A Baltimore Circuit Court judge dismissed yesterday a lawsuit attempting to force Allfirst Financial Inc.'s former and current officers and directors to repay $691.2 million lost in a currency trading scandal.
Judge Albert J. Matricciani Jr. ruled that Irish law applies in the case, and it does not allow shareholders to bring "derivative" actions against corporations.
The decision was a blow to Tomran Inc., which sued Allfirst directors and officers in May, claiming that they were negligent in their duties and should repay the Baltimore bank's losses.
"We are going to review his opinion carefully and examine our options, including an appeal," said Cyril V. Smith, an attorney representing Tomran. "We believe we laid out a meritorious case. We need to give some thought about what our next step is."
Attorneys representing Allfirst and its parent, Allied Irish Banks PLC of Dublin, Ireland, could not be reached for comment.
Mark D. Gately, an attorney representing David M. Cronin, a defendant in the case and Allfirst's former treasurer, said he was "delighted with the result and the reasoning."
"I think that everyone knew Irish law controlled," Gately said. "At the end of the day, this is an Irish law corporation, and because of that, Irish law has to govern the rights and remedies of its equity holders."
Gately said he was sure Cronin would be "delighted" with the judge's decision.
"I'm sure he will be happy with this," he said.
Tomran's lawsuit was filed three months after Allfirst stunned the business world Feb. 6 with its announcement of the $691.2 million loss.
Allfirst accused one of its currency traders, John M. Rusnak, 38, of hiding the losses through fake trades entered into the bank's computer system.
The trades ultimately made Allfirst's profits rise and allowed Rusnak to make even larger bets on currencies.
Rusnak was fired along with six co-workers and supervisors whom the bank said failed to detect the fraud over a five-year period.
He pleaded guilty in October to one count of bank fraud, part of a plea bargain that calls for him to serve 7 1/2 years in prison. Rusnak is expected to be sentenced in January.
Allied Irish agreed in September to sell Allfirst to M&T; Bank Corp. of Buffalo, N.Y., in a $3.1 billion deal that officials of both banks say was in the works before the scandal was uncovered.
Tomran's lawsuit named 15 directors and officers, including Frank P. Bramble, Allfirst's former chairman, who took early retirement shortly after the losses were made public, and Susan C. Keating, the banking company's former president and chief executive officer, who resigned in July.
Attorneys for Tomran, an Allfirst depositor that says it owns 4,800 shares of Allied Irish, accused Allfirst executives and directors of negligence and gross negligence, alleging that they ignored warnings as early as 1995 that allowed the losses to mount. Tomran requested a jury trial on all issues.
Its attorneys argued that Matricciani should take on the case because Allfirst is a Maryland chartered institution, the crime was committed in the state and most of the defendants live here.
But Matricciani wrote in his opinion that he was "unwilling to go farther and ignore the well settled principles that ... require that the law of the place of incorporation govern the rights and responsibilities of the parties with respect to its internal operations."
"It became clear to me as I went on that Irish law was controlling," Matricciani said in an interview. "Irish law wouldn't have permitted this action. I didn't have any choice."