J.P.Morgan Chase Illegal Gold Market Manipulation

Published: Thu 19 Dec 2002 10:31 AM
December 18, 2002
News media contact:
Neal R. Ryan (888) 531-4653
Blanchard and Company, Inc., and Save Gold
Barrick Gold Corp. And J.P.Morgan Chase & Co. Accused Of $2 Billion Illegal Gold Market Manipulation
NEW ORLEANS, La. -- An anti-trust lawsuit filed today accuses Barrick Gold Corp., Toronto, and J.P. Morgan Chase & Co., New York City, of "unlawfully combining to actively manipulate the price of gold" and making (US)$2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors.
The suit was filed by Blanchard and Co. Inc. of New Orleans, the largest retail dealer in physical gold in the United States, and by Blanchard clients who bought gold bullion. Blanchard ( is paying the costs of the suit, which asks the federal court to terminate the trading agreements between Barrick and J.P. Morgan Chase and other, as yet unnamed bullion banks. Blanchard believes its clients have suffered substantial losses as a result of Barrick's and J.P. Morgan Chase's unlawful price manipulation, anti-trust violations and unfair trade practices.
"Since the end of 1987, when the collaboration between Barrick and J.P. Morgan began, the growth of global income and wealth would have lifted the gold price to approximately $740 if the price had been able to respond to the normal laws of supply and demand," stated Blanchard's chief executive officer, Donald W.Doyle Jr. "If gold had kept pace with inflation, the price today would be approximately $760."
The lawsuit claims that in the past five years Barrick and J.P. Morgan Chase injected millions of ounces of additional gold into the market -- additions that were several times as great as the annual production of every gold mine in South Africa, the largest gold producing nation in the world. By using privately negotiated derivative contracts and concealing the addition of billions of dollars worth of (physical) gold with off-balance sheet accounting, Barrick was able to make it virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions.
"The same type of accounting maze that hid Enron's debts made it possible for Barrick to manipulate the price of gold without the checks and balances that come from public scrutiny. As a percentage of Barrick's total assets, its off-balance sheet assets make Enron look like a champion of full disclosure," said Doyle. "Is Barrick a gold mining company, or is it a hedge fund with a mine out back?"
The suit alleges that J.P. Morgan Chase financed Barrick's repeated short selling with remarkably advantageous terms not available to others, including deferred repayments and no margin calls. Doyle said the short-sales scheme between the bank and Barrick appears to be the proverbial "money for nothing."
"Over the past five years, J.P. Morgan Chase loaned gold to Barrick at approximately 1.5 percent; sold the gold into the market, and invested the dollar proceeds at approximately 6.5 percent; then paid both the proceeds from the sales and the 5 percent interest differential to Barrick whenever it repaid any of the borrowed gold. During a period when the price of gold dropped by more than 25 percent, Barrick's annual operating cash flow increased by more than 400 percent."
"In 1983, Barrick was a start-up with a single mine in Canada, a founder with no experience in the gold business, and principal investors from Saudi Arabia. Today, through a combination of market manipulation and a 1992 transaction that the U.S. secretary of the interior described as 'the biggest gold heist since the days of Butch Cassidy,' Barrick has amassed off-balance sheet assets that are worth more than the market capitalizations of the next five biggest gold mining companies in the world combined," said Doyle.
Doyle explained that "Blanchard and Co. was founded on the belief that gold and other tangible assets are essential to proper portfolio diversification. However, because of the illegal manipulation of its price, we advised our clients to avoid gold like the plague until such time as the free market laws of supply and demand were allowed to dictate the price. We believe that the anti-trust lawsuit filed today will stop the illegal suppression of the price of gold and other hard assets, and return them to their roles as stores of value and financial insurance."
The suit was filed by the law firm of Jones, Verras & Freiberg LLC of New Orleans in the U.S. District Court for the Eastern District of Louisiana. It is document number 02-3721 Section C, Blanchard and Co. Inc. v. Barrick Gold Corp.; J.P. Morgan Chase & Co.; and ABC Companies. A web site is being set up to provide ongoing information,

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