The ‘Gray’ Man of Copper Was Feared by Fellow Traders

Known as “Mr. Five Percent” and “The Hammer,” Yasuo Hamanaka was able to sway world copper markets with his decisions to buy or sell.

But none of his coups was as surprising as the announcement that his decisions had also lost his company, Sumitomo Corp., at least $1.8 billion over the last 10 years.

Colleagues on Friday described Hamanaka as “the man in the gray flannel suit,” a quiet, almost shy 48-year-old who, outside his deals, was nothing like the modern-day image of an aggressive young trader living in the fast lane.

“He nearly always dressed in a gray suit. We always thought of him as Mr. Corporate,” a stunned young colleague said.

Even at a news conference in Tokyo to discuss the losses, Sumitomo Corp.’s president, Tomiichi Akiyama, seemed at a loss to explain how he could have misjudged Hamanaka.

“My impression of him was that he was a man of great control, a man of logic, so I trusted him as a very able metal trader,” Akiyama said. “Now, I feel very disappointed.”

As fellow players in copper markets reflected on Hamanaka’s sudden downfall, a common theme emerged.

“Everyone was familiar with him,” said a trader on the floor of the New York Mercantile Exchange. If his name was mentioned as the trader behind a big transaction, “it would make me quiver.”

“He was the most feared man in the copper market,” said another New York trader. “In copper, as in any physical commodity, whoever controls the chips in the game controlled the way things proceeded.”

These traders spoke on condition that they not be identified by name because their employers had banned their discussing the Sumitomo scandal--an indication of the company’s influence.

For years, Hamanaka’s prowess was legendary in the business of trading the metal, used in everything from electrical lines to water pipes to pennies. When copper prices plunged in world commodity markets in recent weeks, speculation swirled about how Hamanaka had exerted powerful dominance over copper trading by controlling copper stockpiles held in a London Metals Exchange warehouse in Long Beach.

Yet for all his notoriety, Hamanaka, who conducted trading out of Tokyo, was also described as a quiet, unassuming businessman.

His personality starkly contrasted with his trading style, traders who knew him said. He was so dedicated to his job that he would stay at work until 3 a.m. Tokyo time, which is when the New York markets closed.

“You wouldn’t ever know he had been as powerful as he was if you never met him,” said one trader in the copper floor of the New York Mercantile Exchange.

“But when you meet him, you can see why he became such a success.”

Hamanaka worked for Sumitomo for 23 years, the last 15 as a copper trader focusing on transactions out of the London Metals Exchange, where the bulk of Sumitomo’s copper trades were conducted. Though Hamanaka traveled around the world for his job, he hadn’t taken a vacation in the last 10 years, Sumitomo said.

As government authorities and Sumitomo officials address the central question in the financial scandal--how Hamanaka hid such huge losses for so long--one key answer already has emerged: Hamanaka was his own bookkeeper, a management flaw that has contributed to scandals at other big companies in recent years.

Sumitomo said it discovered the unauthorized transactions while cooperating with the U.S. Commodities Futures Trading Commission and Britain’s Securities and Investment Board in their investigation into the recent volatility in copper prices.

During that effort, the company received a contradictory bank statement that prompted further probing by Sumitomo.

At that point, Hamanaka “called his superior and confessed that he had engaged in an unauthorized series of transactions that resulted in substantial losses that he intentionally concealed” by falsifying corporate books and records, a Sumitomo statement said.

The unauthorized trading had gone on for 10 years and mainly involved Hamanaka, the firm said.

Hamanaka, who lives in Tokyo, could not be reached for comment Friday. But in an article in American Metal Market in November, Hamanaka denied accusations that he manipulated the copper market.

“I trade in copper purely and strictly as a business and commercial activity,” he said, telling the trade publication that supply and demand, not his trades, were the basis for copper prices.

Industry officials say they nicknamed Hamanaka “Mr. Five Percent” because his nonferrous metals division controlled nearly 5% of world copper trading, making Sumitomo the market’s biggest player.

His other nickname, “The Hammer,” was a play on both his name and the way his deals could hammer the market.

Sumitomo took daily metal trading out of his hands last month as their investigation into his activities turned up more and more questions.