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Merrill sued in copper scam
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May 20, 1999: 1:33 p.m. ET
U.S. officials say broker had role in Sumitomo scheme to fix copper prices
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NEW YORK (CNNfn) - U.S. commodity market officials filed suit against Merrill Lynch & Co. Thursday, alleging the brokerage helped Japan's Sumitomo Corp. in its effort to fix copper prices more than three years ago.
The U.S. Commodity Futures Trading Commission filed the complaint against the brokerage, two Merrill affiliate firms, and Global Minerals and Metals Corp. and two of its executives.
Merrill's alleged role was in providing "large sums of credit" to both Global and Sumitomo to corner copper stocks on the London Metal Exchange, and benefiting from trades carried out using knowledge of their activities.
In a statement Thursday, Merrill Lynch said the allegations are "without merit" and said the broker intends to defend itself against the suit.
The allegations bring back to the fore the 1995 case of Sumitomo's top copper trader Yasuo Hamanaka, jailed that year for forgery related to the loss of $2.6 billion by that firm.
The squeeze Hamanaka helped put on the copper market was followed by a sharp drop in the price of the metal.
Merrill is not the first top-tier U.S. brokerage to be named in the Sumitomo copper scandal. In 1997, Morgan Stanley & Co. was cited for lax management in its relationship with the Japanese financial firm, press reports then said.
Two individuals named in the complaint were Global's president and chief executive officer, R. David Campbell, and chief copper trader Carl Alm. They were cited for working with Sumitomo and Hamanaka to control copper prices.
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