Release: #4265-99 (CFTC Docket # 99-11)
For Release: May 20, 1999
CFTC Enforcement Proceeding Filed Against Global Minerals and Metals, R. David Campbell, Carl Alm, Merrill Lynch & Co., Inc., Merrill Lynch International Inc., and Merrill Lynch Pierce Fenner and Smith (Brokers & Dealers) Limited in Connection with 1995 Manipulation and Attempted Manipulation of the Copper Market; Global, Campbell, and Alm Charged in the Administrative Proceeding with Direct Participation in the Conduct; Merrill Lynch Entities Charged with Aiding and Abetting
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a one-count administrative complaint against Global Minerals and Metals Corporation (Global) of New York City; Global's president and chief executive officer R. David Campbell of New York City; and Global's chief copper trader Carl Alm of Massapequa, New York, alleging that the respondents manipulated, cornered, and attempted to manipulate and attempted to corner the copper market in late 1995. The CFTC complaint also names Merrill Lynch & Co. Inc. of New York City, Merrill Lynch International Inc. of New York City, and Merrill Lynch Pierce Fenner and Smith (Brokers & Dealers) Limited of London, England (collectively referred to as Merrill Lynch), alleging that they aided and abetted Global, Campbell, and Alm in the worldwide copper market manipulation and attempted manipulation.
The CFTC's complaint alleges that between October and December 1995, Global, Campbell, and Alm, together with Sumitomo Corporation of Japan, manipulated and attempted to manipulate upward the worldwide price of copper and copper futures contracts in violation of sections 6(c), 6(d) and 9(a) of the Commodity Exchange Act (CEA), as amended. The complaint alleges that the manipulation of copper prices was the culmination of a long and deliberate scheme by Campbell and Sumitomo's former chief copper trader, Yasuo Hamanaka (Hamanaka), to acquire large market positions and liquidate them at distorted and artificially high prices.
In order to accomplish their market manipulation, the CFTC alleges Global, Campbell, and Alm, among other things, acquired and maintained a dominant and controlling position in London Metal Exchange (LME) warehouse stocks of copper and thereafter withheld substantially all or a large percentage of that copper from the market; purchased and held massive and unneeded long copper futures contract positions; and engaged in an elaborate scheme of deception and false statements, which fostered the manipulation. As a result of their conduct, the prices of copper futures contracts, copper spread price differentials, and the prices of cash or physical copper -- both in the United States and abroad -- reached artificially high levels, the complaint alleges.
The CFTC complaint further alleges that the Merrill Lynch respondents knowingly and intentionally aided, abetted, and assisted the worldwide manipulation and attempted manipulation of copper prices through, among other actions, providing large sums of credit and finance with which the Global respondents and Sumitomo cornered LME warehouse stocks and providing the trading facilities and capacity through which the Global respondents and Sumitomo acquired their cornering position in warehouse stocks, maintained their massive and overhanging futures contract positions and made available only a small portion of their holdings to the market at artificially high prices and spread price differentials. According to the complaint, Merrill Lynch also knowingly and intentionally advised, counseled, and assisted the Global respondents and Sumitomo on the manner in which they could best manage their position for the purpose of manipulating the market. Merrill Lynch benefited from the manipulation through, among other things, its own proprietary trading in the copper market, which was conducted based upon knowledge of the manipulative actions of the Global respondents and Sumitomo, the complaint alleges.
A public hearing has been ordered to determine if the charges in the complaint are true, and, if so, what sanctions, if any, are appropriate and in the public interest. Possible sanctions include an order directing the respondents to cease and desist from violating the CEA, civil monetary penalties of not more than the higher of $100,000 or triple the monetary gain for each violation, and restitution of the damages proximately caused by the violations of the CEA.
Previously, on May, 11, 1998, the CFTC issued an opinion and order against Sumitomo Corporation of Japan, to which Sumitomo consented without admitting or denying the findings therein, finding that Sumitomo had violated the CEA by manipulating upward the price of copper and copper futures, and imposing sanctions including a cease and desist order and civil monetary penalty of $125 million, and the establishment of an escrow account in the amount of an additional $25 million to be used for the benefit of victims of the market manipulation or as a penalty. (See In the Matter of Sumitomo Corporation, CFTC Docket No. 98-14 and CFTC News Release #4144-98, May 11, 1998.)
Geoffrey Aronow, Director of the CFTC's Division of Enforcement, which investigated this matter and brought today's proceeding, commented:
"The filing of this proceeding today culminates a three-year investigation in which the Division uncovered what I believe is one of the most serious worldwide manipulations of a commodities market encountered in the 25-year history of the Commission. I want to acknowledge the sustained efforts of the Division' staff in pursuing this matter literally across three continents, and in working closely with the authorities in the United Kingdom and in Japan to bring the matter to this point today."
# # #