London copper trader suspends staff in Tokyo

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The Independent Online
The first cracks within the London copper market in the wake of the pounds 1.2bn trading losses incurred by Sumitomo Corporation began to emerge yesterday after Rudolf Wolff, a highly respected member of the London Metal Exchange, announced that it had suspended three of its Tokyo staff.

Rudolf Wolff yesterday refused to give any further details of the suspensions, which followed the spectacular losses forced on Sumitomo by its rogue copper trader Yasui Hamanaka.

A Wolff spokesman said: "Naturally we are co-operating, as are all brokers who have had any dealings with Sumitomo, with the appropriate regulatory authorities.

"We have 130 years of tradition behind us and Rudolf Wolff would never tolerate any behaviour which is not impeccable."

The problem, if there was one, was isolated to the Tokyo office where Japanese business accounted for less than 4 per cent of all Wolff's world- wide revenue, the spokesman added.

A London trader said yesterday: "I think this sort of news scuppers claims that Hamanaka acted alone in his unauthorised dealings. This is something not just confined to our Japanese friend."

Another source said: "I would be surprised if this is the only set of suspensions and interventions by big firms that we are likely to see. Hamanaka was working with too many people for this to be a isolated case."

The suspensions followed news of expanding inquiries into the Sumitomo scandal in the United States, amid growing concern that the company might know more than it was telling UK and US investigators.

One report in New York suggested the US market regulator, the Commodities Futures Trading Commission, was ready to issue a formal complaint against Sumitomo if the company continues to block its investigations.

Regulators and fraud investigators want to know how far Hamanaka might have acted alone or whether there may have been a price-rigging cartel.

On Monday, the FBI entered the world-wide inquiry by demanding telexes, faxes and other documents linked to Sumitomo and Hamanaka from David Threlkeld, the Vermont-based metals trader who first tried to blow the whistle on the Japanese dealer in 1991.

Mr Threlkeld said the FBI request was probably linked to a grand jury probe by Manhattan's US Attorney's Office into Sumitomo. A trader, Global Minerals and Metals Corporation, has already been subpoenaed to give evidence.

Last month, Vincent Zuccarelli, a former Commodity Exchange (Comex) independent trader, filed a class action complaint against Sumitomo and Hamanaka, and also against two US traders, Global and Birch Brokerage. The complaint alleged they manipulated Comex and LME copper markets to levels higher than they would otherwise have been.

Fears that the scandal may spread to include other firms in Japan, the US and the UK, helped to depress copper prices yesterday, which fell below the threshold of $1,900 before consumer bargain-hunting kicked in to lift it back above that level.