Sumitomo Sets Aside $150 M Over Scam

Sumitomo Corp said yesterday it had set aside 19.8 billion yen ($150 million) in reserves to cover some of the future costs related to a copper scandal which has already cost the Japanese trading firm $2.6 billion.

In June 1996, Sumitomo stunned world financial markets by announcing the huge copper trading losses, which it blamed on unauthorised deals by its chief trader Yasuo Hamanaka.

Muneo Shigematsu, general manager of Sumitomo, told a news conference yesterday that the company had decided to set aside the reserves in the financial year which ended on March 31, 1998 to deal with future costs related to the copper case, including a settlement with US regulators.

 

He also said more money was likely to be needed. We dont think it (the $150 million) will cover all costs. There is a possibility we will need more money in the future,Shigematsu said without elaborating.

On Thursday, sources in Washington said the Commodity Futures Trading Commission, which oversees US futures markets, had ended its investigation of Sumitomos trades and might announce a settlement as early as next week.

Once source, who declined to be identified, said one penalty in the settlement would involve Sumitomo paying a substantial fine.

Asked about a possible fine, Shigematsu said: We havent reached any agreement yet. Hamanaka and Sumitomo were accused by traders at the New York Mercantile Exchanges Comex Division and the London Metal Exchange of trying to manipulate the copper market. The company also faces class action lawsuits in the United States.

In March, a Japanese court sentenced Hamanaka, the worlds former top copper trader, to eight years in prison for fraud and forgery. He has appealed the sentence.