GATA (Gold Anti-trust Action)Lawsuit... Page 1
is moving quickly ahead and it is now in the judges hands whether to "hear" the case or not. All defendents have responded as of March 30th and plaintiff for GATA Reg Howe has responded. Here is the plaintiffs response to defendants. My own personal opinion is that it will be hard for the judge to not hear this case.
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Reprinted by permission via Bill Murphy GATA President:
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UNITED STATES DISTRICT COURT
District of Massachusetts
Civil Action No.
00-CV-12485-RCL
___________________________________________
)
Reginald H. Howe, )
Plaintiff, )
)
v. )
)
Bank for International Settlements, et al.,)
Defendants. )
___________________________________________)
PLAINTIFF'S CONSOLIDATED OPPOSITION TO ALL
MOTIONS TO DISMISS AND RELATED MOTIONS,
INCLUDING REQUEST FOR JURY TRIAL ON ANY
UNRESOLVED ISSUES RELATING TO ARBITRATION
For the reasons set forth in the memorandum below, the plaintiff, Reginald H. Howe, opposes the motions to dismiss filed by all defendants, the motion to substitute Paul O'Neill, Secretary of Treasury, insofar as it seeks dismissal of the complaint against former secretary Lawrence Summers individually, the motion to substitute the United States for Alan Greenspan, and the motion of the Bank for International Settlements either to dismiss or stay for arbitration, and in connection with the latter motion requests a trial by jury on all issues so triable.
Table of Contents
Statement of the Case
Statement of Facts
1. The Freeze-Out: Withdrawing the BIS's American Issue for the Fed.
2. Gold Lending and Gold Derivatives: The Dangerous Short Position.
3. Use of Gold Lending and Gold Derivatives To Suppress Gold Prices.
4. Gold Swaps by the ESF.
5. Relationship of Gold Prices to BIS and FCX Gold Preferred Shares.
Argument
I. UNDER THE FIFTH AMENDMENT, DEFENDANTS GREENSPAN, McDONOUGH AND SUMMERS ARE LIABLE TO THE PLAINTIFF FOR DAMAGES ARISING FROM COMPULSORY WITHDRAWAL OF HIS BIS SHARES AT BELOW FAIR VALUE WITH INTENT TO TRANSFER THEM ULTIMATELY TO THE FEDERAL RESERVE.
A. Sovereign Immunity Does Not Bar Suits for Injunctive Relief and Damages Based on Violations of the Fifth Amendment by Federal Officials Acting outside the Scope of their Legal or Constitutional Authority.
B. Neither the Secretary of the Treasury nor Federal Reserve Officials Have Authority to Manipulate or Set Gold Prices, either Directly or Indirectly.
1. Congress Has Mandated a Free Gold Market.
2. Pre-1971 Statutes Do Not Permit Gold Market Intervention Today.
C. Defendants Summers, Greenspan and McDonough May Be Held Personally Liable in Damages Because They Knew or Should Have Known They Lack Authority to Manipulate Gold Prices.
D. Defendants Summers, Greenspan and McDonough Knew or Should Have Known They Lack Authority to Arrange for U.S. Membership in the BIS by Purchasing Shares without Authorization and Appropriation by Congress.
E. Defendants Summers, Greenspan and McDonough Knew or Should Have Known that Suppressing Gold Prices through the BIS or Otherwise Is Contrary to U.S. Foreign Policy toward Sub-Saharan Africa.
II. PLAINTIFF HAS STANDING TO ASSERT CLAIMS FOR DAMAGES AND INJUNCTIVE RELIEF ARISING FROM PRICE FIXING IN THE GOLD MARKET BECAUSE HE HAS SUFFERED DIRECT INJURY AND IS THREATENED WITH
FURTHER HARM FROM THIS ILLEGAL CONDUCT.
A. Participation in Gold Price Suppression by Federal Officials Abusing their Authority Coupled with Failure of the DOJ to Enforce the Sherman Act Counsel against Denying the Plaintiff Standing.
B. Under Standard Sherman Act Criteria, Plaintiff Has Standing to Bring Price Fixing Claims for both Damages and Injunctive Relief against the Defendant Bullion Banks.
1. Actual Injury and Threatened Harm to Plaintiff's Property.
2. Direct Relationship of Antitrust Violation to Plaintiff's Injury.
C. The BIS and Federal Officials Acting outside the Scope of their Authority Are "Persons" Subject to Suit under the Sherman Act.
III. THE BIS DEFENDANTS COMMITTED SECURITIES AND COMMON LAW FRAUD BY SEVERAL DECEPTIVE SCHEMES AND DEVICES REINFORCED BY NUMEROUS MISSTATEMENTS AND OMISSIONS OF MATERIAL FACTS.
A. By Illegally Suppressing Gold Prices, Concealing the Manipulation, and Failing to Set the Freeze-Out Price in Gold Francs, the BIS Defendants Corrupted the Process of Valuing and Paying for the Shares.
B. By Acting without the Legal Authority They Misrepresented Themselves to Have, the BIS Defendants Foreclosed Plaintiff from Making a Voluntary Investment Decision and from Pursuing Other Remedies.
C. Numerous Misstatements and Omissions by the BIS Defendants as to Material Facts Provide Further Evidence of Scienter.
IV. PLAINTIFF'S CLAIMS AGAINST THE BIS ARE NOT WITHIN THE SCOPE OF ITS ARBITRATION PROVISION, WHICH HAS LAPSED, TO WHICH HE NEVER AGREED, AND WHICH FAILS TO MEET DUE PROCESS REQUIREMENTS.
A. The Treaty's Arbitration Tribunal Is Defunct.
B. This Dispute Does Not Come within the Arbitration Clause.
C. Plaintiff Has Not Agreed to Arbitrate This Dispute.
D. The Arbitration Tribunal Does Not Satisfy Due Process.
E. Plaintiff Is Entitled to Jury Trial on Disputed Issues of Arbitrability.
V. OTHER DEFENSES SPECIFIC TO CERTAIN DEFENDANTS ARE WITHOUT MERIT, CORRECTABLE, OR BOTH.
A. This Action Is Not Cognizable under the Federal Tort Claims Act.
B. Service on the BIS Satisfies the Hague Convention.
C. If Required, Any Defects in Service on Messrs. Summers or Greenspan Are Correctable.
D. The Corporate Shield Defenses of the Bullion Banks Are without Merit, as are Other Fact Specific Defenses of Citicorp and Deutsche Bank.
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Statement of the Case
This is a complaint for damages and injunctive relief arising out of two intertwined events: (1) the unauthorized compulsory freeze-out by the Bank for International Settlements ("BIS" or "Bank") of its private shareholders, including U.S. holders of its American issue, with apparent intent to transfer all shares of that issue to the Federal Reserve at the freeze-out price, which is less than one-half of their admitted net asset value, a figure that expressed in gold francs -- the BIS's unit of account -- would itself be higher but for the undisclosed illegal manipulation of gold prices; and (2) price fixing in the gold market orchestrated through the BIS by Federal Reserve officials and the Secretary of the Treasury acting outside the scope of their legal or constitutional authority and in league with certain major U.S. and foreign bullion banks.
The plaintiff, Reginald H. Howe, is a resident U.S. citizen. Until implementation of the freeze-out on January 8, 2001, the plaintiff owned six shares of the BIS's American issue (complaint, para. 2, hereinafter "C. _"). He is also the owner of 1200 depositary shares of Gold-Denominated Preferred Stock, Series II, of Freeport-McMoran Copper & Gold, Inc. ("FCX gold preferred shares"), which pay quarterly dividends equal to a stated weight of gold multiplied by the arithmetic average of the London PM gold price over the relevant preceding five-day period. These shares will be redeemed in 2006 for the cash value of one-tenth ounce of gold calculated in the same manner (C. 14).
The BIS, based in Basle, Switzerland, is often referred to as the "central banks' central bank." Although it describes itself as an international organization, the BIS has not been so designated under the International Organizations Immunities Act (22 U.S.C. s. 288 et seq.). Its principal owners and customers are the central banks of the major industrial nations. The BIS accepts gold deposits, makes gold loans, holds approximately 200 metric tonnes of gold for its own account, and is an active participant in the gold market (C. 4).
Besides the BIS, the defendants are Alan Greenspan, Chairman of the Board of Governors of the U. S. Federal Reserve System ("Federal Reserve" or "Fed") and a director of the BIS (C. 5); William J. McDonough, President of the Federal Reserve Bank of New York ("N.Y. Fed") and a director of the BIS (C. 6); five major bullion banks, J. P. Morgan & Co., Chase Manhattan Corp., Citigroup, Inc., Goldman Sachs Group, Inc. and Deutsche Bank (C. 7-11); and Lawrence H. Summers, Secretary of the Treasury (C. 12), who by law exercises personal control over the Exchange Stabilization Fund ("ESF") subject only to approval by the President.
The complaint alleges interference with property rights and deprivation of property without due process in violation of the Fifth Amendment by federal officials acting outside their legal or constitutional authority (count 4 against the BIS, Greenspan, McDonough and Summers), price fixing in violation of section 1 of the Sherman Act (count 1 against all defendants), securities fraud in violation of section 10(b) and Rule 10b-5 of the Securities Exchange Act (count 2 against the BIS, Greenspan, McDonough and Morgan, collectively the "BIS defendants"), and common law fraud and breach of fiduciary duty (count 3 against the BIS defendants).
The statutory bases for jurisdiction and venue, which include several applicable federal statutes (C. 1, 16), are not challenged. The federal officials raise various defenses based on sovereign immunity. However, even if they were acting within their official capacities with respect to some or all of the events alleged, sovereign immunity is waived by 5 U.S.C. s. 702 as to declaratory or injunctive relief but not as to money damages. Mr. McDonough and Deutsche Bank raises issues regarding personal jurisdiction or venue.
Since the filing of the complaint on December 7, 2000, Morgan and Chase have merged into J.P. Morgan Chase & Co., and Paul O'Neill has become Secretary of the Treasury, automatically replacing Mr. Summers under F.R.Civ.P. 25(d)(1), but only to the extent that he was sued in his official capacity. Relevant events since December 7 as well as certain new or additional evidence are set forth in the plaintiff's affidavit filed herewith (cited as "P.A." followed by paragraph number or exhibit identification).
All the defendants have filed motions to dismiss, some jointly, so that there are a total of seven such motions supported by an equal number of separate memoranda. The motion to dismiss filed by the BIS contains an alternative request to stay for arbitration. The Department of Justice ("DOJ") has filed two additional motions. One seeks not only to substitute Paul O'Neill as Secretary of the Treasury in place of Lawrence Summers, but also by this device to dismiss the claims against Mr. Summers individually. The other seeks to substitute the United States for Alan Greenspan under the Federal Tort Claims Act.
In addition, four defendants have filed affidavits: (1) the BIS has filed an affidavit of Gunter D. Baer, including copies of various relevant documents (cited as "BIS.A." followed by paragraph number or exhibit identification); (2) the DOJ's memorandum in support of Alan Greenspan's motion to dismiss includes five exhibits (cited as "DOJ Ex."), authenticated by separate affidavits (four of these exhibits are reproduced in tab Z to plaintiff's affidavit); (3) Deutsche Bank has filed an affidavit that is materially and demonstrably incorrect and incomplete regarding its operations in Massachusetts; and (4) the N.Y. Fed has filed an affidavit regarding its limited activities in Massachusetts.
The purpose of the latter affidavit is to contest jurisdiction over the N.Y. Fed in Massachusetts. The affidavit assumes: (1) that Mr. McDonough is being sued in his capacity as president of the N.Y. Fed; and (2) that serving as a director of the BIS falls within the duties of that office. For reasons to be discussed, neither assumption is correct...
Best regards, J.T. |
