THE SUMITOMO DEBACLE : Trading Firm Subpoenaed in Growing Probe

Federal prosecutors in New York joined the ranks of agencies investigating former Sumitomo Corp. copper trader Yasuo Hamanaka.

The U.S. attorney’s office in Manhattan has subpoenaed a New York metals trading firm that dealt frequently with the powerful trader, a spokesman for the metals broker said Tuesday.

The new investigation means that six agencies in the United States, Britain and Japan are investigating Sumitomo in the wake of its stunning announcement last week that it faces about $1.8 billion in losses due to clandestine trades Hamanaka performed over the last decade.

Global Minerals & Metals Corp. said it received a federal subpoena seeking documents and requested Global’s founder, David Campbell, to testify about Hamanaka.

“We’re not the target here at all. It’s Hamanaka,” said Global spokesman Elliot Sloane. He said he did not have further details, and a telephone call placed to Global’s attorney, Peter Haveles, was not returned. The U.S. attorney’s office declined to comment.

The scope of the new investigation was unclear, but the Commodity Futures Trading Commission announced late Monday that it is engaged in a sweeping review of Sumitomo’s business relationships.

The Sumitomo case also led one member of Congress, Rep. Charles E. Schumer (D-N.Y.), to ask whether the CFTC should have greater powers to police the U.S. activities of overseas exchanges, such as the London Metal Exchange, where Hamanaka dealt actively.

In a letter to John Tull, the CFTC’s acting chairman, Schumer cited the LME’s copper warehouse in Long Beach. Critics say the operation encouraged people to put their copper in the warehouse but not withdraw it--which would reduce available supplies and could artificially boost the global price of the metal. Sumitomo reportedly held 70% of the copper in the Long Beach warehouse at a time when the copper market was abuzz with rumors of a “squeeze” to inflate prices for large traders.

The CFTC has said it lacks the jurisdiction to regulate U.S. warehouses that accept commodities to satisfy contracts on overseas exchanges. Schumer asked Tull whether the nation’s commodity laws need to be updated to protect the public interest in light of major changes in international financial markets.

The LME’s own investigation since the scandal broke should lead to big changes in the way metals are traded on the world’s largest metals exchange, analysts said.