bonus.

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