Sumitomo Creates Reserve For Copper Losses

Sumitomo Corp. will create a special reserve of $1.4 billion to cope with losses due to unauthorized trades by its former star copper trader, the company said Wednesday.

It also announced it had suspended plans to buy back its own stock and make bonus payments to board members this year.

However, the company said it has not decided yet whether to write off all the $1.8 billion in losses in the fiscal year ending next March. Sumitomo President Tomiichi Akiyama said the loss would be realized as soon as possible.

Sumitomo had previously said the losses could easily be absorbed because of its large financial reserves.

Meanwhile, a group of stockholders intends to sue Sumitomo for losses associated with the copper debacle.

Sumitomo management must bear responsibility for the oversights that led to the trading losses, the plaintiff’s attorney, Hideto Iida said. The amount would be the largest ever demanded from a Japanese company in a lawsuit by shareholders.

Sumitomo disclosed the massive losses last week, blaming them on 10 years of unauthorized trades by rogue copper trader, Yasuo Hamanaka. It said he acted alone.