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Morgan barrick gold conspiracy court { September 10 2003 } Original Source Link: (May no longer be active)
http://www.nationalpost.com/financialpost/story.html?id=CD4A73F1-4BC5-4E0E-9FB0-F5A4F13DAA8Ehttp://www.nationalpost.com/financialpost/story.html?id=CD4A73F1-4BC5-4E0E-9FB0-F5A4F13DAA8E
J.P. Morgan, Barrick gold conspiracy to get day in court
Louisiana anti-trust suit
Ian Karleff
Financial Post
Wednesday, September 10, 2003
Gold conspiracy theorists have finally found a receptive court to hear allegations that J.P. Morgan Chase & Co. and Barrick Gold Corp. conspired to manipulate gold prices.
Gold coin and bullion dealer Blanchard & Co. convinced the Louisiana District Court yesterday that its anti-trust lawsuit had sufficient merit to enter the discovery process, despite Barrick's contention the lawsuit is "ludicrous."
"I think this is a very significant development getting this thing into a court of law, and into the discovery process, because some difficult questions might be asked," said John Embry, portfolio manager at Sprott Asset Management in Toronto.
At the crux of the lawsuit are allegations that Barrick and J.P. Morgan concocted a scheme to depress gold prices through a complex system of derivative trades and off-balance sheet deals.
"The court finds that the complaint adequately states a claim for Barrick's acquisition or attempted acquisition of monopoly power in the gold-mining market and Morgan's acquisition, or attempted acquisition, of monopoly power in the gold derivatives market," wrote Judge Helen Berrigan.
Barrick and J.P. Morgan have 10 days to ask for permission to appeal the decision to the 5th Circuit Court of Appeal.
Barrick and J.P. Morgan's motives are alleged to be twofold and far-reaching in that Barrick is accused of cherry-picking competitors via acquisitions thanks to depressed gold prices, which enabled it to morph into the world's second-largest gold producer in only 20 years.
Contrary to popular wisdom, falling gold prices have proved lucrative to Barrick, earning the company US$1.7-billion in a five-year period as it locked in gold sales at higher prices.
Unlike most of its competitors, Barrick proved correct in its bet that gold prices were on the decline.
Furthermore, the suit's supporters say a low gold price lent support to a strong U.S. dollar, erased fears of inflation and allowed interest rates to stay artificially low, thereby giving rise to an over-inflated stock market.
The allegations have circulated on the Internet and in select circles for years, but have generally been dismissed as unsubstantiated claims from fanatical gold bugs. If the case is not scuttled by an appeal, it may finally put to bed what is one of the most enduring controversies in the public markets.
Observers say the location of the trial is also significant because courts in the Southern states are more receptive to suits filed against big corporations, especially those domiciled in the North or in Canada.
An earlier lawsuit was dismissed on technical grounds in a U.S. District Court in Boston in March, 2002, after the judged ruled the plaintiff -- Reg Howe -- was inappropriate, in that he had not personally suffered direct injury, unlike a bullion dealer or private gold investor.
New Orleans-based Blanchard was able to argue that as the largest rare-coin dealer in the United States, demand for its products has been irreparably harmed because its customers are no longer interested in its products thanks to declining and stagnant prices.
"Boston is establishment country, and Louisiana is more maverick. They are willing to listen and not so influenced by the mainstream establishment," said Bill Murphy, chairman of the Gold Anti-Trust Action Committee.
Mr. Murphy said the price of gold would be at US$680 an ounce, or 79% higher than current prices, if bullion banks were not free to manipulate the price by borrowing an estimated 15 thousand tonnes of the 32 thousand tonnes of gold held by central banks around the world.
Legal challenges against large corporations tend to have better luck in winning blockbuster settlements in Southern states.
Research In Motion is in the midst of a patent litigation suit with a Chicago-based inventor, that the maker of BlackBerry e-mail devices initially dismissed as a frivolous suit, not worthy of mentioning to investors.
The Virginia Court, known as the Rocket Docket for its speedy handling of cases, has since hit RIM with an injunction that has cost the firm millions in legal costs and forced it to put into escrow 5.7% of product sales.
ikarleff@nationalpost.com
© Copyright 2003 National Post
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