Tomiichi Akiyama sent a signal of what was to come when he walked into the room full of journalists in Tokyo last week looking tense and uncomfortable. For the next hour, the president of mighty Sumitomo Corp., one of Japan's top trading and industrial companies, offered details of a fiasco. Akiyama declared that Sumitomo had just fired its former chief copper trader, Yasuo Hamanaka, for engaging in unauthorized transactions over an entire decade. Piling mistake on mistake, Hamanaka had lost a staggering $1.8 billion.

Akiyama's revelation sent shudders around the world, driving copper prices in London and New York City markets down as much as 10%. The Sumitomo disaster ranks as the largest unauthorized trading loss in history, bigger than the $1.1 billion racked up by a rogue trader at Japan's Daiwa Bank and the $1.3 billion bloodbath that brought an end to Britain's 233-year-old Barings investment bank. Significantly, all three of the titanic corporate implosions have taken place in the past 16 months. Once again, market analysts, executives and international regulators had to ask whether the lightning-fast trading of huge volumes of goods--including money--in the international marketplace is monitored well enough by government agencies and by the trading firms themselves, especially in Japan.

At his press conference, Akiyama emphasized that Sumitomo, with global assets of $50 billion, is not likely to be driven into bankruptcy, as Barings was by the desperate speculation of Nicholas Leeson. But analysts said Sumitomo's dominant role in copper trading--it controls about 8% of the world's supplies of the metal, excluding what is held in the former East bloc nations and China--could be at an end. Britain's Serious Fraud Office has opened an investigation, raising the question of whether Sumitomo will suffer anything like the punishment meted out to Daiwa, which was forced to stop doing business in the U.S. for covering up the unsanctioned trading of one of its employees. Moreover, Sumitomo's huge losses, which could grow even bigger if copper prices continue to fall, could rattle metals markets for months to come.

In contrast to Daiwa officials, however, Akiyama insisted that his company was innocent of wrongdoing. He said the firm had been kept in the dark by Hamanaka, 48, for years considered the world's most powerful copper trader. Sumitomo, which has been in business since the 17th century, buys 800,000 tons of the metal a year, selling it to affiliates and to the booming market in Southeast Asia. Most of that trading was done by Hamanaka, known as Mr. Five Percent because he and his team controlled at least that share of the world copper market. Hamanaka was given unusual autonomy within the Sumitomo organization. The lack of oversight apparently allowed him to keep two sets of trading books, one reportedly showing big profits for Sumitomo in the buying and selling of copper and copper futures and options, and a secret account that recorded a dismal tale of billion-dollar losses.

Hamanaka's double-dealing began to unravel last December, when the U.S. Commodity Futures Trading Commission and Britain's Securities and Investments Board, which oversee commodity markets in New York City and London, asked Sumitomo to cooperate in an investigation of suspected price manipulation. Sumitomo later started an in-house investigation of its own.

According to Akiyama, a company auditor in early May uncovered an unauthorized April transaction, the funds for which passed through an unnamed foreign bank. The trade, he says, was "small in value," but the paper trail led quickly to Hamanaka's office door on the third floor of Sumitomo's headquarters, near the Imperial Palace. On May 9, Hamanaka was abruptly reassigned to the post of assistant to the general manager of the Non-Ferrous Metals Division, in what Sumitomo characterized at the time as a promotion.

It took only days for traders around the world to figure that something was wrong at Sumitomo. In mid-May a phalanx of commodities firms unloaded their copper holdings in anticipation that Sumitomo would do the same. Prices dropped 15% in four days, leaving the international market in an uproar. Faced with chaos, Sumitomo stepped up the pace of its internal investigation. On June 5, Hamanaka apparently bowed to the inevitable and confessed to his corporate bosses that he had been conducting unauthorized trades for the past 10 years in a vain attempt to cover up snowballing losses. According to Akiyama, Hamanaka showed company officials detailed records of the secret transactions. "It was off-the-book trading, and the company had no idea of what was going on because it had been shrewdly concealed," Akiyama said.

The big question: How did he get away with it for 10 years? Part of the answer is that he was Yasuo Hamanaka, a ruthless trader who had crushed the competition with huge buy-and-sell orders that enabled him to dominate the market. A workaholic, he would often stay in the office until 3 a.m. to conduct transactions in the New York and London markets. Because he produced huge profits--at least on paper--he was not rotated into other jobs as most Sumitomo executives were. His books showed that his division had cash reserves far greater than they actually were. And no one dared look too closely at his transactions. Five years ago, an influential trader told the London Metal Exchange that Hamanaka had made fictitious trades. The charges got into the financial press, but no regulatory action was seemingly taken.

"Hamanaka was famous because of the business he brought in," says Kenichi Yoshida, an analyst at Nikko Research Center. "He was given a great deal of responsibility by the company, and his only regulators were overseas, far from Tokyo." Akiyama admitted that Hamanaka remained so long in the copper-trading section--23 years in all--"because of the expertise and specialization needed for the job. However, we should have rotated him a long time ago."

One of Hamanaka's apparent accomplishments was to keep the price of copper artificially high in the past few years, a period during which basic commodity prices have been hitting longtime lows. There is nothing about the metal that makes it immune to global commodity trends, however. "Copper held up enigmatically in recent years," says Nick Moore, an analyst at Fleming Global Mining Group in London. "So already we smelled a rat." The high price encouraged metals producers to open new mines, Moore says, and as a result there is now a global copper glut. Once traders headed for the exits, however, the price began to plunge: about 25% since May 8, to $2,145 a ton. Moore predicts that many big producers will have to close down at least some of their operations.

Sumitomo claims that once it had proof of Hamanaka's unauthorized trades, it moved quickly to inform proper regulatory authorities in the U.S. and Britain. Last week executives met with officials of the Japanese Ministry of International Trade and Industry (miti) and then contacted U.S. and British regulators. Late on Thursday Sumitomo instructed its U.S. lawyers to announce the news--a move that angered members of the Japanese press, since they learned of the affair hours after the U.S. media.

Part of Sumitomo's intention was clearly to avoid the fate of Daiwa. That firm was ejected from the U.S. because it concealed the activities of its own rogue trader, Toshihide Iguchi, for months after it learned of his debacle. In the opinion of Tokyo analysts, Sumitomo should have moved even faster than it did. "Sumitomo says it discovered what had happened on June 5, but they waited a week and a half until going public," complains Tomoyasu Kato, a Nomura Research Institute analyst who follows Sumitomo. "They needed some time to calculate their losses, but had they only gone public several days [earlier], they could have avoided [additional] declines in copper prices that resulted because of all the rumors and uncertainty."

The latest incident is expected to increase pressure on the Japanese government to institute credible surveillance of commodities trading. miti currently exerts little control over the markets, and its perplexed chief, Shunpei Tsukahara, said he wasn't sure if his ministry even had jurisdiction over commodities trading. Nonetheless, miti plans to conduct its own probe into the mess. For his part, Prime Minister Ryutaro Hashimoto offered up his bland dismay at the latest business catastrophe, saying, "There is always the risk of sustaining losses in business. But it becomes a problem when these losses are the result of violating rules."

The government's top spokesman, Chief Cabinet Secretary Seiroku Kajiyama, suggested that the ethical problems go much deeper than breaking a few regulations. "This shows that the moral standards of companies and all Japanese have declined," he said. "I'm very concerned about this numbed attitude people have toward money." For the moment, that attitude had been replaced by the numbness of shock, as Japan and the world tried to make sense of the latest international business disaster.

--Reported by Michael Brunton/ London and Irene M. Kunii and Satsuki Oba/Tokyo