''Midas'' commentary for May 31, 2001

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PLAINTIFF'S QUALIFIED OPPOSITION TO REPLY MEMORANDA OF
PAUL O'NEILL, ALAN GREENSPAN, AND THE BIS IN SUPPORT OF
THEIR MOTIONS TO DISMISS

The plaintiff, Reginald H. Howe, submits this qualified
opposition to the separate motions of Paul O'Neill,
Alan Greenspan, and the Bank for International
Settlements for leave to file reply memoranda in
response to the plaintiff's consolidated opposition to
all defendants' motions to dismiss, including theirs.
Should the Court allow the filing of the memoranda
submitted with these motions, the plaintiff
respectfully requests that the Court also accept this
qualified opposition as the plaintiff's response
thereto.

Statement of the Case

From March 15 through April 10, 2001, the defendants
filed seven motions to dismiss and two related
procedural motions, all supported by briefs having a
total combined length of 126 pages, including 45 pages
from Messrs. O'Neill and Greenspan and 20 from the BIS
in support of their four motions. On April 19, 2001, in
response to the defendants' entire barrage, the
plaintiff filed a consolidated opposition (cited as
quot;COquot;) of 62 pages. Now, five weeks later, these three
defendants seek leave to file three additional
memoranda totaling 23 pages.

When reply briefs are allowed as of right in the
appellate courts, they must ordinarily be filed within
14 days of the principal briefs to which they respond.
Although these proposed reply memoranda thus stretch
reasonable limits of both total combined pages and time
for filing, the plaintiff does not urge their rejection
on these grounds if the Court believes that they might
nevertheless be helpful. However, since these reply
memoranda inaccurately, incompletely, or erroneously
describe important aspects of the matters addressed,
the plaintiff believes that they are unlikely to assist
the Court unless responded to in a way that not only
corrects these deficiencies but also may bring certain
key issues into better focus. Accordingly, that is the
purpose of this qualified opposition.

Argument

I. THE O'NEILL MEMO TRIES TO OBSCURE THE BASIC LEGAL
AND CONSTITUTIONAL ISSUE, WHICH IS WHETHER THE
SECRETARY OF THE TREASURY CAN USE THE EXCHANGE
STABILIZATION FUND TO MANIPULATE GOLD PRICES.

With respect to the Exchange Stabilization Fund, the
plaintiff does not rest his claim for damages against
former Treasury Secretary Summers simply on his use of
the ESF quot;to deal in goldquot; (O'Neill memo at 2), which
under certain circumstances and for certain reasons may
be permissible (CO 29), but on his use of the ESF for
the express purpose of manipulating gold prices. Nor
does the plaintiff assert quot;that the Constitution
forbids the government from acting to depress the price
of goldquot; (O'Neill memo at 3).

What the Constitution does forbid is what Congress has
not done: delegate to the president and the secretary
of the treasury authority to set the dollar gold price
in their uncontrolled and absolute discretion.

Far from questioning quot;the power of Congress to regulate
the dollar value of goldquot; (O'Neill memo at 3), the
plaintiff affirms this power. He asserts: 1) the
Constitution vests in Congress exclusive power to
determine the gold weight or value of the dollar (CO
25); 2) since 1971, Congress has by various acts
mandated that the gold value of the dollar be
determined solely by free market forces (CO 25-27); and
3) because of these actions by Congress, the president
and the secretary of treasury lack even colorable
authority to use the Exchange Stabilization Fund --
established in 1934 for the purpose of helping to
maintain the fixed $35/ounce gold price set by Congress
at that time -- to intervene in today's quot;freequot; gold
market for the purpose of manipulating, suppressing, or
otherwise affecting dollar gold prices (CO 27-29).

The O'Neill memo does not address any of these points,
and its silence on the last point is particularly
significant. Neither Secretary O'Neill nor the Justice
Department appears willing to argue publicly in
unambiguous language that former Treasury Secretary
Summers had authority, or at least a reasonable basis
to believe that he had authority, to use the ESF to
manipulate the free market price of gold. This
argument, could it be convincingly made, would undercut
the plaintiff's damage claims against Mr. Summers
because executive branch officials have a qualified
immunity for actions taken in a reasonable though
mistaken belief that they are constitutional (CO 24).
Failure to make this argument, however, supports the
plaintiff's assertion that Mr. Summers knew or should
have known that he lacked authority to manipulate gold
prices (CO 29-31).

The plaintiff's damage claims against Mr. Summers rest
on two causes of action that are also misstated in the
O'Neill memo.

The first arises under the Fifth Amendment, which
prohibits government officials from invading private
property rights without due process and supports a
direct private right of action for damages against
those who do so while acting beyond or abusing their
authority. Apparently because of the wealth of case
authority supporting this proposition (CO 23-24), the
O'Neill memo asserts that quot;Howe relies not on the Fifth
Amendment, but on Article 1, s. 8, of the Constitutionquot;
and that quot;there is no judicial precedent recognizing a
private right of action under [this provision, which
grants Congress the power, inter alia, quot;To coin Money,
regulate the Value thereof, and of foreign coin.quot;]

If Congress, acting under Article 1, s. 8, fixed the
dollar at a specified weight of gold and the secretary
of the treasury thereafter took action to cause the
plaintiff to receive fewer dollars for his gold than
the congressional parity required, the plaintiff
asserts that he would have a direct cause of action
against the secretary under the Fifth Amendment. That
is essentially what has happened in this case, except
that instead of setting a fixed dollar gold price,
Congress has mandated that gold should trade at free
market prices, which the plaintiff alleges were
manipulated downward by former Secretary Summers
through the ESF.

The plaintiff's second cause of action against Mr.
Summers arises under the Sherman Act for per se illegal
price fixing (CO 43-44). By eliminating any official
monetary role for gold and making it an ordinary
commodity under U.S. law, Congress made price fixing in
the gold market as wrongful as in any other market and
subject to the same statutory remedies. But here again,
instead of addressing the claim actually made by the
plaintiff, the O'Neill memo (at 3-4) sets up a
completely irrelevant straw -- i.e., that the plaintiff
must somehow be asserting a private right of action
under 31 U.S.C. s. 5302, which he is not, and then
proceeds to knock it down with recent Supreme Court
decisions limiting implied rights of action for
damages.

II. NO LIMITATIONS ON JUDICIAL REVIEW IN THE
ADMINISTRATIVE PROCEDURES ACT OR ELSEWHERE BAR THE
PLAINTIFF'S CLAIMS FOR INJUNCTIVE RELIEF TO PREVENT
MANIPULATION OF GOLD PRICES BY THE FED OR ESF BECAUSE
THESE CLAIMS ARISE UNDER THE CONSTITUTION AND GO TO THE
EXISTENCE OF AUTHORITY, NOT TO THE EXERCISE OF
DISCRETIONARY AUTHORITY.

Although for different reasons, both the O'Neill and
Greenspan memos argue that the plaintiff cannot obtain
injunctive or other declaratory under the
Administrative Procedure Act, 5 U.S.C. s. 701 et seq.
The APA is of no relevance to the plaintiff's claims
for damages, but does provide a basis for injunctive or
declaratory relief against Messrs. O'Neill and
Greenspan acting in their official capacities (CO 24).
The O'Neill memo (at 5-7), relying on the provision in
31 U.S.C. s. 5302(a)(2) that decisions of the secretary
under the ESF quot;are final and may not be reviewed by
another officer or employee of the government,quot; argues
that s. 701(a)(1) of the APA, which makes it
inapplicable to cases where quot;statutes preclude judicial
review,quot; precludes its application in this case. If a
district court judge is an quot;officerquot; of the United
States within the meaning of s. 5302(a)(2), so is a
justice of the Supreme Court, and the provision would
preclude review even by that court of decisions of the
secretary under the ESF, including claims of
constitutional violations such as the plaintiff makes
in this case.

In Califano v. Sanders, 430 U.S. 99, 109 (1977), the
Court recognized quot;the well-established principle that
when constitutional questions are in issue, the
availability of judicial review is presumed, and we
will not read a statutory scheme to take the
`extraordinary' step of foreclosing jurisdiction unless
Congress' intent to do so is manifested by `clear and
convincing' evidence.quot; Indeed, where a statute must be
read to foreclose judicial consideration of
constitutional questions, the constitutionality of the
statute itself is brought into question. Johnson v.
Robison, 415 U.S. 361, 366-367 (1974). Accord, Webster
v. Doe, 486 U.S. 592, 603 (1988), and cases cited.
Accordingly, the word quot;reviewedquot; in 31 U.S.C. s.
5302(a)(2) should not be construed to include judicial
review, but only review by other officers of the
executive branch, such as inspector generals, auditors,
and the like.

Nor is there any practical need to construe s.
5302(a)(2) to bar all judicial review. As the O'Neill
memo (at 7-9) points out, s. 701(a)(2) of the APA also
makes it inapplicable to quot;agency action ... committed
to agency discretion by law.quot; Thus, as the O'Neill memo
argues, the discretionary and foreign policy judgments
pursuant to which the ESF conducts interventions in the
foreign exchange markets may well be inappropriate
subjects for judicial review.

These, however, are activities for which the ESF
possesses well-recognized authority (CO 39). The gold
market is not the foreign exchange market. The
fundamental question in this case does not relate to
the exercise of discretionary authority admitted to
exist; it relates to whether any authority exists that
would permit the ESF to intervene in the gold market
for the purpose and with the intent of affecting gold
prices.

The O'Neill memo (at 7) correctly notes that 31 U.S.C.
s. 5302 requires the ESF to operate in a manner
quot;consistent with the obligations of the Government in
the International Monetary Fund on orderly exchange
arrangements and a stable system of exchange rates.quot;
However, as the plaintiff has previously pointed out
(CO 26), Art. IV, s. 12(a), as amended, of the IMF's
Articles of Agreement commits members to quot;the objective
of avoiding the management of the price, or the
establishment of a fixed price, in the gold market.quot;

The Greenspan memo (at 3-5) appears to argue that the
plaintiff's allegations of Mr. Greenspan's (or the
Fed's) involvement in manipulation of gold prices are
insufficient to establish a basis for relief against
Mr. Greenspan in his official capacity under the APA.
The factual bases for the plaintiff's claims in this
regard have been covered previously (CO 11, 13-19, 29-
31). In this connection, although the alleged statement
of Bank of England Governor and BIS director Eddie
George set forth at paragraph 55 of the complaint has
received wide circulation on the Internet and
elsewhere, the plaintiff has yet to be made aware of
any denials. In any event, there are none in any of the
defendants' briefs, where among all the flak about the
plaintiff's allegations lacking specificity, there is
not a single mention of this statement.

III. IF THE FED DOES NOT HAVE TO PURCHASE BANK FOR
INTERNATIONAL SETTLEMENTS SHARES, ITS CONTINUED
MEMBERSHIP IN THE BANK CAN REST ONLY ON CAPITAL
INVESTED IN THE BIS BY THE FORMER PRIVATE HOLDERS OF
THE AMERICAN ISSUE BUT NOT RETURNED TO THEM DUE TO AN
UNFAIRLY LOW FREEZE-OUT PRICE.

The proffered Greenspan reply memo (at 1-2) argues that
there is no plan for the Fed to acquire any shares in
the BIS, and that the Fed can continue to vote the
shares of the American issue even though they now
reside in the treasury of the BIS.

Every central bank member of the BIS has always had
capital invested in the Bank by one of two methods or a
combination thereof: directly for its own account or
indirectly through shares publicly subscribed in its
home country. Were capital investment in the Bank not
required by one or the other of these methods, there
would have been no need to subscribe the American issue
in the United States. The shares could have been sold
anywhere or to other central banks and the votes
assigned to the Fed. If as a result of the freeze-out,
holders of the American issue were paid full and fair
value for their shares, there is no current capital
investment in the Bank on account of these shares,
notwithstanding that they are held as treasury shares
instead of being canceled.

On the other hand, if the private holders did not
receive the full and fair value for their shares, as
the plaintiff contends, then there remains a residual
amount of American capital investment in the Bank that
theoretically could support the Fed's continued
membership. However, in that event, this residual
capital investment has effectively been transferred to
the Fed with no payment therefore to its prior owners,
including the plaintiff. Indeed, by acknowledging that
quot;the right to vote the shares of the American issue is
unrelated to their ownershipquot; (at 2), the Greenspan
memo effectively concedes that the BIS lacked any sound
rationale for discounting the net asset value of their
shares due to their nonvoting status.

In any event, the argument that the Fed cannot purchase
the redeemed shares of the American issue because it is
not currently a quot;central bank shareholderquot; of the BIS
is a largely factual rather than legal assertion, and
thus not determinable on a motion to dismiss. The BIS
treats its Statutes essentially as corporate bylaws,
which it changes or disregards at its whim (CO 20, 54-
55).

In addition to whether the Fed's continued membership
is supported by any invested capital as is the case
with all other member banks, there are other factual
issues regarding the Fed's continued membership which
the plaintiff is entitled to explore: 1) the reasons
for permitting the Fed to remain the only member of the
BIS which has not accepted the jurisdiction of the
arbitral quot;Tribunalquot; (CO 51); 2) the rationale, if there
is one, under which Messrs. Greenspan, McDonough, and
Summers decided to continue U.S. membership in the
quot;newquot; BIS without complying with the constitutional
procedures through which the United States ordinarily
joins public international organizations (CO 31-33);
and (3) the efforts, if any, that Messrs. Greenspan and
McDonough made to fulfil their fiduciary duties to
private holders of the American issue in connection
with the freeze-out (CO 45-48), particularly since they
now concede that the nonvoting status of these shares
was not a valid reason for discounting their net asset
value.

IV. THE ARBITRATION TRIBUNAL IS NEITHER DESIGNED NOR
CAPABLE OF FULLY AND FAIRLY ADJUDICATING THE ISSUES
RAISED BY THIS CASE.

The BIS reply memo (at 1-3) does not dispute that the
Tribunal, although established as a permanently sitting
body under the relevant treaty, did not exist when this
case was filed on December 7, 2000, and thus was
unavailable to the plaintiff at that time (CO 53). Nor
does the BIS anywhere suggest that the antiquated
procedural rules of the Tribunal meet modern due
process requirements, particularly for a case of this
type (CO 55-56).

Its argument (BIS reply memo at 3-6) that the Tribunal
should be treated as presumptively unbiased because it
was reconstituted in January 2001 by quot;governmentsquot; --
not by the central banks of those governments acting at
the request of the BIS -- is disingenuous. Two of those
governments, France and Belgium, have a direct interest
in the freeze-out since parts of their BIS issues were
involved. As for the United Kingdom, this case puts
squarely at issue the true reasons for the British gold
auctions, which the Bank of England has carried out
pursuant to orders from the British Treasury apparently
emanating directly from the prime minister (CO 12-13,
42-43). Whatever the theoretical possibility that the
Tribunal might hear some other case, it was recreated
after more than a half century of desuetude expressly
to hear disputes arising from the freeze-out.

With respect to the scope of the arbitration provision,
the BIS does not and cannot show: 1) that the U.S.
Federal Reserve or Messrs. Greenspan or McDonough are
in any way subject to the jurisdiction of the Tribunal
(CO 51); or 2) that the Tribunal has jurisdiction to
render judgment on any of the plaintiff's claims
relating to price fixing (CO 43-44, 54), securities
fraud (CO 44-50, 54), the constitutional requirements
for U.S. membership in the new, restructured BIS (CO
31-33, 54), or the misuse of the BIS by American
officials to manipulate gold prices (34-35). Other
arguments raised in the BIS reply memo relating to the
scope of the arbitration provision and the factual
disputes relating thereto are sufficiently covered in
the plaintiff's consolidated opposition and affidavit
filed in support thereof.

Conclusion

For the foregoing reasons, the plaintiff suggests that
the reply memoranda submitted by Messrs. O'Neill,
Greenspan, and the BIS are unlikely to be of much
assistance to the Court, takes no position on whether
the Court should grant the motions for leave to file
them, but requests that if leave is granted, the Court
also accept this qualified opposition as the
plaintiff's response thereto.