John M. Rusnak was preparing to open a ZIPS dry cleaning business in Pasadena when a job seeker walked in from a nearby drug recovery house. The applicant had little experience, was recovering from a heroin addiction and had a misdemeanor charge on his record. But he needed a job and wanted a second chance.
Rusnak — the former Allfirst Financial Inc. currency trader convicted in one of the largest U.S. bank frauds in history — knew about second chances. He hired Noah Shefrin, who stayed clean and has since moved up to become a ZIPS general manager. So began Rusnak's mission of hiring others who've made mistakes.
"These are terrific young men and young women who come out of bad choices, whether it's jail or drug addiction, and are trying to turn their life around. It struck a chord. It seemed to me like I was looking in the mirror and seeing myself," Rusnak said. "It's really an untapped resource. … They need a second chance and an opportunity, and they work very hard to prove themselves."
The 49-year-old Mount Washington resident, who has started a new life running ZIPS cleaners for a franchise owner, has come a long way from living a double life more than a decade ago.
As a trader for the former Baltimore-based bank, Rusnak schemed over five years to hide nearly $700 million in trading losses; he was convicted of fraud in 2002. Today he realizes his name will forever be linked to what he calls "past failings," actions that spurred the overhaul of bank management in Baltimore, the sale of the bank by its Dublin-based parent and the shedding of some 1,100 jobs. Rusnak served 51/2 years in federal prison.
"People are always going to associate my name with that criminal activity, and I just have to live with it," said Rusnak, dressed in a blue pullover sweater as he sat in a cramped back office of a ZIPS store in a shopping center off Route 100. He runs that store, which advertises standard $1.99-per-item pricing, along with cleaners in Columbia and Glen Burnie.
Rusnak says he found renewed meaning in his faith while in prison and is remorseful for the pain he caused at Allfirst.
But that pain remains fresh to some former colleagues.
Karen Weiss, a Baltimore resident and Allfirst's former senior vice president for health care banking, is still angry about Rusnak's deception.
"I think many employees felt betrayed by John Rusnak, who had done something damaging to the bank and done it to cover up mistakes he made, instead of stepping up and saying, 'Yes, it was a heinous mistake, but I made it.'"
Weiss, who did not know Rusnak at Allfirst, recalled the scandal as a stressful, uncertain time as employees sought to reassure customers about the bank's stability even as they worried about their own futures. Some employees felt cheated out of raises or bonuses that were withheld because of the bank's losses.
"There were a lot of employees who felt that in their wallets," she said.
Some who work with ex-offenders also note that Rusnak — who was able to take advantage of resources that others lack — had an unusually smooth re-entry into society.
After leaving prison in 2008, Rusnak returned to his family and Victorian house on Smith Avenue, which he was legally permitted to keep as his residence, and set about quietly rebuilding his life. He's grateful that a local businessman stepped in to provide a path to professional redemption — and a chance to help others.
Since opening the first ZIPS in 2011, Rusnak has hired at least 50 workers who've been in jail or halfway houses, 15 of whom continue to work today among the business' 60 workers. Some hires have come through his volunteer work leading weekly Bible studies at Opportunity House, a Pasadena drug recovery center run by Opportunity Ministries Inc. He's also helping juveniles who have been held in adult prisons find entry-level jobs once they are released.
Shefrin, 23, who started out at minimum wage and now manages the Glen Burnie store, said he considers Rusnak a mentor.
Rusnak, he said, "was open and honest. He didn't promise anything, but he promised opportunity. He understands the struggles because obviously he's been in similar situations.
"John's been good to me. He's understanding in ways most bosses wouldn't be."
The man Shefrin describes has little resemblance to the John Rusnak that an investigator for Allfirst parent Allied Irish Banks PLC called a "mugger" in "a corporate mugging."
Rusnak was viewed as "strong and confident" and a "good family man," but also "arrogant and abusive," according to a March 2002 report by Eugene A. Ludwig, a former U.S. comptroller of the currency who conducted a monthlong internal investigation into Allfirst losses.
"Mr. Rusnak was unusually clever and devious," Ludwig's report said. "Rusnak took advantage of weak and inexperienced employees in the treasury control groups."
Rusnak made bets on the direction of the Japanese yen but racked up losses. He disguised them with fake trades on the books that appeared to hedge the bets, the report showed. It noted that on one day in May 2001 he "executed four transactions — two with Citibank and two with Bank of America — that involved a total of about $1.6 billion in notional value," the value of the assets linked to the trade.
Prosecutors said Rusnak, who earned about $400,000 in performance-related bonuses, feared losing his job and concealed the trades to appear as if he were booking profits. He came to feel trapped by his lies and saw no way out other than continuing to play the markets for a big payoff, they said.
On Friday, Feb.1, 2002, after his trades had come under scrutiny, he left his office at 25 S. Charles St. for the last time. That weekend he sat down at home and confessed to his wife, Linda. Two days later, the bank went public with its losses. News of the "rogue trader" drew British, Irish and Swedish television crews to his home, where they staked out spots for days.
The Ludwig probe found that Rusnak lacked supervision and was able to avoid getting the required independent confirmations from a back-office employee. Along with Rusnak, six co-workers and supervisors were fired.
In October 2002, Rusnak pleaded guilty to one count of bank fraud in a deal with prosecutors that barred him from working at a bank or other federally insured financial institution. At the time, Maryland's U.S. Attorney Thomas M. DiBiagio called the white-collar sentence "very stiff."
"We wanted to send a very clear statement out there that we consider this a serious crime," DiBiagio said.
Allied Irish, which would go on to sell its majority stake in Allfirst to M&T Bank Corp. for $3.1 billion in April 2003, declined to comment on fallout from the case, a spokeswoman said. "Unfortunately all the people working at AIB at that time are no longer working for AIB," the spokeswoman, Helen Leonard, said in an email.
The Baltimore bank's former chairman, Frank P. Bramble, and its former CEO and president, Susan C. Keating, declined requests for interviews about the case. Bramble, president of Calvert Hall College High School in Towson, took early retirement in April 2002. Keating, now president and CEO of the National Foundation for Credit Counseling, resigned from Allfirst in July 2002.
Neither executive was implicated in the trading scandal; Ludwig's report placed the blame on Rusnak's rogue trading and on a lack of controls that went no higher than middle management.
Rusnak says he has been in contact with many former Allfirst co-workers.
"I've asked for forgiveness and been forgiven," he said, adding that one former trader's daughter even works for him. But, he says, he also found that "everyone is not willing to forgive" — something he understands while conceding that it bothers him.
Weiss, who testified at Rusnak's sentencing hearing, said she never believed the apologies Rusnak offered as the scandal unfolded. "My belief at that point was he was only sorry he'd been caught and been uncovered."
Weiss left for another bank job before Allfirst was sold. She decided to speak at Rusnak's sentencing hearing because, she says, "I wanted John Rusnak to hear from someone who was nameless and faceless to him that his actions had consequences."
The case still ranks as one of the biggest U.S. bank frauds in terms of size and duration, said Ludwig, CEO of Washington-based Promontory Financial Group, the advisory firm that investigated for Allied Irish.
"These kinds of events have a profound impact on companies, employees and communities," Ludwig said. "Among the several thousand men and women who work hard every day, the vast majority have very high standards and high integrity and character … and this kind of event which is so negative has a pretty profound impact in terms of cutting into morale."
Rusnak says he spent his time in prison in Bible study groups, teaching rudimentary personal finance to fellow inmates and exercising. He felt relieved to be away from the high-pressure demands of trading, he said in a 2005 Baltimore Sun interview.
During the latter part of his sentence, he was moved from one prison to another. His wife and his two children, who are now in college, would visit. But such trips became more difficult once he was moved a final time to the Federal Correctional Institution in Elkton, Ohio.
Rusnak credits businessman Harvey Rothstein with giving him a much-needed second chance, in a professional sense. Shortly after his release in July 2008 to a halfway house on Monument Street in East Baltimore, Rusnak had a job, thanks to Rothstein, the CEO of Wendy's restaurant operator DavCo Restaurants LLC.
The two had met in 1999 when a mutual friend asked the former trader, then at Allfirst predecessor First National Bank, to look into a DavCo interest rate swap that accompanied a large, complex loan arrangement. Rusnak met with Rothstein to help DavCo better communicate with his banker to improve the pricing, which had seemed incorrect.
Rusnak was hired at DavCo and the job gave him a paycheck that could go toward bills — as well as the $1,000 in restitution he owes each month to the U.S. Department of Justice. More than that, it helped restore self-worth. Rusnak, who in theory owes the entire amount of the bank loss, was required to pay restitution through January 2014 and now is in discussions with the U.S. attorney's office to work out a continuing payment plan.
"I don't think Harvey did it because I was a great guy," he said. "They did it because it was the right thing to do."
Rusnak concedes that some at the company were not happy to be working with him, fearing "I would do something to wreck the company. It's not an unreasonable position. I get that."
He worked for DavCo for three years as senior director of automation and efficiency. When Rothstein looked to diversify his business, he tapped Rusnak to help find and run a franchise. ZIPS seemed the most interesting of several concepts considered, with low expenses and labor costs.
Rothstein, who declined to be interviewed for this article, became an investor in the franchise company, Pilgrimage Development, along with three other people; the DavCo firm is not involved. Rusnak serves as president of Pilgrimage, which hopes to open 20 locations in the Baltimore region in the next 81/2 years. A recent morning found him working amid bags of garments and racks of crisp dress shirts, joking with employees who were steaming shirts and folding pants.
While Rusnak has benefited from a strong support network and connections to get him back on his feet, that's not typical of those leaving prison each year, especially ex-offenders from the city, said Joseph T. Jones Jr., founder and president of Baltimore-based Center for Urban Families. The center runs programs to help ex-offenders, recovering addicts and others overcome what can seem insurmountable barriers to finding jobs with a future.
"There is a divide in our country," Jones said. "People who have access to resources and resource people have a better chance of being able to come out and earn a family-sustaining wage.
"I applaud what John's resource person did for him; that's laudable, but we have to consider most of the folks who come from the criminal justice system who deserve a second chance in Baltimore are not the John Rusnaks of the world. Access to resource people and mentors is critical."
Rusnak now views himself as someone working to tear down such barriers. He hopes to persuade other businesses to follow his lead in considering the largely untapped labor pool of ex-offenders and people in recovery. After hiring Shefrin, Rusnak developed a partnership with Opportunity House and has since found employees there. He also works with Uncuffed Ministries, a Baltimore group that helps find jobs for juveniles who were held in adult facilities.
Rusnak has hired others from Opportunity House, some of whom are referred through jail treatment centers, said Larry Kramer, the group's executive director.
"He's a dynamic person. With everything that he's been through, business-wise, along with going through his struggle and going to jail [he has] a unique perspective," Kramer said. "John can relate, maybe not struggling to find a job when he got out of jail, but certainly to the feelings of losing everything."
Adds Michael Ganovski, "John … knows what he did was wrong, and he carries that with him. He feels he's been given a second chance, and that's why he's so generous to those who are having a hard time and struggling. He was the guy at the bottom."
Ganovski, who became Rusnak's friend through Grace Fellowship Church in Timonium, said he has watched Rusnak come to a deeper understanding of his faith. When they met about six years ago, Ganovski knew Rusnak only as a fellow volunteer helping to lead the church's middle-school ministry on Sunday mornings. They also led Bible studies during the week at students' homes.
Beside their ministry, the men shared a common interest in football and the stock market, and discovered their wives had previously met. The couples soon became friends, spending time together and socializing over dinner.
During the Bible study the two now lead for groups of six or eight men at an Opportunity House residence each Monday night, Ganovski said, "He'll share a story. He'll connect the dots with his own experience. He'll talk about personal responsibility. He'll talk about good choices, bad choices and consequences of choices."
Rusnak says he feels qualified to offer such advice.
"If someone realizes they made a big mistake," he said, "after talking to me they will feel a lot better."
1996: Currency trader John M. Rusnak begins losing money on bets that the Japanese yen would rise in value against the dollar.
Feb. 1, 2002: Confronted on fake-looking trade confirmations, Rusnak leaves his office and fails to return the next workday.
Feb. 6, 2002: Allied Irish Banks PLC announces it has been informed of a major fraud at subsidiary Allfirst Financial Inc.
Oct. 24, 2002: Rusnak pleads guilty to one count of bank fraud in connection with the bank's $691 million loss.
April 1, 2003: Allied completes the sale of its majority stake in Allfirst to Buffalo-based M&T Bank Corp. for $3.1 billion.
July 2008: Rusnak is released from prison and sent to a halfway house.
July 2011: Rusnak opens the first of three franchised ZIPS cleaners, in PasadenaCopyright © 2014, The Baltimore Sun