Sumitomo copper affair
The Sumitomo affair of 1996 is one of the biggest financial scandals in recent history. The scandal, in which a single dealer of Japanese trading company Sumitomo Corporation for eleven years laminated completely unauthorized transactions ultimately ended with a loss of 1.8 billion U.S. dollars. This record loss for a single company to the international financial markets has so far been matched only by the trader Jérôme Kerviel in proprietary trading of the major French bank Société Générale, which had caused damage of around 4.9 billion euros. Not only financial experts wondered how a single dealer could conceal such an unprecedented loss before his superiors.
Since the fraud in contrast to other cases ( see, eg, Barings Bank) did not have the company's bankruptcy the consequence the affair remained rather outside the mass media.
Background
The Sumitomo Corporation in Tokyo presented the 1985 Stock Trader Yasuo Hamanaka one. The then 37 -year-old man was seen as an expert in commodity futures. In particular, he was able to demonstrate excellent knowledge of the very complex trade in copper.
By Hamanaka first the company has seen big gains; this happened but only because Hamanaka manipulated by unauthorized stock purchases of copper companies to market. This, he moved artificially massaged by purchases of copper futures in the air. As early as 1991, the supervisory authority of the London Metal Exchange applied (LME ) to the Controller at Sumitomo and proved to the company that Hamanaka air bookings made included in the balance sheet. However, there were no sanctions from Sumitomo Corporation and Hamanaka remained at his post.
In 1993 Hamanaka recognized because of the growing industrial large-scale production an increase in copper demand in China. The Ministry of Economy in Beijing, however, responded to Hamanakas speculating on a rising copper price by continued market with verbal interventions under pressure. This already meant losses in millions of dollars for Hamanaka and thus for Sumitomo. Since the average price of the futures contracts Hamanakas despite its artificial increase was still above the market price, Hamanaka then began to fake balance sheets and trading reports.
In June 1996, the criminal acts Hamanakas was known. The company had to report heavy losses and announced the former star merchant without notice. As a result, the price of copper fell within a day by 27 percent, which meant a loss of 2.6 Sumitomo billion U.S. dollars, equivalent to about one tenth of the company's capital.
Judgment
Hamanaka was sentenced to a prison term of 8 ½ years in 1998. The judge criticized, however, in his ruling, the management of the bank sharp.