Eugene McErlean claims AIB wants to scapegoat him for the debacle at its US subsidiary, Allfirst, where it lost $691m (£474m) through the activities of foreign currency trader John Rusnak.
He is asking for a court declaration that he retains his job and is also seeking damages, alleging defamation and breach of contract.
An independent investigation into the Rusnak affair listed several examples of how Allfirst and AIB management missed opportunities for detecting the huge trading losses, which started some five years earlier.
In response to the report, AIB chief executive Michael Buckley announced a series of measures to strengthen controls and restore investor confidence, including the dismissal of some US executives.
At the time, he said in a statement: ‘The position of group internal auditor falls due to be filled in the normal way later this year. The position will be filled by external appointment.’
McErlean is understood to have been ‘extremely upset’ by this statement, which he regarded as very damaging to his reputation.
He claims that the report of the Allfirst investigation did not find any wrongdoing on his part. Disciplinary action is being taken against him, he maintains, without affording him the opportunity to challenge any evidence being advanced, or to confront his accusers. He has been on leave of absence since March.
AIB declined to comment officially on the court action, but sources said the bank would vigorously defend itself, when the case comes to hearing shortly.
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