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Goldman, LME hit with another lawsuit

Keywords: Tags  aluminum, Goldman Sachs Group, Inc., London Metal Exchange, LME, antitrust lawsuit, Petersen Industries Inc., price manipulation Metro International Trade Services LLC.


CHICAGO — Goldman Sachs Group Inc., two of its subsidiaries and the London Metal Exchange have been slapped with another antitrust lawsuit alleging that they conspired to boost wait times for aluminum and to manipulate metal prices and premiums.

Miami-based door and glass enclosure manufacturer Peterson Industries Inc. contends that Goldman Sachs, following its acquisition of warehousing company Metro International Trade Services LLC in 2010, also took advantage of LME rules to boost daily rental fees and profits, according to a class-action complaint filed Sept. 20 in federal court in U.S. District Court for the Southern District of New York.

"Since Goldman Sachs entered the warehouse business, the time it takes buyers to get metal from the warehouses has ballooned to more than 16 months, up from six weeks," Peterson said in the complaint. "This was Goldman Sachs’ design. The longer the metal sits in its warehouses, the more rent Goldman Sachs earns from aluminum purchasers."

Metro rents in Detroit rose from 42 cents a day in 2011 to 48 cents per tonne in July 2013 as LME warehouses morphed from a market of "last resort" into a market of "first resort," Peterson said. The result was the creation of two markets, an LME storage market with as much as 80-percent of metal locked into financing deals and an alternate physical market characterized by high premiums, the company said.

The LME declined to comment on the complaint.

Goldman Sachs said it would defend itself against the lawsuit. "We believe this suit, like the other substantively identical ones, is without merit and we intend to vigorously contest it. We also note that aluminum prices are down 40 percent from their peak in 2006," a spokesman for the New York-based bank said Sept. 27 in an e-mail to AMM.

Goldman and the LME are facing at least seven similar lawsuits (amm.com, Aug. 19, Sept. 17).

Peterson, in its complaint, countered that the bank is "conveniently neglecting that the cost of aluminum relative to the LME trading prices drastically increased" following Goldman subsidiary GS Power Holding LLC’s acquisition of Metro.

The Peterson complaint also lists as "co-conspirators"—but not as defendants—JPMorgan Chase & Co., New York; Glencore Xstrata Plc, Baar, Switzerland; and Trafigura Beheer BV, Amsterdam.

Glencore and Trafigura declined to comment. JPMorgan did not respond to a request for comment, but has said it is considering a sale of its physical commodities business (amm.com, July 26).

Peterson Industries president Bruce Cynamon referred a request for comment to the attorney who filed the case. Robbins Geller Rudman & Dowd LLP attorney Samuel Howard Rudman did not reply to a request for comment Sept. 27.


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