'Mr Copper' May Face Civil Law Suit In Japan

The company's move against the trader known as Mr Copper reinforces its claim that Hamanaka, alleged to have manipulated copper prices on the LME, was operating alone. Its preparations come as Japanese prosecutors, who are intent on keeping the case on their turf and who feel that a crime committed by an employee of a Japanese corporation should be tried by Japanese rules, have also started to prepare a criminal case.

From the start we have been looking into the possibilities of filing charges against Hamanaka, Sumitomo said.

It has hired a legal team and accountants, including Coopers & Lybrand, who are in Japan poring over documents and trading books. Sumitomo's civil suit will also help the company buy time, since such cases take years to process through Japan's judicial system.

 

This will suit the company, which is trying to forget the case. Although some in the copper industry and even Japanese government officials closely watching the world's copper markets have known of Hamanaka's massive long copper positions, Sumitomo has claimed they were unauthorised and denied any knowledge, saying they were hidden in a devious and complicated manner.

The company is keen to avoid being identified as operating with Hamanaka, since this might subject it to a wave of law suits from copper traders and brokers who claim to have incurred losses from volatility in the markets.

Some individual brokers in the US have filed law suits in New York against Sumitomo, Global Minerals & Metals, and Birch Brokerage for orchestrating a rolling manipulation.

While larger metals traders and corporations have remained on the sidelines, some are considering joining a class action suit against Sumitomo.

Evidence available so far appears to run counter to Sumitomo's claims. A number of financial institutions and copper brokers that dealt with Hamanaka, including Merrill Lynch and Credit Lyonnais, have stated that his transactions had been fully approved by Sumitomo board members.

Moreover, the London Metal Exchange notified the company of his transactions once in 1991 and also in 1993. Japanese prosecutors have started to prepare a criminal case.

Although the justice ministry, which supervises the prosecutors, has pledged co-operation with UK and US regulators, the Tokyo prosecutor's office is keen to maintain control of the Sumitomo case.

While the copper trades were done on the LME, the phone calls were made from Japan and any crime should be solved in Tokyo, they say.

The Tokyo district public prosecutor's office is analysing trading records and documents in order to file possible breach of trust charges. In order to stand up charges, the prosecutors would need to prove that Sumitomo's internal rules were broken and losses inflicted on the company for personal gain.

The ministry of international trade and industry, which governs commodity trading and trading houses but has kept its distance from the Sumitomo affair to avoid any criticism of being negligent, has also suddenly expressed an interest.