Allied Irish Banks PLC officials said the decision hinges on whether Baltimore-based Allfirst rebounds sufficiently from the currency trading scandal that rocked the company in February.
Gary Kennedy, Allied Irish's group financial director, said after the annual meeting that the Dublin-based bank has suspended plans to acquire other banks in or near the mid-Atlantic region. Kennedy took over risk management after Allfirst currency trader John M. Rusnak lost $691.2 million in wrong-way bets of the U.S. dollar against the Japanese yen.
Allied Irish must first determine, he said, whether the Allfirst name has been eroded by what bank investigator Eugene A. Ludwig called the fourth-worst banking scandal in history.
"If you have a sore tooth, you take it out, but the pain doesn't go away right away," Kennedy said. "You have to see if there's infection underneath."
Allied Irish officials blame the trading scandal on Rusnak and a half-dozen co-workers and supervisors who acquiesced or ignored his losses, which began in 1997.
Rusnak, of Mount Washington, is cooperating in an FBI probe, bank officials said. He has not been charged with a crime but has been accused of falsifying documents to cover up trading losses so large that they erased more than half of last year's profits at Allied Irish, one of the largest companies in Ireland.
Quinn said the FBI has not been in touch with Allied Irish officials.
At the shareholders meeting, officials did not try to diminish the incident. Rather, they showed a mini-documentary about the debacle on large-screen monitors in a ballroom at Belfast's Culloden Hotel.
"I accept that the fraud was a traumatic event," Quinn said after resolutions to remove him and other directors were overwhelmingly defeated.
He said he was pleased by the shareholders' vote but added that "a vote to remove us is justified."
"We as a board and a management team failed," he said. "It was an honest failure. But there is no doubt that the issue of the Rusnak fraud will be with us for some time."
Quinn said afterward that the bank's decisions to hire Ludwig, a former comptroller of the currency, and to release his full report turned out to be masterstrokes because they quickly restored confidence among regulators, investors and customers. After the scandal broke, bank officials soon realized that they couldn't credibly investigate the matter themselves and that a partial report would eventually be leaked in full. "We decided to leak it ourselves," Quinn said.
Most of the 200 shareholders who ventured to Belfast for the two-hour meeting supported the bank, routinely approving and reappointing directors. Several investors seemed more concerned about $700 million in "nonperforming loans" that might not be recovered at the Allied Irish-controlled Bank Zachodni WBK, the fifth-largest bank in Poland, than with the losses in Baltimore.
Bank executives explained that Allied Irish was aware of the bad loans when the company expanded to Poland last year and that they weren't a surprise or a major problem, although the Polish economy hasn't grown as fast as they hoped.
The board also announced that accounting firm KPMG will replace PricewaterhouseCoopers, which the bank said last month would not be retained after the firm's earlier audits failed to uncover the trading losses. The board will reconvene briefly June 26 for a vote on the new auditor, which was selected Tuesday, Quinn said.
While bank officials navigated the trading storm at the meeting, they ran into some trouble with investor Niall Murphy. The rare-books dealer has conspicuously attended the annual meeting since he was fired from the bank in 1981, ending a 25-year career. Murphy contended that he was dismissed after picketing his branch in a labor dispute. His protests and scorn have continued through anti-bank Web sites, divisive appearances at the annual meetings, and repeated, unsuccessful motions to have bank directors removed and to be appointed himself.
"I'm tempted to vote for him if for no other reason then to bring an end to the constant hassling" at the annual meetings, said shareholder Brendan Garvin, a Dublin lawyer.
After Murphy had launched into several rambling monologues that touched on subjects including John Wayne and Frankenstein's monster, Quinn instructed technicians to turn off the shareholder's microphone. Murphy shouted, climbed behind Quinn and refused to return to his seat.
Quinn, who had bantered with Murphy moments earlier, grew red-faced and anxious. As several spectators alternately hollered support and derision for Murphy, a half-dozen guards encircled him and led him out. He returned later, still quite vocal and no more contrite.
The turnout was similar to past shareholders meetings, but it might have been larger, given the trading scandal, had the meeting taken place near the bank's Dublin base. It was held in Belfast, 100 miles north, to fulfill an earlier commitment to move the annual meeting around the island. Plans to meet in Northern Ireland last year were canceled because of an outbreak of foot and mouth disease, and the board had arranged to meet in Belfast this year before the Rusnak affair.
Bank officials say they hope the appointment of Eugene C. Sheehy, who headed the Ireland operation, as Allfirst chairman and the board's decision to shift greater oversight to Dublin from the United States will right the subsidiary, which had a lackluster two years before the scandal.
"Allfirst previously made over 20 percent of our profits. It's important for us to resume that," said Michael Buckley, Allied Irish president and chief executive officer. "This episode was so untypical of the rest of the company. It made us even more determined to publish the whole report, warts and all."