Sumitomo Admits Larger Loss In Scandal
The statement came in a revision of the trading group's earnings forecast. The company said it revised its group net forecast for 1996-97 to show a loss of 147 billion yen ($1.34 billion) from a profit of 24 billion yen ($220 million).
The trade house announced on June 13 that it had suffered huge losses from unauthorised copper trades and blamed the long-time head of its copper trading division Yasuo Hamanaka, whom it promptly fired.
In a statement in English, confirmed by a Sumitomo spokesman, the company said it was seeking criminal charges against Hamanaka. An earlier statement in Japanese said it would take legal action, indicating a civil complaint. The spokesman said it was considering a separate civil lawsuit but had reached no decision.
The company said on Thursday it planned no further changes to the copper loss estimate and said it has now closed out most of its long copper positions.
As a result of our liquidation up to now, there still remain some positions, including both short and long positions, but the liquidation of uncovered positions is nearly complete, Sumitomo president Kenji Miyahara told reporters. Accordingly, there is almost no risk remaining and it is our judgment that we will not again revise the estimated loss we have announced, he added.
Traders and financial analysts had questioned Sumitomo's previous loss estimate, saying it appeared to be much too low given the company's huge exposure in the market and a sharp fall in copper prices since the scandal broke.
Sumitomo said Hamanaka had for a decade deceived the company, setting up bogus accounts to conduct his improper dealings.
Miyahara said the losses snowballed over the years as Hamanaka tried to cover up a 1985 trade that went bad with more speculation in the market. He also alleged that Hamanaka forged documents to cover up his dealings.
Investigators from Britain and the US are looking into the affair, the biggest financial scandal in history. In Washington, congressional hearings into the affair opened on Wednesday. An official with the US Federal Reserve said the crisis appeared to be confined to Sumitomo and had not spread to any other financial firms.
Japanese authorities, meanwhile have been reluctant to step into the case, arguing that since all of the questionable trades took place overseas, there would be no violation of Japanese law.
Sources said recently that a criminal investigation has been launched into whether Hamanaka broke any laws by defrauding the company. But some of those allegedly linked to his trades say the accounts in question were fully authorised by senior Sumitomo officials.
What we want to prove most at the moment is that the company was not involved with Hamanaka's unauthorised copper trading, Miyahara said.
Hamanaka, a 26-year veteran of Sumitomo, has kept largely silent about his activities since his dismissal, staying at his modest suburban house near Tokyo and saying only that he would give his side of the story at a later date.