Important News About the Blanchard Case

In my recent interview in Barron's I referred to the lawsuit initiated by Blanchard & Company, the largest coin dealer in the US, against Barrick Gold Corporation and JP Morgan Chase. This action, which was brought under the Sherman Antitrust Act, alleges that Barrick and Morgan were conspiring to fix the gold price. I said in the interview that the impact of this legal action could be "extremely profound because it would suggest the gold price has been low because of price fixing and not because of its own merits or demerits."

There has been an important new development. Morgan/Barrick had requested that the case be dismissed. The judge denied that motion, and Barrick appealed. Its appeal has now been dismissed. The full text of the judge's order denying the appeal has been posted to the Blanchard website that discloses information related to this case, www.savegold.com

A dispatch by Reuters reported in part the following:

"VANCOUVER, British Columbia, Nov 4 (Reuters) - A U.S. court has denied a request from Barrick Gold Corp., the world's No. 3 gold producer, that the court reconsider its ruling that an antitrust case against Barrick may go ahead, the plaintiff in the case said on Tuesday.

The plaintiff, Blanchard and Co., a New Orleans-based coin and bullion dealer, launched a suit against Barrick, as well as financial services giant J.P. Morgan Chase & Co Inc., last December. Blanchard alleged the two companies broke U.S. antitrust laws by colluding to rig the gold price and monopolize trading in bullion.

Toronto-based Barrick and J.P. Morgan tried to get the case thrown out but were unsuccessful. Barrick then tried in September to get the court to rethink its earlier ruling but this too has now failed."

As a consequence of this ruling, this case is now ready to move into the discovery phase. Trial has been set for April 10th, 2004. But here's the important part of this case that in my view is not yet widely understood.

Blanchard has requested an injunction against the defendants. This means that if Blanchard wins the case, the defendants will be forced to cover their short position. I don't know Morgan's position - whether long or short - in gold because it is not disclosed in its financial statements. But according to Barrick's latest financial report, it is short 16 million ounces. If Blanchard prevails - and there is still a long road ahead - it will be interesting to see how the gold market would respond to the buying triggered by the injunction.

Lastly, for the sake of disclosure, I would like to note I've had some discussions with the Blanchard attorneys as a potential expert witness should the case go to trial.

Published by GoldMoney
Copyright © 2003. All rights reserved.
Edited by James Turk

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