said Wednesday it would pay
, the Japanese banking company, $275 million to settle losses run-up as a result of unauthorized copper trades made by a chief copper trader at Sumitomo.
The deal marks the end to a long-running dispute between the two companies.
"We are very pleased to be able to resolve this matter without resorting to extensive and protracted litigation," the companies said in a joint statement.
Under the terms of the deal, in which Merrill admits no wrongdoing, Sumitomo will release the financial services giant from any further claims stemming from the roughly $2.6 billion in losses the bank suffered from unauthorized trading. Sumitomo has sued four other companies --
Chase Manhattan Bank
JP Morgan & Co.
Credit Lyonnais Rouse
-- for more than $1.7 billion, contending they knew or should have known about the unauthorized conduct.
Sumitomo did not sue New York-based Merrill Lynch.
Last year, Merrill agreed to pay $15 million to settle a complaint in the case brought by the
Commodity Futures Trading Commission
without admitting or denying the charges. The firm also agreed to pay $10.5 million to resolve a similar action brought by the
London Metal Exchange
Wednesday's announcement stems from the trading in copper futures by Yasuo Hamanaka, the Sumitomo rogue trader known as "Mr. Five Percent" for his rumored control of that percentage of the world's copper market. Hamanaka is now serving an eight-year term after pleading guilty to criminal charges for forgery and fraud in Japan in 1997.
In 1996, Sumitomo sent the price of copper plunging when it disclosed the unauthorized trading by Hamanaka.
Merrill said the $275 million that it agreed to pay Sumitomo will not have a material impact on second-quarter earnings because "it has substantially provided for the settlement." Merrill shares fell 1/4, or 0.25%, to 99 1/8 in midday trading. (Merrill Lynch finished up 3/4, or 0.75%, at 100 1/8.)