Tokyo police arrest rogue copper trader

Yasuo Hamanaka, the Japanese metals trader once nicknamed "Mr Copper", was arrested yesterday after his former employer, Sumitomo Corporation accused him of incurring losses of $2.6bn (pounds 1.6bn) during 10 years of unauthorised trading.

The arrest marks the first significant development in an investigation that has involved police and regulators in Britain and the US, as well as in Japan.

The arrest did not follow a request from the Serious Fraud Office in the UK, which yesterday said its own inquiry into Mr Hamanaka's trading activities was continuing.

An SFO spokesman said: "The Japanese investigation is obviously different from the SFO's ... so our investigation continues as it has done."

In June, Sumitomo sacked Mr Hamanaka, its head of copper trading, after the original announcement that he had lost the company $1.8bn, much of it in dealings on the London Metal Exchange. Estimated losses have since risen, mounting further yesterday as copper prices, to which Sumitomo is still tied by Mr Hamanaka's outstanding trading positions, slipped slightly, despite substantial reductions in LME stocks.

Japanese television yesterday showed an unshaven Mr Hamanaka being driven from the Tokyo Public Prosecutor's Office to the city's detention centre. His home in nearby Kawasaki was raided by investigators who carried away bags of documents.

The Japanese investigation is focusing on metal trading contracts sent to a subsidiary of Merrill Lynch. The documents, dated January and September 1994, bear the signatures of two Sumitomo executives and authorise Mr Hamanaka to carry out trades in the company's name through Merrill Lynch Pierce Fenner and Smith, a subsidiary.

In the September document, Mr Hamanaka was authorised to name recipients of funds in connection with metal trading between Sumitomo and Merrill Lynch Pierce and other Merrill Lynch group companies.

In New York, a Merrill Lynch spokesman said: "We conducted all of our business with Sumitomo in an entirely proper manner."