“Allied Irish Banks PLC said Wednesday that it has uncovered suspected fraud in the foreign-exchange operations at its Allfirst unit in the U.S, amounting to a loss of $750 million,” according to a report in today’s Wall Street Journal.

“AIB said it has launched an investigation, and has called in the U.S. Federal Bureau of Investigation to help. The bank said the sole trader thought to be responsible for the $750 million loss has failed to report for work since the huge loss was discovered and several top managers at Allfirst have been suspended until the investigation is complete.”

“The suspected fraud would be the biggest pinned to a single bank employee since Singapore dealer Nick Leeson destroyed Britain’s Barings Bank by piling up $1.4 billion in concealed losses in the mid-1990s.”

“Shares of AIB, Ireland’s biggest bank, plummeted on news of the the fraud probe and huge loss, which the bank said would result in a one-time charge of more than $500 million.”

” ‘We are hugely disappointed that our Allfirst control procedures failed to uncover this situation at an earlier stage,’ said Allied Irish Chief Executive Michael Buckley.’The investigation now under way will determine not only how it arose but also how we can guard against any recurrence.’ “

“Mr. Buckley said the trader — who wasn’t identified by name, but was described as a Pennsylvanian father of two in his mid-40s on a salary of $85,000 — could well have been working in collusion with others, possibly in Allfirst’s control department or outside the firm.”

“During an epic conference call with journalists and European analysts Wednesday, Mr. Buckley said middle-ranking Allfirst managers had confronted the trader by telephone last weekend when the magnitude of the fabricated trading documents was discovered following several weeks of investigation. ‘We’ve had a fairly sophisticated fraud done on the basis of conspiracy, with the possibility of internal and external collusion that got round some of the control mechanisms in place,’ Mr. Buckley said.”

“Allied Irish’s director for finance and risk, Gary Kennedy, said ‘alarm bells went off’ when the trader didn’t return calls Sunday night, then didn’t arrive for work Monday morning. He said the bogus trades dated back to early 2001 and included one shortly after Christmas.”

“But it wasn’t until Monday night, they said, that Allfirst executives telephoned their Dublin bosses with the news.”