Copper scandal just won't go away
By Staff -- Purchasing, 9/2/1999
Sumitomo Corp. is suing Credit Lyonnais Rouse for $308 million, alleging the commodity-trading arm of France's fifth-largest bank aided illegal copper trades, causing the Osaka-based company to lose $2.6 billion. Japan's fifth-largest general trading company charged CLR with helping its former chief copper trader, Yasuo Hamanaka, to carry out unauthorized transactions which, three years ago, emerged as one of the biggest-ever commodity trading scandals.Earlier, Sumitomo sued Chase Manhattan Bank, the second-biggest U.S. bank, and Union Bank of Switzerland, Europe's second-biggest bank, with helping Hamanaka hide his losses. Sumitomo is seeking $761 million from UBS and Chase.
Hamanaka bought so much copper that other traders dubbed him "Mr. Copper." He manipulated the market by hoarding the metal in warehouses in California. The disclosure of his trades led to a plunge in world copper prices and triggered investigations into commodity trading practices, particularly those at the London Metal Exchange. Hamanaka is now in prison serving a sentence of eight years for fraud and forgery, and Sumitomo has recovered about $1 million from Swiss bank accounts belonging to the trader.
Merrill Lynch & Co., the largest U.S. brokerage, agreed at the end of June to pay $25 million to settle charges in the U.S. and the U.K. that it played a role in the Sumitomo copper trading debacle. Merrill admitted no wrongdoing but agreed to pay a fine of $10.2 million to the LME, where the bulk of Hamanaka's copper futures and options contracts were bought and traded.
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