Sumitomo Corporation Files Lawsuits Against UBS and Chase Manhattan to Recover Losses from Former Employee's Illicit Trading Activities

Strategic Insights -

Sumitomo Corporation, a leading international trading and distribution company, has filed two lawsuits to recover losses resulting from the unauthorized trading activities of its former employee, Yasuo Hamanaka. Hamanaka, who was General Manager of Sumitomo's Non-Ferrous Metals Department, was involved in illicit copper trading activities that resulted in significant losses for the company. The lawsuits, filed in Tokyo and New York, name UBS AG and Chase Manhattan Bank as defendants, alleging that they provided funds to Hamanaka without authorization and disguised the loans as "copper swap transactions." Sumitomo Corporation is seeking to recover approximately (Y)27.9 billion (approx. $250 million) in damages from UBS and over $530 million in damages from Chase Manhattan.

Key Takeaways:

  • Sumitomo Corporation has filed lawsuits against UBS AG and Chase Manhattan Bank to recover losses resulting from the unauthorized trading activities of its former employee, Yasuo Hamanaka.
  • The lawsuits allege that UBS and Chase Manhattan provided funds to Hamanaka without authorization and disguised the loans as "copper swap transactions."
  • The complaints seek to recover approximately (Y)27.9 billion (approx. $250 million) in damages from UBS and over $530 million in damages from Chase Manhattan.
  • Sumitomo Corporation has already made payments to both UBS and Chase Manhattan, totaling approximately $258 million and $521 million, respectively, in an attempt to recover some of the losses resulting from Hamanaka's activities.
  • Hamanaka was sentenced to eight years in prison by a Tokyo District Court Judge in March 1998 for forgery and fraud related to his unauthorized trading activities.
  • Sumitomo Corporation has also taken steps to recover losses from other third parties, including a $25 million payment to a Tokyo-based commodities trader and $7.4 million in civil charges against Hamanaka and his former supervisor.
  • Sumitomo Corporation has operations in 154 offices across five continents, with assets of approximately $44.0 billion and sales of $94.2 billion in the fiscal year ended March 1999.

Statistics:

  • Sumitomo Corporation's losses resulting from Hamanaka's unauthorized trading activities: approximately $2.6 billion (Y285 billion)
  • Amount recovered by Sumitomo Corporation from UBS in 1996: $257.35 million
  • Amount recovered by Sumitomo Corporation from Chase Manhattan in 1996: $521 million
  • Damages sought by Sumitomo Corporation from UBS: approximately (Y)27.9 billion (approx. $250 million)
  • Damages sought by Sumitomo Corporation from Chase Manhattan: over $530 million
  • Assets of Sumitomo Corporation: approximately $44.0 billion
  • Sales of Sumitomo Corporation in the fiscal year ended March 1999: $94.2 billion

Sources:

  • Sumitomo Corporation press release, June 3, 1999
  • Business Wire, June 3, 1999