Broker 'turned blind eye' to rogue copper trader, court told
Thu Oct 7,10:39 AM ET Business - AFP
LONDON (AFP) - French broker Credit Lyonnais Rouse was accused in a London court of dishonestly assisting, or turning a blind eye to, the activities of rogue trader Yasuo Hamanaka, who racked up losses of 2.6 billion dollars at his former employer, Sumitomo Corp.
The claim was made by lawyers for the Japanese group, which is suing CLR -- now part of French banking group Credit Agricole -- for 1.1 billion dollars (895 million euros) in London's High Court.
Hamanaka was said to have controlled five percent of the global copper market at one point, earning him the nickname "Mr Five Percent".
He found himself at the centre of one of the world's biggest rogue trading scandals after running up huge losses in unauthorised deals over 10 years from 1985.
The losses were double those of infamous trader Nick Leeson, who caused the British merchant bank Barings to implode in 1995.
CLR acted as clearing broker for the copper trading of Hamanaka, who was jailed for eight years by a Japanese court in 1998 after pleading guilty to charges of fraud and forgery.
Christopher Carr, a lawyer representing Sumitomo, alleged that CLR knew of or ignored the fact that Hamanaka was acting in breach of his duty to his employer when he made trades "of unprecedented magnitude" in 1993.
He said Hamanaka's confession to his manager during a 90-minute lunch meeting in June 1996 came as a complete shock to his employer "because of the nature of what had happened, the length of time it covered and the size of the operation".
Faced with the concealment and destruction of documentation, Sumitomo had to approach its market counterparties to discover what its current positions and risk exposures were, Carr told the court.
"During the course of the investigations, there arose reasonable grounds for thinking that some of the brokers and bankers who assisted Mr Hamanaka had done so dishonestly and had assisted him to conceal his massive losses," he said.
CLR has denied any wrong-doing, describing the case as "far-fetched and contrived".
"We are confident that justice will be done and CLR will be exonerated of any wrong-doing," the French brokerage firm said in a statement. |
