Rogue Copper Trader Sentenced To 8 Years In Prison

Former Sumitomo Corp copper trader Yasuo Hamanaka, who once dominated the metals global market, was yesterday sentenced to eight years in prison for forgery and fraud in racking up $2.6 billion in trading losses.

Hamanaka, who had been free on bail, had pleaded guilty to the charges. His lawyers later said they were considering an appeal against the sentence.

In June 1996, Sumitomo stunned the worlds metal markets by announcing huge copper trading losses, which it blamed on unauthorised deals by Hamanaka.

In sentencing Hamanaka at Tokyo District Court, Chief Judge Yoshifumi Asayama said the traders actions had a major international impact that caused confusion in global copper markets.

This was a complex, vicious crime and he used everything to hide his unauthorised trading, Judge Asayama said.

His crimes have shaken the management of Sumitomo. They have caused a big international impact and particularly caused confusion in the international copper market. Hamanaka was known as Mr Five Per cent for his rumoured control of that much of the worlds copper trade.

During the trial Hamanaka, 50, admitted he committed forgery and fraud, but said he did so in an effort to recover massive losses in off-balance-sheet trades for Sumitomo, rather than for personal gain.

Prosecutors had urged that Hamanaka receive a 10-year sentence, less than the 15-year maximum penalty. Wearing a blue suit and flanked by three of his lawyers, Hamanaka shifted uneasily in his chair as the sentence was pronounced.

The year-long trial of Hamanaka leaves unanswered key questions about whether, and how, he may have manipulated global copper prices.

Fraud investigators in Britain and the US are continuing to work at trying to unravel the tangled web of deals Hamanaka spun around the globe. Seeking leniency, defence lawyers had lashed out at lax controls at Sumitomo, arguing that Hamanakas superiors must have been aware of the unauthorised trades.

In the US, Sumitomo is the target of a lawsuit alleging that it conspired to manipulate prices of copper futures contracts, together with Hamanaka, Global Minerals and Metals Corp, Merrill Lynch & Co and Morgan Stanley & Co.

Regulators around the world are also tightening their grip on the worlds futures markets to prevent and detect manipulative or abusive trading practices.

The London Metal Exchange has also taken steps to improve market transparency, while saying that Hamanaka was operating beyond its reach in the over-the-counter and physical markets and that it took steps behind the scenes to alert Sumitomo of potential problems.

Over the years, traders said, Hamanaka kept copper prices artificially high through skilful use of complex derivatives transactions and his iron grip on a large amount of copper stocks in LME warehouses.