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By James Turk
The Freemarket Gold & Money Report
The long-awaited ruling from Judge Lindsay
has arrived. All claims against the Bank for
International Settlements and the other
defendants in Reg Howe's lawsuit have been
dismissed.
When I received this news, my initial
reactions were dismay and disappointment, but
I was also surprised. The wrongdoing by the
Defendants appears so clear-cut, and the
evidence that has emerged to date so
compelling, I wondered how this case could
possibly be dismissed? But then I thought
more deeply about this dismissal and my own
understanding of the law.
If there is one thing I have learned in my
30-plus years of business experience, there
are right and wrong, and then there is the
law as it is written and interpreted in
America today. After all, if President
Clinton could claim innocence because of
"what the definition of 'is' is," who knows
what could be possible in a complex case like
Reg's?
As I started to read the judge's ruling, my
question was quickly answered. To put it in
non-legal terms because I am not an attorney,
the answer is that the defendants may be
guilty, but in the eyes of the court, the law
is the law. Or in other words, Reg Howe may
be right, but the judge denied him the
opportunity to pursue these claims. The
reason?
Reg, in the opinion of the judge, does not
have "standing." In other words, the case may
have merit, and Reg may have convinced the
judge of wrongdoing by the defendants.
Indeed, given that the judge did not say that
the factual allegations are insufficient to
bring a price-fixing case, one can reasonably
conclude that the judge believes Reg's case
has merit. But regrettably, Reg was unable to
persuade the judge that within the scope of
the law that he has "standing." In essence,
the judge said that Reg is the wrong person
to bring this case to trial.
The ruling from the judge began forthrightly
and candidly: "This case involves allegations
of 'an unholy alliance of high public
officials' and 'large bullion banks' to
manipulate the price of gold. The plaintiff,
Reginald H. Howe, asserts that various
combinations of the defendants committed two
interrelated sets of wrongful acts: first,
that all of the defendants conspired to
depress the price of gold; and second, that a
subset of the defendants conspired to set an
unfairly low price in the mandatory
redemption of shares of the Bank for
International Settlements."
The judge then describes the aforementioned
"wrongful acts" as "factual allegations."
Having completed only the first paragraph of
a 38-page ruling, I could sense that I had an
interesting read ahead of me. And in fact my
interest perked up considerably in the next
section, entitled "background."
The judge began this section by stating: "The
facts set forth below are those alleged in
the complaint as well as uncontested matters
of public record, which have been adverted to
by the parties in their papers. Alternative
Energy Inc. v. St. Paul Fire & Marine Ins.
Co., 267 F.3d 30, 33 (1 st Cir. 2001) (noting
that a district court properly may consider
matters of public record in deciding 12(b)(6)
motions to dismiss). I must accept as true
the allegations in the complaint and construe
in the plaintiff's favor all reasonable
inferences from those allegations." Then
through another three pages he lays out in
detail key facts that Reg presented in his
complaint.
As I read the ruling it became clear that the
judge was not dismissing the case because the
allegations were unfounded. Nor was the judge
saying that the factual allegations made by
Reg were insufficient. To the contrary. The
judge said nothing negative about the
allegations put forth by Reg. For that reason
one can reasonably conclude that there is
merit to Reg's argument that the defendants
committed "wrongful acts," and, perhaps more
importantly to the future of this case, that
the allegations presented by Reg are
sufficient for this case to allege price
fixing by the defendants.
Thus, I didn't have to wait long to answer my
question about how this case could possibly
be dismissed. It was not because the
defendants didn't manipulate the price of
gold. Rather, the case was dismissed for a
reason that I consider to be a technical
matter. The judge said Reg did not have
standing.
To explain this point, the judge states:
"There are many participants in the gold and
gold derivatives markets who could allege a
more direct injury than does the plaintiff.
For example, there are many gold mining
companies and private investors in gold (not
to mention those central banks with gold
reserves) that the plaintiff does not allege
to be involved in the conspiracy. All of
these persons or entities would be more
directly injured than the plaintiff by a
scheme of the kind he alleges."
In judge-speak, there are "more appropriate
plaintiffs" than Reg. And as if his point is
not sufficiently obvious, he says further:
"…it seems clear that there is sufficient
incentive for any of the many gold mining
companies or private investors in gold or
gold derivatives to bring suit."
Will the gold industry please stand up? In
this remarkable statement the judge is giving
us here an open invitation for a gold mining
company to take over Reg's complaint and his
allegations of price fixing.
Is there a gold mining company out there to
which Reg can pass the baton?
So the gist of the ruling came quickly, but
I'm glad that I continued reading the judge's
memorandum. There were some surprises,
unbelievable even to my jaded eyes.
For example, one surprise involved the
judge's statement as follows: "Thus when
there is no evidence that Congress intended
to subject federal government agencies,
officials, and instrumentalities to the
antitrust laws -- indeed, when all evidence
points in the opposite direction -- it is
inappropriate for a court to infer such an
intent."
The ghastly conclusion reached by the judge
of this reading of the law is: "For all the
reasons set forth above, I conclude that
Greenspan, McDonough, and the Secretary of
the Treasury in their official capacities are
not 'persons' within the meaning of the
antitrust laws. They enjoy the protection of
sovereign immunity." In other words, they are
above the law. You can sue them only if they
first allow you to sue them. Now where did
the Founding Fathers put that clause in the
Constitution?
The judge observes: "All of the relevant case
law, as discussed above, indicates that
government officials are not subject to the
Sherman Act, and both the Federal Reserve and
the ESF have statutory authority to trade in
gold."
And therefore to manipulate its price?
Interestingly, the judge never addresses that
thorny issue.
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