Sachs Group Inc. has been hit with two more lawsuits for
allegedly violating U.S. antitrust laws, manipulating aluminum
prices and driving up premiums by hoarding metal in
Both cases are
class-action complaints demanding a jury trial.
One lawsuit was filed
in U.S. District Court in New York by Viva Railings LLC
and Regal Recycling Inc. against New York-based Goldman and its
subsidiaries, Metro International Trade Services LLC and GS
Power Holdings LLC, according to documents dated Aug. 8.
Lewisville, Texas-based Viva makes modular railing systems,
while Howell, Mich.-based Regal Recycling is a Michigan-based
scrap metal dealers, according to the documents.
The other case was
filed by Monticello, Ark.-based boat builder Team Ward Inc.,
which does business as War Eagle Boats, according to documents
filed in U.S. District Court in Michigan and also dated Aug. 8.
The War Eagle Boats case names the London Metal Exchange and
LME Holding Ltd. as defendants in addition to Goldman Sachs,
Metro and GS Power.
"We believe these
suits are without merit and we intend to vigorously contest
them. We also note that aluminum prices are down 40 percent
from their peak in 2006," a Goldman spokesman said in an e-mail
The LME and attorneys
representing Viva Railings, Regal recycling and War Eagle Boats
declined to comment on the suits.
Viva and Regal allege
in their joint complaint that the Midwest aluminum premium was
driven up after Goldman purchased Metro in 2010 and later began
paying incentives to traders storing metal in warehouses.
"Cash incentives have essentially created a floor
... as the premium needs to be high enough to entice metal away
from the warehouse and back into the market," they said, noting
that incentives jumped to $210 to $215 per tonne in January
from as low as $60 per tonne in 2010.
In addition to
hoarding aluminum, Viva and Regal allege, the defendants used
LME-approved warehouses to take metalmost tied up in
long-term deals with banks, hedge funds and traders and
unavailable to fabricators, processors and other usersin
and out of the "dark" to boost profits.
In a market in
backwardation, warehouse owners could benefit from "taking
inventory dark" by storing it in non LME-registered, private
facilities and creating an apparent destocking effect even when
none existed, they said.
Conversely, when the market was in contango, warehouse owners
could take "dark inventory" public, presenting the "appearance
of a sudden surplus" even though the supply glut had already
existed, they said. Such activities may have allowed
Goldmans commodity derivatives business to further profit
from manipulated aluminum supplies and prices, the two
War Eagle Boats made
similar allegations. The company also protested what it
considered abuses of "monopoly power" held by both Goldman and
the LME. Purchasers of aluminum were injured as metal was
diverted into warehouses and restricted from leaving them, the
company said. "The scheme inflated the daily storage fees
charge by the Goldman defendants and shared with the LME," War
Eagle Boats said, also questioning whether Goldmans
position on the LMEs executive committee compromised the
exchanges warehousing policies.
Financial institutions and the LME are already facing
several lawsuits related to the alleged manipulation of
aluminum prices and supplies (amm.com,
Aug. 9) as well as increased scrutiny from politicians and
amm.com, July 30).