Goldman Sachs Group Inc. was sued on September 26, 2013, in another proposed class action alleging it has engaged in anti-competitive warehousing agreements designed to drive up the cost of storing aluminum.
The suit, filed by Miami, Florida-based bathroom fixture manufacturer Peterson Industries Inc., alleges Goldman has caused aluminum purchasers to overpay more than $5 billion since it acquired a complex of aluminum warehouses from Metro International Trade Services LLC in February 2010. Goldman has deliberately caused backlogs of aluminum to accumulate in its warehouses in order to earn more money on rental fees for storage, the complaint says.
“Over time, Goldman Sachs has earned more money on daily rent fees than the cost of the aluminum it has shipped out,” the complaint said. “This incentive has motivated Goldman Sachs to hoard as much aluminum as possible, and sit on it rather than delivering it to customers.”
The complaint also names as defendants Metro International and the London Metal Exchange Ltd., which oversees trading of industrial metals and regulates warehousing of certain metals, including aluminum. Peterson is seeking to represent a class of companies that have purchased aluminum from February 22, 2010 to the present, through a contract with a price term based on the industry standard known as the Midwest Transaction.
Since Goldman entered the warehousing business, the average time it takes aluminum buyers to get metal from the Metro warehouses, which control a large chunk of the aluminum available in the U.S., has spiked from six weeks to 16 months, according to the complaint. Meanwhile, Goldman’s aluminum stockpile in the warehouses has ballooned from 850,000 tons to 1.5 million tons, court documents say.
The suit claims Goldman conspired with the London Metal Exchange, which regulates its warehouses, to limit the amount of aluminum distributed out the warehouses and increase rates for storing aluminum.
Goldman has denied any wrongdoing, and in late July it announced moves to ease delays at the aluminum warehouses, including giving end users physical aluminum in exchange for orders in the queue and altering their priority system.
Peterson’s suit comes on the heels of a similar complaint filed August 7 by Jacksonville, Florida-based Master Screens Inc., which also targeted JPMorgan Chase and GlencoreXstrata PLC for their roles in the alleged conspiracy. JPMorgan’s Henry Bath & Son Ltd. owns 93 metal warehouses and storage facilities, while Glencore controls 51 metal warehouses, according to court documents.
Peterson’s complaint names JPMorgan and Glencore as co-conspirators but not as defendants.
Regulators, lawmakers and market participants have recently increased their scrutiny of banks’ actions in the physical commodities markets, in part sparked by news reports about warehousing agreements between Goldman and the London exchange. Metro controlled around 80 percent of the aluminum warehousing market in the greater Detroit area when Goldman purchased it.
The case is Peterson Industries Inc. v. Goldman Sachs Group Inc. et al., case number 1:13-cv-06689, in the U.S. District Court for the Southern District of New York.
Categories: Class Actions of Interest