ON MAY 17, 1999, Manuel Feder of Hanover, Pa. bought 3,000 American depositary shares in Allied Irish Banks for $30 a share, or $90,000, according to a sworn statement Feder filed with a federal court in New York's Southern District.
It didn't turn out so well.
Allied Irish is trading above $40, so Feder's stake would have been worth $120,000. But he unloaded his shares at a loss in 2002, he told me on the phone, after Allied Irish shocked the financial universe by disclosing more than $600 million in currency-trading losses at its Baltimore subsidiary, Allfirst Financial.
Is Feder entitled to compensation from Allied Irish? Not on the evidence presented so far.
I'm sorry for everybody who lost money on Allied Irish stock, just as I'm sorry for the hundreds of employees who lost jobs when Allied Irish sold Allfirst to M&T; Bank Corp. after the currency scandal.
But the damage sustained by Allied Irish shareholders doesn't look especially severe, and many shareholders didn't lose anything.
Such losses that exist might be difficult to tie to the fraud committed by rogue Allfirst currency trader John M. Rusnak. And even if Rusnak's caper made people lose money, to claim that it resulted from fraud or recklessness by top bank bosses - as Feder must prove to win - is a long, long stretch.
This is not Enron, where fraud indubitably occurred at high levels and the stock went to zero and stayed there.
Feder is the lead plaintiff in what his lawyers hope will be a class action suit against Allied Irish and several executives, including former Allfirst Chairman Frank P. Bramble and former Allfirst Chief Executive Officer Susan M. Keating.
His complaint was merged with another last week in the New York federal court, bringing new attention to the 2002 Allfirst blowup. At stake is recompense for Allied Irish shareholders and, potentially, millions in fees for lawyers.
The class Feder purportedly represents includes everybody who bought Allied Irish stock in the three years before it disclosed the currency fiasco in February 2002. The idea is that investors were cheated because they didn't know about huge losses being piled up by Rusnak, who pleaded guilty to criminal charges in 2002 and is serving a 7 1/2 -year sentence.
But the Rusnak revelations barely dented Allied Irish's long-term stock charts. It didn't take news of a cowboy yen trader to deflate the shares. They had accomplished that by themselves, falling close to $15 within a year after Feder bought them and then climbing back to $23.55 before the scandal was revealed.
The day the bombshell became public, they fell to $19.77, but that was still far above what many shareholders paid the previous three years. By mid-March - less than two months later - the shares had recovered to $24. They closed yesterday at $41.84.
Where's the damage? Losing money on Allied Irish was essentially a random event based on when you bought or sold the stock. That's grounds for a lawsuit?
"The share price did drop substantially when the Rusnak fraud hit the wires," responds Donald J. Enright, a lawyer for the plaintiffs. "It's clear that at least some purchasers of AIB securities during the class period - although by no means all - have suffered damages and deserve representation."
Well, maybe not successful representation.
To win, plaintiffs' lawyers must demonstrate intentional deceit by top Allied Irish executives or recklessness so grievous that it approached the same thing. But there's little evidence so far that they knew what Rusnak was up to, and there are few conceivable motives for them to have helped him with a cover-up.
Yes, there were caution flares. Rusnak's colleagues sometimes questioned his activities, and at one point concerns were apparently raised at Allied Irish headquarters in Dublin. But every disaster - Pearl Harbor, the 2001 terrorist attacks, even the recent tsunami - produces information in its aftermath that could have roused people to action had they only heeded it. The blame, however, almost always rests with bad luck or low-grade carelessness, not conspiracy.
And bad luck is part of being a business owner. That's what you become when you buy stock. Shareholders have no contract, as bondholders do. You're exposed to the risks and adventures faced by any proprietor. Sometimes those include bad employees.