Sumitomo affair
The 1996 Sumitomo affair is considered one of the biggest financial scandals in recent history. The scandal, in which a single trader of the Japanese trading company Sumitomo Corporation concealed completely unauthorized business for eleven years, ultimately ended in a loss of 1.8 billion US dollars. This record loss for a single company on the international financial markets has so far only been exceeded by the trader Jérôme Kerviel in the proprietary trading of the major French bank Société Générale , who caused a loss of around 4.9 billion euros. Not only financial experts wondered how a single trader could hide such an unprecedented loss from his superiors.
Since, in contrast to other cases (see e.g. Barings Bank), the fraud did not result in the company's bankruptcy , the affair tended to remain outside the mass media.
background
The Sumitomo Corporation in Tokyo hired the stockbroker Yasuo Hamanaka in 1985 . The then 37-year-old man was considered an expert in commodity futures . In particular, he was able to demonstrate outstanding knowledge of the very complex trade in copper .
Through Hamanaka, the company was initially able to record large profits; However, this only happened because Hamanaka manipulated the market by buying unauthorized shares from copper companies . He artificially increased this by massively buying copper futures contracts. As early as 1991, the supervisory authority of the London Metal Exchange (LME) approached the controllers at Sumitomo and proved to the company that Hamanaka incorporated air bookings into its balance sheet. However, no sanctions were imposed on the Sumitomo Corporation and Hamanaka remained in his post.
In 1993, Hamanaka recognized an increased demand for copper in China due to the growing large-scale industrial production . However, the Ministry of Economic Affairs in Beijing responded to Hamanaka's speculation about a rising copper price by putting the market under pressure with verbal interventions . This already meant losses in the millions for Hamanaka and thus for Sumitomo. Since the average price of Hamanaka's futures contracts was still above the market price despite its artificial increase, Hamanaka then began to forge balance sheets and trade reports.
In June 1996 Hamanaka's criminal activity became known. The company had to report high losses and terminated the former star dealer without notice. As a result, the copper price fell by 27 percent within one day, which meant a loss of 2.6 billion US dollars for Sumitomo, about one tenth of the company's capital.
judgment
Hamanaka was sentenced to eight years in prison in 1998, six of which were served. However, the judge also sharply criticized the management of the bank in his judgment .
See also
Web links
- Article by Paul Krugman on web.mit.edu