Heat rises on Sumitomo over pounds 1.2bn rogue loss
Sunday 16 June 1996
Sumitomo sought to settle the market and satisfy regulators again this weekend by restating it would stand by deals made by Yasuo Hamanaka, its star copper trader who was fired last week.
It also denied it had acted too slowly in making public the losses: "The company takes its responsibilities very seriously about how it handles public announcements, and there has been nothing inappropriate," said a spokeswoman in Tokyo.
Market sources say, however, that the indications are that the company started to free itself from copper contracts earlier last week while still denying that anything was amiss with Mr Ham-anaka.
The "rogue trader" scandal is the second in a year to hit a big Japanese corporation, and markets are already speculating fiercely on possible parallels.
Last year, hard on the heels of Nick Leeson's pounds 830m losses at Barings, Daiwa Bank suffered $1.1bn ($720m) of losses on unauthorised bond trading by New York-based dealer Toshihide Iguchi.
Daiwa was fined $340m and kicked out of the US earlier this year after pleading guilty to a cover-up.
The Serious Fraud Office is already investigating, joining UK securities regulators and New York's Commodity Futures Trading Commission in probing Sumitomo's trading and the large number of US and UK brokers that Mr Hamanaka used.
This weekend, Sumitomo denied speculation that its president Tomiichi Akiyama would also fall on his sword as the losses threatened to exceed pounds 2bn after a plunge in the copper price.
Mr Tomiichi apologised profusely to regulators last week and said he was "profoundly embarrassed" by "severe violations of the company's business policies". Pressure on the Sumitomo boss will intensify, however, if allegations that the company traded out of more trouble before disclosing Mr Hamanaka's losses prove to be well founded.
"For all the talk of honouring long-term contracts, it was unwinding its position in the run-up to the announcement," one London market source said.
"That would make sense commercially. The feeling among all the physical (copper) traders is that most of it has been done."
Sumitomo and regulators have been tight-lipped so far about the scale and nature of Mr Hamanaka's dealings.
He was, however, flush with copper when fundamentals, plus aggressive selling by US funds, were combining to force down the copper price.
The market has seen violent swings in the last month after a battle between Sumitomo and the funds, before the price for three-months delivery closed down $175 at $1,980 a tonne on Friday.
"The copper market was heading for disaster in our view. The price had lead a charmed life for the last three years," said analyst Nick Moore of broker Robert Fleming's Global Mining Group.
Traders speculated that Mr Hamanaka had taken ever larger positions to cover mounting losses and issued false invoices, Nick Leeson-style, to conceal his speculative trading.
Last week, Sumitomo said it only discovered the problem after finding a fictitious deal on 5 June while co-operating with regulators.
A report in yesterday's Financial Times, said, however, that Mr Hamanaka asked a London trader for a fictitious invoice for $225m in 1991 of which Sumitomo was allegedly aware. When quizzed by the LME, Sumitomo said it was for tax reasons, the article said.
The UK's Securities and Investment Board used its sweeping powers under the Financial Services Act to compel disclosure by Sumitomo.
- 1 Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
- 2 Pictures show young Palestinian girl biting Israeli soldier trying to detain boy during West Bank protests
- 3 Watch the Supermoon live: How to see the brightest Moon of the year tonight
- 4 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Watch the Supermoon live: How to see the brightest Moon of the year tonight
Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Stock up on canned food for stock market crash, warns former Gordon Brown adviser
Labour leadership: Jeremy Corbyn voters most likely to believe 'world is controlled by a secretive elite'
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...