Sumitomo's president, Tomiichi Akiyama, told the Japanese newspaper Asahi Shimbun that the trader Yasuo Hamanaka kept track of his unauthorised deals over 10 years in a secret under-the-counter book that only he knew about.
Authorities in Japan, Britain and the United States are set to widen their investigations this week into how the scandal went unnoticed for 10 years, while world copper traders are braced for a hectic ride as markets reopen today.
The market's main uncertainty is how Sumitomo, the world's biggest copper trader, plans to extricate itself from the long positions Mr Hamanaka has locked the company into.
In the UK the Serious Fraud Office (SFO) has said it is widening its investiagion to cover anyone connected with the fraud.
Earlier this year the Securities and Futures Authority (SFA), the City regulator, conducted an investigation into Winchester Commodities, a UK copper broking firm which has made huge returns from the business. Winchester's two largest shareholders, Ashley Levitt and Charlie Vincent, are now based in Monaco.
Pressure on the London Metal Exchange is expected to increase this week as it emerged that it was alerted as early as 1991 to irregularities in copper trading by Hamanaka. The rogue trader asked a metals broker in October 1991 to confirm details of his trades, some of which were fictitious. The broker, David Threlkeld, declined and brought the request to the attention of the LME. "The LME was aware of this in 1991,'' Mr Threlkeld told journalists on Saturday.
Agencies in the United States, Britain and Japan are urgently trying to discover whether Tokyo's "Mister Five Per Cent" was a one-off maverick, or whether they have stumbled on a plot to rig the price of the world's flagship industrial metal.
If accomplices in any unlawful activity are found, vowed David King, chief executive of the London Metal Exchange (LME), "we will hang them high and publicly''.
The main traders in the copper market expect further wild fluctuations in the metal's price as Sumitomo sorts out its positions. Mr King commented yesterday: ``I am confident that the situation can be resolved in a satisfactory manner without causing disruption in the marketplace."
The Securities and Investments Board (SIB), London's senior market regulator, has been supervising the SFA's investigations into the cooper market. The SIB has also been investigating the trade in copper in liaison with the US Commodities Futures Trading Commission (CFTC).
Enquiries may be redoubled into the scandal that hit Chile's state copper giant Codelco in 1995 when it lost $170m on unauthorised LME trading. Its top dealer has denied fraud charges.
Mr Akiyama, referring to Hamanaka's secret book, said it recorded trades which were about twice the amount a year shown in official paperwork Mr Hamanaka processed for the company.
Sumitomo's annual copper trading volume in 1995 was $9.4 bn, the Asahi Shimbun said.
Mr Akiyama said Sumitomo only learned of what was going on when Hamanaka confessed on 5 June to his rogue trading and showed company officials the secret book. Mr Akiyama said the trader was able to get away with his unauthorised dealings for so long because papers from banks he used in his trading transactions, which should have been sent to the company's financial department, were instead sent directly to Mr Hamanaka.
The company was only fully alerted to Mr Hamanaka's activities when bank documents meant for the trader were mistakenly sent to the company's financial department, the Asahi said.Reuse content