GATA (Gold Anti-trust Action)Lawsuit... Page 4
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.
The due process clause of the Fifth Amendment provides: "No person shall ... be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation." Contrary to assertions in the DOJ's memoranda, the plaintiff does not assert a taking claim against the United States or the Secretary of the Treasury arising out of the freeze-out. Nor could he. As the DOJ correctly points out, a compensable taking under the Tucker Act (28 U.S.C. s. 1491(a)(1)) cannot exist absent authorization by Congress, express or implied, for the taking alleged. Tabb Lakes, Ltd. v. United States, 10 F.3d 796, 802 (Fed. Cir. 1993). "The claimant must concede the validity of the government action which is the basis [for his claim]." Id.
The plaintiff makes no such concession in this case. Quite to the contrary, the plaintiff contends that insofar as the United States is concerned, the freeze-out is a patently illegal and unconstitutional scheme designed to put the Federal Reserve in the same position that it would occupy were the United States a signatory to the original BIS treaty, which it is not. Since the date of the complaint, but while Mr. Summers was still in office, the BIS implemented the freeze-out of its private shareholders. At the same time, it provided for sale of the shares thus acquired "to central bank shareholders against payment of an amount equal to that of the compensation paid to the private shareholders" (P.A. Ex. N, Annex, Article 18(A) (Transitional)). Without a transfer of the American issue to the Fed, there will be no basis for its continued participation in the BIS.
The BIS asserts that the freeze-out is part of a plan to shed its unique original corporate structure and become a public international institution like the IMF or World Bank. Nevertheless, there is no indication that any effort has been made to obtain Senate consent to the United States joining the BIS, or that Congress has made an appropriation or given any other authorization for the purchase of BIS shares. What the plaintiff asserts, therefore, are claims under the Fifth Amendment for damages and injunctive relief based on interference with his property rights and deprivation of property without due process by federal officials, including Messrs. Summers, Greenspan and McDonough, acting outside their legal or constitutional authority.
In addition, by abusing their authority to effect the suppression of free market gold prices, these same officials caused: (1) a decrease in the gold franc value of the plaintiff's BIS shares as of the date of the freeze-out; and (2) decreases in the dividends previously paid to plaintiff on his FCX gold preferred shares as well as threatened decreases in both his future dividend payments and the redemption payment in 2006. These payments, which are directly calculated from the arithmetical average of the London PM gold price over a defined period, are the functional equivalent of a direct sale of gold bullion at this price.
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.
Being fundamental to the American constitutional scheme, the Fifth Amendment supports a private right of action for damages or other appropriate injunctive or declaratory relief against federal officials who violate it while acting beyond or abusing their authority. Davis v. Passman, 442 U.S. 228, 241-245 (1979). Boyce v. United States, 523 F.Supp. 1012 (D.C.N.Y. 1981). See Gerena v. Puerto Rico Legal Services, Inc., 697 F.2d 447, 449 (CA1 1983).
Federal officers cannot claim sovereign immunity in actions brought by citizens whose property rights they have invaded. Ickes v. Fox, 300 U.S. 82, 97 (1937). United States v. Lee, 106 U.S. 196, 217, 220-221 (1882). Elaborating on this bar to sovereign immunity in Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 687-688 (1949), the Court refused to allow a suit for injunctive relief against a federal officer acting in his official capacity, but stated (at 689) that sovereign immunity does not bar suits for specific relief against federal officers acting outside the scope of their authority or in an individual capacity. What is more, the Court also stated in Larson (at 690) that sovereign immunity will not bar suit against an official acting within the scope of his authority if the actions themselves or the statute on which they are based are unconstitutional. The Court reiterated these principles in Dugan v. Rank, 372 U.S. 609, 621-622 (1963), and Malone v. Bowdoin, 369 U.S. 643, 647 (1962). See American Policy Holders Insurance Co. v. Nyacol Products, Inc., 989 F.2d 1256, 1265 (CA1 1993).
In suits for damages, federal officials in the executive branch have a qualified immunity for actions taken in good faith with a reasonable belief that they are constitutional even though that belief ultimately proves mistaken. Hunter v. Bryant, 502 U.S. 224, 227 (1991). Mitchell v. Forsyth, 472 U.S. 511, 524 (1985). Reasonable error is tolerated; willful wrongdoing is not. Harlow v. Fitzgerald, 457 U.S. 800, 818-819 (1982). As the Court pointed out in Mitchell (at 524), allowing only qualified rather than absolute immunity does not impede normal and legitimate operations of government, but does give government officials "pause to consider whether a proposed course of action can be squared with the Constitution and laws of the United States."
Under the Administrative Procedure Act, the United States has waived sovereign immunity in actions in federal courts "seeking relief other than money damages and stating a claim that an agency or an officer or an employee thereof acted or failed to act in an official capacity or under color of legal authority." 5 U.S.C. s. 702. In appropriate cases, this section permits broad injunctive and declaratory relief. Cobell v. Norton, 240 F.3d 1081, 1107-1109 (CADC 2001) (breach of federal government's fiduciary duty regarding Indian trust funds).
With respect this case, Mr. McDonough is not sued as president of the N.Y. Fed or on account of its activities. He is sued as a director of the BIS, serving in that capacity as a federal official appointed by vote of the Federal Reserve Board (DOJ Ex. B) acting pursuant to authority received from both the Secretary of the Treasury and the Secretary of State (DOJ Ex. C) to assist in carrying out the President's foreign policy (DOJ Ex. D). Accordingly, he is subject to suit, inter alia, under 28 U.S.C. s. 1391(e)(3), which provides that federal officers or employees acting in an "official capacity or under color of legal authority" may be sued in the judicial district where the plaintiff resides.
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.
The monetary provisions of the Constitution grant to Congress sole and exclusive power to determine the gold value of the dollar. "The Congress shall have power ... To coin Money, regulate the Value thereof, and of foreign coin." U.S. Const., Art. 1, s. 8, cl. 5. "No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and Silver Coin a Tender in Payment of Debts." U.S. Const., Art. 1, s. 10, cl. 1. The Supreme Court has declined to rule on whether Congress may constitutionally sever the value of the dollar from a defined weight of gold, i.e., whether the U.S. monetary system in place since the closing of the gold window in 1971 meets constitutional requirements. See, e.g., Walter W. Fischer v. City of Dover, N.H., et al. No. 91-221 (Petition for Certiorari, copy at www.goldensextant.com/Resources/Copy of fischerweb.htm). But whatever the link between the dollar and gold, the Constitution vests in Congress -- not in the uncontrolled and covertly exercised discretion of executive branch officials -- the exclusive power to define it.
From 1792 to the closure of the gold window in August 1971, gold functioned in an official monetary role under the Constitution and laws of the Unites States. Gold's use in ordinary domestic coinage ended in 1934 with the monetary measures of the New Deal, including the devaluation of the dollar from $ 20.67/ounce to $ 35/ounce and a general prohibition on the ownership of gold by United States citizens. Under the Bretton Woods Agreements (59 Stat. 512 (1945)) adopted after World War II, gold remained at the center of the international monetary system and the United States committed itself to redeem dollars presented by official foreign monetary institutions at the legal standard of $ 35/ounce. When the United States unilaterally ceased redeeming dollars for gold in August 1971, the Bretton Woods system collapsed, and the international payments system moved to floating exchange rates with no currency convertible into gold at fixed parities.
These changes were formally recognized by the Second Amendment to the IMF's Articles of Agreement (IMF Resolution 31-4, approved Apr. 30, 1976, effective Apr. 1, 1978), which prohibits members from linking their currencies to gold (Art. IV, s. 2(b), as amended) and commits the IMF to "the objective of avoiding the management of the price, or the establishment of a fixed price, in the gold market." Art. IV, s. 12(a), as amended.
In 1972, Congress authorized and directed the Secretary of the Treasury to establish a new par value for the dollar of $ 38/ounce (Pub. L. 92-268, s. 2, 86 Stat. 116 (1972)), which it amended in 1973 to $ 42.22/ounce or 0.828948 IMF Special Drawing Right. Pub. L. 93-110, s. 1, 87 Stat. 352 (1973). Effective April 1, 1978, Congress repealed the 1973 par value act, leaving the dollar for the first time since 1792 statutorily undefined with reference to gold or silver. Pub. L. 94-564, s. 6, 90 Stat. 2661 (1976), repealing 31 U.S.C. s. 449. See 31 U.S.C. ss. 314, 821, repealed by Pub. L. 97-258, s. 5, 96 Stat. 877 (1982).
In 1974, Congress eliminated the restrictions adopted forty years earlier on private ownership of gold by American citizens, and soon afterwards trading of COMEX gold contracts resumed. In 1977, Congress repealed the prohibition on gold clauses in private contracts (31 U.S.C. s. 5118(d)(2)), enabling the issue of gold-linked securities, e.g., plaintiff's FCX gold preferred shares. Under the Gold Bullion Coin Act of 1985 (31 U.S.C. s. 5112, as amended by Pub. L. 99-185, 99 Stat. 1177), Congress authorized the United States to resume issuing gold coins with a legal tender face value but sold to the public at the market value of the bullion at time of sale plus costs of minting and distribution.
By its actions since 1971, Congress has effectively declared that for purposes of federal law, gold is no longer money but an ordinary commodity whose value against the dollar should be determined by free market forces. Trading of gold and gold derivatives, including futures and options, now takes place daily through private transactions, in over-the-counter financial markets and on public commodities exchanges, such as the COMEX, which are regulated under the authority of Congress precisely to assure that they function honestly and fairly for all participants. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 362-366 (1982).
Best Regards, J.T. |
