By Nikki Tait –
A $1bn-plus High Court claim being pursued by Japan’s Sumitomo against Credit Lyonnais Rouse, part of the French Credit Agricole group, could take more than six months to try and involve more than three dozen witnesses, say lawyers.
If there is no settlement between the two sides, the case will be the third blockbuster trial stemming from financial scandals in the 1990s to hit the London courts recently.
This year the slew of litigation stemming from the collapse of Barings Bank ended after a lengthy trial pitting the bank’s liquidators against Deloittes.
Meanwhile, the mammoth case being brought by liquidators of Bank of Credit and Commerce International, which collapsed in 1991, against the Bank of England over alleged misfeasance by the central’s bank supervisory department, is continuing.
The Sumitomo/CLR trial is scheduled to begin on October 4 and stems from a copper price manipulation scandal that shook commodity markets in the mid-1990s. The nub of the scandal was that Yasuo Hamanaka, Sumitomo’s chief copper trader, acting without authorisation, successfully squeezed the copper market over a 10-year period.
It was not until 1996 that the London Metal Exchange discovered what was happening. Mr Hamanaka was dismissed and sentenced by a Tokyo court to eight years in prison for fraud and forgery. The company itself suffered substantial losses.
In 1998 Sumitomo paid about $150m to settle claims by regulators in the US and UK, although it did not admit or deny their allegations. A wave of litigation also ensued, involving claims by traders against Sumitomo, as well as a series of suits filed by the company against banks and brokers that dealt with Mr Hamanaka. Most of these actions have subsequently been settled.
The current case derives from CLR’s role as an LME clearing broker to Sumitomo’s copper trading business and encompasses two claims.
The first relates to a series of transactions cleared by CLR for Sumitomo between June and September 1993 – including a parcel of futures and options deals cleared on June 25 and known as the “MAGM/RADR” trades. Sumitomo claims a loss of about $303m, plus interest.
The second relates to CLR’s role in paying out proceeds of transactions between Sumitomo and Morgan Guaranty executed in November 1993. Sumitomo alleges that, if it had been alerted, it could have avoided losses of more than $392m.
CLR denies the claims, in particular, allegations that it acted dishonestly. “This case is a matter of principle for us and we shall defend it vigorously … We are confident that justice will be done and CLR will be exonerated of any wrongdoing,” it said in a statement.
Source: Financial Times