GATA (Gold Anti-trust Action)Lawsuit... Page 6
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.
The manipulative activities of the defendants in the gold market constitute horizontal price fixing and are illegal per se as set forth by the Supreme Court in United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-224 (1940):
Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se. ... Where the means for price-fixing are purchases or sales of the commodity in a market operation..., such power may be found to exist though the combination does not control a substantial part of the commodity. In such a case that power may be established if as a result of market conditions, the resources available to the combinations, the timing and the strategic placement of orders and the like, effective means are at hand to accomplish the desired objective. But there may be effective influence over the market though the group in question does not control it. Price-fixing agreements may have utility to members of the group though the power possessed or exerted falls far short of domination and control. ... Proof that a combination was formed for the purpose of fixing prices and that it caused them to be fixed or contributed to that result is proof of the completion of a price-fixing conspiracy under s. 1 of the Act.
In United States v. Nippon Paper Industries Co., 109 F.3d 1 (CA1 1997), the First Circuit held that price fixing activities committed abroad which have a substantial and intended effect within the United States may form the basis not just for civil relief but also for criminal prosecution in U.S. courts.
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.
If this case involved any commodity other than gold, or any price fixers less powerful than the world's largest banks supported by top government officials, evidence like that contained in the complaint and the plaintiff's affidavit would already have produced a major price fixing investigation by the Department of Justice -- one very likely to lead to criminal indictments. Today the gold price is hundreds of dollars below its true equilibrium, causing enormous damage to the gold mining industry and to a number of smaller gold producing nations around the world, especially in southern Africa. By turning a blind eye toward manipulative activities that are becoming ever more obvious to knowledgeable observers and participants in the gold market, the DOJ emboldens the gold price fixers and nourishes cynicism about the nation's true commitment to the rule of law and the Constitution.
The burden of pursuing legal relief from this per se illegal conduct should not fall on a private plaintiff, particularly when the mere commencement of a DOJ investigation, backed by issuance of a few Civil Investigative Demands to major bullion banks, would almost certainly terminate these illegal activities overnight. However, when such per se illegal conduct is alleged on credible evidence, involves top federal officials, and the DOJ declines to act, the courts should be very hesitant to deny standing to a private plaintiff who makes a strong case for standing under the standard Sherman Act criteria.
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.
Section 4 of the Clayton Act permits "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" to sue for damages. 15 U.S.C. s. 15. Section 16 provides that any person "shall be entitled to sue for and have injunctive relief ... against threatened loss or damage by a violation of the antitrust laws ... ." 15 U.S.C. s. 26.
To establish standing to sue under the antitrust laws, a plaintiff must satisfy three injury-related requirements: (1) actual injury to business or property or, for injunctive relief, threatened harm; (2) that the injury or harm results from an antitrust violation; and (3) that the injury or harm is of a type that the antitrust laws are intended to prevent. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). R. W. International Corp. v. Welch Food, Inc., 13 F.3d 478, 487 (CA1 1994).
However, for the narrowing categories of violations that remain per se illegal, the third test is met because "nothing more is needed for liability; the defendants' power, illicit purpose and anticompetitive effect are all said to be irrelevant." Addamax Corp. v. Open Software Foundation, Inc., 152 F.3d 48, 51 (CA1 1998). If there is some hypothetical per se violation where a plaintiff who meets the first two tests cannot meet the third, it is not horizontal price fixing. See Engine Specialties, Inc. v. Bombardier Ltd., 605 F.2d 1, 12-13 (CA1 1979).
1. Actual Injury and Threatened Harm to Plaintiff's Property.
Injury to business or property includes personal as well as commercial property. Reiter v. Sonotone Corp., 442 U.S. 330, 341 (1979). Waldron v. British Petroleum Co., supra, 231 F.Supp. at 86-87. Accordingly, whether the plaintiff's BIS shares or FCX gold preferred shares were or are personal or business investments is irrelevant.
With respect to injunctive relief, a plaintiff need not show injury to business or property; it is sufficient to show only that relief is necessary to prevent injury to his interests as opposed to someone else's. Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 111 (1986). The plaintiff has a direct personal interest in: (1) the future dividends and redemption payment on his FCX gold preferred shares, all calculated arithmetically from the London PM gold price; and (2) determination of the correct price and net asset value for his BIS shares, which requires a calculation in Swiss gold francs.
2. Direct Relationship of Antitrust Violation to Plaintiff's Injury.
In Associated General Contractors v. California State Council of Contractors, 459 U.S. 519 (1983), the Court set forth relevant factors to consider in determining whether an antitrust plaintiff meets the causative requirements for standing. These were distilled by the Sixth Circuit in Peck v. General Motors Corp., 894 F.2d 844, 846 (CA6 1990), into a useful five part framework: (1) the causal connection between the antitrust violation and the harm to the plaintiff, including whether the harm was caused intentionally; (2) the nature of the plaintiff's injury, including whether the plaintiff is a consumer or competitor in the relevant market; (3) the directness of the injury, and whether and to what extent the damages may be speculative; (4) the potential for duplicative recovery or complex apportionment of damages; and (5) the existence of more direct victims of the antitrust violation. See also Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982).
The defendants challenge the plaintiff's antitrust standing on two basic grounds: (1) he is not a purchaser or seller of gold bullion in a direct relationship with any of the defendants; (2) as a holder of BIS shares and FCX gold preferred shares, his damages from the alleged gold price fixing are too indirect and/or speculative. They rely chiefly on Kansas v. Utilicorp United Inc., 497 U.S. 199 (1990) (utilities' customers lack standing to sue utilities' gas suppliers for overcharges later passed on in customers' bills). See Hannover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968); Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).
None of these indirect purchaser cases fits the facts of this case, which involves a unique commodity market -- the gold market -- and two different securities linked directly and with arithmetic precision to the price of gold. Two cases that directly support the plaintiff's standing are Sanner v. Board of Trade of City of Chicago, 62 F.3d 918, 926-930 (CA7 1995), recently followed in In re Copper Antitrust Litigation, 98 F.Supp.2d 1039, 1051 (W.D.Wis. 2000).
Sanner involved soybean farmers who sold beans in the cash market at depressed prices allegedly caused by a CBOT resolution requiring certain traders to liquidate their long futures positions in beans. The Board argued that the farmers lacked standing because its resolution was directed only at the futures market, the farmers did not participate in that market, and their injuries were thus too indirect as well as being speculative and difficult to apportion.
The Seventh Circuit rejected these arguments, holding (at 929): "The futures market and the cash market for soybeans are thus 'so closely related' that the distinction between them is of no consequence to antitrust standing analysis." [Citation omitted.] The court continued (id.): "[T]he injury the farmers claim to have suffered is in no sense 'derivative.' The farmers are not attempting to stand in the shoes of a third party or to complain of the secondary consequences arising from an injury to a third party." And finally, noting that some courts have read McCready, supra, to require that a plaintiff's alleged harm be a necessary incident of the antitrust violation, the court held (at 930): "[I]njury to the farmers was necessary to accomplish the [Board's] allegedly anticompetitive scheme. The cash and futures markets for soybeans are so closely related that a directive issued toward one promised to invariably impact the other."
Sanner was followed in In re Copper Antitrust Litigation, supra, 98 F.Supp.at 1043, 1049-1051, holding that a purchaser of copper in the cash market, where prices were set by reference to the price or a monthly average price of copper futures on the COMEX or London Metal Exchange, had standing to sue refiners and traders for price manipulation in the futures markets even though the plaintiff did not trade in those markets.
Both the dividend and redemption payments on the plaintiff's FCX gold preferred shares are a direct arithmetic function of the London PM gold price, which is set while the COMEX is open (P.A. 27). In purpose and function, these payments are the exact equivalent of selling a specified weight of gold. They operate in substantially the same way as contractual gold clauses of earlier eras. Congress has expressly re-authorized securities providing for payment in gold, or in equivalent dollar value. 31 U.S.C. s. 5118(d)(2). See Adams v. Burlington Northern Railroad Co., 80 F.3d 1377, 1380-1381 (CA9 1996), cert. denied, 519 U.S. 864. Any manipulation of gold prices necessarily affects the value of payments under these securities in the same manner and to the same extent as it affects purchases and sales of bullion.
The connection between the plaintiff's BIS shares and gold prices is still more direct. Even assuming that the BIS had authority to freeze-out its private shareholders, both its Statutes and its regular practice with respect to transactions on capital account required the Bank to price its shares in gold francs and to offer to pay in an equivalent weight of gold (C. 68-70).
The plaintiff's FCX gold preferred shares are not, and his BIS shares were not, analogous to the common equity shares of gold mining companies. Such equity shares, unlike the securities involved in this case, derive their value indirectly from profits or losses on the business of mining gold. Many factors enter into that equation besides gold prices, as important as they are. What is more, none of the defendants suggests some other prospective plaintiff more directly affected by the manipulation of gold prices, such as the major gold mining companies with which they have relationships or connections (C. 44, 56, 59, 60, 61). Some of these companies take advantage of their inside knowledge of the manipulative scheme (C. 13, 41), while others are too dependent on financing from their gold bankers or on mining permits from government officials to dare challenge the price fixing cabal (C. 60).
The defendants' argument that the complaint lacks sufficient allegations of a combination or conspiracy to affect gold prices is without merit. "Direct evidence of a conspiracy is not necessary: '[t]he requisite concerted action may be inferred from a course of dealing or from other circumstancial evidence.'" In re Copper Antitrust Litigation, supra, 98 F.Supp.2d at 1054 (citations omitted). DM Research, Inc. v. College of American Pathologists, 170 F.3d 53, 56 (CA1 1999), cited by defendants, was a "rule of reason" case in which, as the court noted, the pleading requirements are very different than for per se illegal conduct, where the purposes, reasons or motives of the defendants are irrelevant.
In any event, two directors of the BIS have confirmed manipulation of gold prices by central banks. Mr. Greenspan has stated publicly that central banks other than the Federal Reserve lease gold in response to price increases (C. 38-39; DOJ Ex. E). The Governor of the Bank of England has stated that in response to the 1999 rally in gold prices triggered by the Washington Agreement, the U.K. and the U.S. Fed "had to quell the gold price, manage it" because "a further rise would have taken down" one or more bullion banks (C. 55).
What is more, the plaintiff has set forth considerable detailed evidence regarding the alleged price fixing conspiracy: (1) the gold carry trade as a source of cheap funding for the bullion banks providing that gold prices remain stable or decline (C. 29); (2) the very large and dangerous short physical position (C. 32-33), confirmed by Mr. George's statement; (3) the vast amount of statistical evidence demonstrating manipulation of gold prices beginning around 1994 (C. 46-48; P.A. 20, 26- 28); (4) the completely unexpected announcement of the British gold auctions, not to mention Deutsche Bank's advance notice of it (C. 42); (5) the synchronization of British gold auctions with COMEX option expiration days in a manner designed to supply bullion banks with gold for delta hedging (P.A. 21-25); and (6) the dominant role that the defendants collectively play in the gold market, making any major manipulation of gold prices virtually impossible without their active and knowing support and participation.
Best Regards, J.T. |
