Sumitomo Sets Up Reserve Fund
TOKYO (AP) _ Japanese trading house Sumitomo Corp. said tpday it had established a 19.8 billion yen ($149 million) reserve fund to deal with claims stemming from a huge copper trading scandal.
The decision comes in response to investigations by regulatory authorities in the United States and Britain into the scandal as well as class-action lawsuits filed in the United States, Sumitomo said.
The company said no agreements have been reached, but officials determined it would be ``prudent″ to establish the reserve as a charge against earnings for the fiscal year ended March 31, 1998.
The company’s former chief copper trader, Yasuo Hamanaka, was arrested in October 1996 and charged with swindling a Sumitomo subsidiary out of $770 million as part of a decade-long scheme to hide his trading losses.
Hamanaka, who amassed total losses of $2.6 billion over a decade and was sentenced to eight years in prison, has appealed to a high court, contending his sentence was too severe.
The U.S. Commodities Futures Trading Commission and Britain’s Securities and Futures Authority are investigating the scandal.
Sumitomo could be censured or punished by regulatory authorities if it is found partly responsible for the turmoil because of its failure to supervise Hamanaka.
In addition, Sumitomo is a defendant in two lawsuits in California and two in New York stemming from the scandal, a company official said. The California suits involve anti-trust law and the New York suits, commodities trading law, he said.
Sumitomo said it had been holding talks to try to resolve these issues.
The company fired Hamanaka in 1996 and has filed a civil lawsuit against him in an effort to recover some of the losses.
The disclosure of Hamanaka’s losses in unauthorized trades roiled world copper markets, rocked the 300-year-old trading company, and raised questions about oversight at Japanese corporations.