Merrill Lynch & Co. on Wednesday agreed to pay about $25 million to settle U.S. and British charges that it played a role in one of the biggest-ever commodities scandals by helping Sumitomo Corp. manipulate the copper market in 1995.
The New York-based brokerage will pay $15 million to settle U.S. regulators' charges that the firm provided more than $500 million through Sumitomo and advised the Japanese trading company on ways to inflate copper prices. Merrill did not admit wrongdoing.
In regard to London Metal Exchange charges, Merrill agreed to a fine of $10.2 million. So far, Merrill will have had to pay about $43 million to resolve lawsuits over its involvement with Sumitomo. That includes last year's $18.1-million settlement with some traders.
The fine "sends an important message to market participants and their brokers that aiding and abetting manipulation of U.S. markets will be met with appropriate sanctions," David D. Spears, acting Commodity Futures Trading Commission chairman, said in a statement.
Merrill shares rose $2.50 to close at $79.50 on the New York Stock Exchange.
The case stems from a decade-long effort by a Sumitomo trader to corner the copper market. Sumitomo, Japan's third-largest trading company, lost $2.6 billion on the trades, and the trader was convicted in Japan and given a prison term.
Last year Sumitomo paid $125 million--it was the CFTC's largest fine ever--to settle commission charges, and set up a $25-million fund to compensate victims of the conspiracy. The $15-million fine against Merrill is the second-largest for an CFTC case.
"We entered into the settlements to bring closure to these regulatory proceedings and to avoid the expense and distraction of protracted litigation," Merrill spokesman Bill Halldin said.
Merrill agreed to the London fine after the LME brought charges that Merrill "assisted clients to manipulate or attempt to manipulate" the copper market, said Lord Raj Bagri, chairman of the exchange. Merrill did not admit wrongdoing.
The U.S. allegations against Merrill were part of a fraud complaint against Global Minerals & Metals Corp., a New York copper broker, and Global's president and chief trader. Those charges are pending. Global has said the charges are too vague and has asked for a more definitive statement. The CFTC has until July 12 to respond.