LONDON (AFP) - Japan's Sumitomo Corp. began a 1.1-billion-dollar damages claim against a unit of French bank Credit Agricole for allegedly turning a blind eye to massive unauthorised copper deals in one of the world's biggest rogue trading scandals.
However, underscoring the complexity of the case, the full opening of the hearing was postponed until Thursday to allow the trial judge to read the mass of documentation.
Sumitomo is suing Credit Lyonnais Rouse (CLR) for 695 million dollars (560 million euros) plus interest in London's High Court, accusing the metals broker of helping Sumitomo's former chief copper dealer, Yasuo Hamanaka, to rack up losses of 2.6 billion dollars in speculative trades over 10 years from 1985.
At one time Hamanaka was said to have controlled five percent of the global copper market, earning him the nickname "Mr Five Percent".
The losses are double those run up by infamous rogue trader Nick Leeson, who brought about the collapse of Britain's oldest merchant bank, Barings, in 1995.
CLR has denied any dishonesty and is set to vigorously defend itself in the case, which is expected to be one of the largest and most complex actions ever to come before the High Court in central London.
"We are confident that justice will be done and CLR will be exonerated of any wrong-doing," the French brokerage firm said in a statement, describing the case as "far-fetched and contrived".
CLR acted as clearing broker for the copper trading of Hamanaka, who was jailed for eight years by a Japanese court in 1998 after pleading guilty to charges of fraud and forgery.
Another metals broker that is no longer trading, Winchester, was the main broker for the trades, but was required to use a clearing agent -- CLR.
Sumitomo alleges that CLR dishonestly assisted Hamanaka in clearing and transacting his unauthorised copper trades in 1993 and knew, or turned a blind eye to the fact, that he was acting in breach of his duties to Sumitomo.
It also claims that CLR dishonestly assisted Hamanaka by receiving on behalf of Sumitomo the 289-million-dollar proceeds of another transaction in November 1993 and paying those sums out to a different Sumitomo subsidiary.
The Japanese trading house accuses CLR's then-chairman Roy Leighton along with managing director William Bradwell and finance director Philip Gamble of knowledge and dishonesty in relation to the trades.
CLR says its lawyers will argue in defence that it had no reason to believe that Hamanaka was not authorised to do the trades he was doing, stressing that Sumitomo held him out as a star employee.
It says it reported to Sumitomo in great detail every trade that it cleared for the Japanese trading house.
Sumitomo has reached settlements with a number of other major banks, including JP Morgan and Merrill Lynch, after filing a clutch of lawsuits.
Credit Agricole acquired CLR when it bought the parent company Credit Lyonnais in 2003, folding the London brokerage business into its investment banking arm, now called Calyon.