Second Blanchard Suit Against Barrick, Morgan Seeks Damages for All Gold Owners
By: Chris Powell, Gold Anti-Trust Action Committee Inc.
Dear Friend of GATA and Gold:
Blanchard & Co., the New Orleans coin and bullion dealer, says it will file tomorrow another anti-trust lawsuit against Barrick Gold and J.P. Morgan Chase over their alleged manipulation of the gold market.
The new lawsuit will be a federal class action that intends to build on the first Blanchard suit so that all gold investors in the United States since 1998 might recover losses caused by the Barrick-Morgan Chase conspiracy.
Blanchard CEO Donald W. Doyle Jr. made the announcement today in an interview with GATA.
Blanchard's first lawsuit, which has entered the evidence-gathering "discovery" phase in U.S. District Court in New Orleans, is expected to go to trial in April 2005, Doyle said. He added that Barrick and Morgan Chase are not being forthcoming in discovery and that Blanchard has filed a motion asking the court to compel them to produce certain evidence. Still, Doyle said, he is confident that evidence already obtained has given Blanchard a strong case.
The current lawsuit seeks only injunctive relief -- a court order prohibiting Barrick and Morgan Chase from continuing to manipulate the gold market. The class-action lawsuit to be filed tomorrow, Doyle said, will attempt to quantify the financial harm done by Barrick and Morgan Chase to gold investors and devise a remedy for their restitution.
The named plaintiffs in the class-action suit will be Greg McKenzie and A.J. Miller, Doyle said, and Blanchard & Co. will bear all the expenses of the litigation.
"We expect to obtain compensation for all gold owners, not only for their losses from their gold investments but also for the profits they should have realized," Doyle said.
"The exact number of gold owners who are members of the class is unknown at this time and can be determined only through appropriate discovery and expert testimony. But we allege, on information and belief, that the members of the class owned, during the period at issue, about 96.5 million ounces of gold having a market value of $38.58 billion at $400 per ounce. Once a judgment is obtained and the amount of damages suffered by the class members is determined, those damages will automatically be tripled under the mandatory provisions of the federal anti-trust laws.
"In 1983 Barrick Gold Corp. was a start-up company with a single mine in Canada and a founder with no experience in the gold business. By 2001 Barrick had amassed off-balance-sheet assets that were worth more than the market capitalization of the next five biggest gold- mining companies in the world combined. Barrick made $2.3 billion on its short sales of gold and made a profit on those short sales for 62 consecutive quarters. A short sale is inherently a high-risk speculation. How many true speculations have ever been profitable for 62 consecutive quarters?"
Blanchard's original lawsuit charges essentially that Morgan Chase provided Barrick with so much borrowed gold -- presumably obtained from central banks -- on such favorable terms that Barrick could overwhelm the market and move prices up or down at will and not have to repay the borrowed gold for many years if at all. In some years, Blanchard maintains, Barrick was able to supply to the market more gold than was supplied by all the bullion banks combined.
In an attempt to have Blanchard's lawsuit dismissed, Barrick seemed to acknowledge the plaintiff's premises. Barrick submitted a motion arguing that in borrowing gold and selling it into the market, the company was acting as the agent of central banks and carrying out their policies in the gold market and thus should share their immunity from lawsuits.
Judge Helen Berrigan rejected Barrick's motion and sent the case on for discovery and trial.
"While the price of gold fell by more than 25 percent," Doyle said, "Barrick was able to increase its annual operating cash flow by more than 400 percent. Barrick became the dominant gold mining company in the world through acquisitions made with the profits from its short sales of gold. By suppressing and depressing gold prices, Barrick forced its competitors to sell gold assets and companies at fire-sale prices.
"The measures that Blanchard has taken have already been good for the gold industry and our clients. Since we began discussions with Barrick in this lawsuit, the company has reduced its hedging position by 10 million ounces, adding gold demand and subtracting gold supply. On December 2, 2003, Barrick's president and chief operating officer announced that Barrick had given up hedging for good. By consenting to the termination of its short sales of gold -- assuming that Barrick honors its commitment -- the company took a major remedial step sought by Blanchard's original complaint.
"I believe that the class action will be successful in recovering damages and putting a stop to practices that have suppressed and depressed the price of gold and all tangible assets," Doyle concluded.
Blanchard's Internet site with information about its litigation is:
http://www.savegold.org
GATA hopes to provide you with more information about Blanchard's lawsuits as it becomes available.
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
