THE BIRMINGHAM POST
BY NEVILL BOYD MAUNSELL
Early next year, it is said, Yasuo Hamanaka is likely to emerge from a Japanese jail, an event awaited with some nervous curiosity in the arcane but excitable, world of commodity dealing.
Mr Hamanaka was the “star” trader who cornered the world’s copper market in the early and mid ‘90s, blithely, as it turned out recklessly, trusted by his employers at Sumitomo. They later confessed that his activities had cost them a breathtaking sum of $2.6 billion and compensated at least four banks which lent Mr Hamanaka money – two, I am told, for nine-figure sums. It is thought that one lawsuit is still outstanding. Its consequences went far beyond the narrow world of metal trading. Mr Hamanaka was operating for several years at the pinnacle of the heady Japanese “miracle” boom. He drove the price of copper above $2000 a tonne, well above the price, even today. Mines were opened to feed the frenzy.
The havoc when the bubble burst was commensurate. Mr Hamanaka got eight years. Market gossips are convinced that he could not have been acting alone, but nobody else was ever charged with anything.
The mystery, though, remains. How did he, or any accomplices, ever make any money out of it?
Hence the interest in what Mr Hamanaka does - more particularly where he goes – when he becomes a free man. Geoffrey Sambrook, a London metal trader, suspects this may not be easy to discover.
Mr Sambrook has written an intriguing novel called Tarnished Copper, Greed and Corruption in the Financial Markets. It is about a bunch of operators on the London Metal Exchange who conspire with a trusted Japanese trader to manipulate the market and perpetrate a colossal fraud.
He gets locked up. Two of them make off to Monaco with hundreds of millions. A third is assassinated.
It is strictly fiction, Mr Sambrook insists, a good story, with an underlying theme that manipulating markets is a serious business not taken seriously enough.
Yes, it is what could have happened in the copper market of the early ‘90s. Mr Sambrook says he has no idea if it did. Certainly nobody ever suggested that an associate of Mr Hamanaka was murdered.
You can get the book direct from TwentyFirstCenturyPublishers.com, or else from Amazon, or from Financial World Bookshop, 90 Bishopsgate, London EC3.
Geoffrey Sambrook Fictionalizes Sumitomo Copper Affair In New Book
By Andrea Hotter
London, Aug. 22 (OsterDowJones) - A fictionalized treatment of the
Sumitomo affair, 'Tarnished Copper,' has just hit the bookshelves with its
author, Geoffrey Sambrook, providing a thought-provoking take on how a scam
could take place on the London Metal Exchange copper market.
The book describes how Yamagazi, a star trader at Kanagi Corporation,
defrauds his Japanese company and manipulates the copper market, acting
mainly in collusion with two London traders.
Sambrook shows how Yamagazi escapes the eye of internal auditors
despite the fact that he is doing huge volumes of off-the-book transactions beyond
the scope of his authority, and how he is able to deceive a Hong Kong bank in
moving many millions of dollars.
In the same way, Sumitomo's former chief copper trader, Yasuo Hamanaka,
was charged with forgery and fraud in a $2.6-billion trading scandal that
rocked the international copper market.
"There have been other metals trading scams that haven't been as notable in
the press as the Sumitomo affair. The book demonstrates that the base
metals market, as history has shown, has been prone to manipulation in the
past," Sambrook said. "Clearly, this is not just a problem for futures
market, but for financiers involved as well," he added.
Sambrook said the market does not have to go back very far to look for
examples of publicized metals trading scandals, with the most recent that of
an investigation into allegations of fraud at U.K.-based trader RBG
Looking further back, the collapse of the Buffer Stock Scheme operated by
the International Tin Council triggered the 'Tin Crisis' of 1985.
The tin crisis brought in its wake first turmoil to the LME, then the
most radical series of changes in all its history, with its management structure
drastically revised and reconstituted and a formal clearing house system
established. In the aftermath of the Sumitomo scandal, the LME was exposed to
criticism for its lack of transparency and adapted its systems to the
requirements of the industry and the regulators that resulted.
"Regulations are periodically changing. The question is as to whether
regulations change to accommodate what has happened in the past, or what may
happen in the future," Sambrook said. "The changes since Sumitomo mean that
the market could never be manipulated in the same way as we are currently
seeing in the cocoa market," he added.
Sambrook was referring to the widely publicized squeeze of the London
market, which helped drive Liffe futures prices 70% higher to 15-year highs
over the past 11 months.
Sambrook has worked in the metals industry for more than 20 years, at
companies including MG Limited, Credit Lyonnais Rouse Limited and N M
CHARACTERS ARE FICTIONAL, SIMILARITIES SEEN ARE COINCIDENTAL
Readers in the metals community will draw the conclusion that the book's
characters resemble real people, but Sambrook is quick to emphasize that this
is purely coincidental.
"The background of the book is Sumitomo, but it is purely an imaginary
take on how one could scam the market," Sambrook said.
The principal trader in the book is Phil Harris, an American who leaves
his metals broking operation in Munich which he runs on behalf of a U.S.
company and sets up a new company to place Kanagi's LME business. Working
in league with Yamagazi, Harris works in the belief that "the [LME] ring, the
pricing, can be manipulated to suit the underlying reality, providing
circumstances are right."
The puppet-master throughout the book, Harris recruits Jamie Edwards, a
talented trader drying out after a cocaine problem, to help him in his
scheme. Harris manipulates Edwards throughout the book, telling him only what is
necessary for him to perpetrate the transactions.
"I find the ammunition, you fire the bullets," Harris tells Edwards - and
despite twinges of conscience at times and uncertainty over whether what he
is doing is legal or not, Edwards sells his soul to the dual devils of Harris and
money. A third, well-developed character is Mack McKee, who runs a LME broker
called Commet, owned by a large industrial group. He is described as "a larger
than life character, in two ways. Six foot six tall, broad to match and with a
stooping gait, he was nicknames 'Jumbo' on the LME floor - but mostly out of
his hearing. He also had a loud personality, and liked to party, so was well
known in bars, clubs and restaurants across London."
The mind games begin when McKee suspects Harris is up to something and
starts to get in on the act himself. Deception and fraud ensue: as with the
Sumitomo affair, the copper market collapses, litigation follows various
banks and individuals for years to come and Yamagazi is jailed. Suffice to say
the book's ending includes an extended stay in Monaco.
Andrea Hotter, OsterDowJones.