The best defense is a good offense. With that as a guiding light, and essentially claiming that the government stole 10 uncirculated 1933 $20 gold pieces from them, the heirs of Philadelphia jeweler and sometime coin dealer Israel Switt filed suit Dec. 5 in U.S. District Court for the Eastern District of Pennsylvania. They demand return of the coins or, in the alternative, significant but unspecified damages.
Last time a 1933 $20 gold piece was sold, in 2002, the U.S. Mint and London, England, based dealer Stephen Fenton split the proceeds from a single-lot auction run by Sotheby?s and Stack?s that yielded over $7.59 million, plus a $20 fee to ?monetize? a coin that the government claims is the only one in private hands that can be lawfully owned.
There have been other sales of the 1933 Saint, none recently and, if the government is to be believed, all illegal.
Handling the new lawsuit is Barry Berke, whose Kramer, Levin law firm in New York City also successfully represented Fenton in a six-year battle with the feds over ownership of the rare gold coin, one of about 445,000 minted in 1933. The government claims none were lawfully released into circulation.
The 31-page complaint, and two-page summons, marks the conclusion of events in which Joan Langbord, Switt?s daughter, and her two sons, Roy and David, handed over 10 of the 1933 double eagles to the U.S. Mint to authenticate, only to have the feds declare them genuine and then announce that since they were government property, they would be retained, not returned.
Story of the seizure
In 2003, the suit alleges, Mrs. Langbord, now 76, the daughter of Switt (who himself died in 1985), discovered the coins in a safe-deposit box that had belonged to her parents. Langbord, acting through her lawyer, voluntarily notified the Mint of the extraordinary discovery and asked that it be authenticated.
Mint officials took possession, and then spent about nine months resolving jurisdictional issues with the Secret Service and examining the coins before concluding that they were genuine ? and then claimed that since they were always government property, the government had no intention of returning them to the family.
The well-researched lawsuit, which advances several different and probably inconsistent legal theories, has been assigned to U.S. District Judge Michael M. Baylson and will be heard in the federal courthouse on Independence Mall in Philadelphia, across the street from the Mint. The location is also just blocks away from place that the coins were manufactured in the first place, and where Switt presumably acquired them.
When the coins went in to the Mint for authentication with a lawyer?s letter asking for assistance, it took Dr. George Hunter, the Mint?s technological guru, months to examine them. But on Aug. 11, 2005, he reached his conclusion and the Mint reached its position as well: the coins were genuine, but would not be returned. The claim: they are illegal to own.
The Mint announced the hoard, and the seizure, on its Web site, where only a short time before they had trumpeted how the 1933 $20 was a unique coin that they ?legalized? in time to sell it through the Sotheby?s-Stack?s auction sale.
Presently, the coins have been shipped to Fort Knox, Ky., where they are in the secure gold depository facility along with the remnants of millions of gold coins struck prior to 1933, and then melted after a Presidential order by FDR that essentially recalled all but numismatic pieces, then termed ?rare and unusual? coin.
They emerged to be displayed at the American Numismatic Association convention in Denver last Summer ? 10 1933 double eagles encased in plastic ? and then went back to the secure Fort Knox.
Not the first lawsuit over a ?33 $20
With the coins in custody, the Langbord family?s remedy was either to acquiesce or to sue the government. Lawyer Berke claims his clients did the right thing in notifying the government of the hoard and is equally adamant that they are entitled to keep the coins. Hence the lawsuit.
Actually, there could have been two lawsuits. The government could have sought a declaratory judgment to justify its seizure actions. They?ve done that before ? several times, in fact ? ironically involving the same described 1933 $20 coins. Berke?s legal papers make that point.
The government successfully has seized or received coins from James A. Stack, J.F. Bell, F.C.C. Boyd and others, and been involved in extensive litigation over several of them.
All of the ?33 $20s, by the way, are tied to Switt, who knew value when he saw it, even during the Great Depression.
Back in 1947, L.G. Barnard?s coin was seized by the government and litigated in U.S. District Court in Tennessee on a theory of Replevin, or returning property that the claimant believes he has superior title to. The government had the coin, which it seized from the collector, who claimed he was an innocent purchaser for value.
That court held that Uncle Sam could be Uncle Scrooge and keep the coin without compensating Barnard. (U.S. v Barnard, W.D. TN 1947). Berke cited this case, too, as did a law review article that I wrote in the late 1970s, suggesting that there might be a different result when private gold ownership restrictions changed.
In the 1950s, James A. Stack, a well-known collector who is completely unrelated to the New York rare coin dealership and auction firm with the same name, also was involved in a governmental seizure of a 1933 $20. He sued, in state court and federal court in New York, and lost (Stack v Strang, 2d Cir. 1951; Sup. Ct. NY 1953).
Berke didn?t cite this example, perhaps because Stack turned the coin in voluntarily, but same result from the suit.
Berke?s clients brought several different counts, including a federal tort claim for the value of the goods seized. That sets off numerous battles, not the least of which is how much the 1933 is worth.
As a single specimen rarity, $7.59 million was its price in 2002. What 10 more are worth apiece is anyone?s guess, though experts could reason through analogy. The coin is so famous that it could be a higher price, or a lower one.
Regardless, it will be a fight ? and many of the arguments raised will be those that applied to the Farouk specimen, a case that was prepared for trial but which settled before much of the ammunition was revealed to the public.
Why are some considered legal?
More than 400,000 of the 1933 $20 gold pieces were produced by the U.S. Mint at Philadelphia in 1933, evidently after the Roosevelt inauguration on March 4, but before one of the critical aspects of controlling the Depression, and the American economy went into effect ? seizure of gold to increase the nation?s bullion reserve. The confiscation order took place about a month after FDR took the oath of office.
The Mint always claimed that none of the coins was ever placed into circulation, and in the 1940s vigorously sought to go after the 1933 $20 whenever the coin went public. This included the Flanagan specimen, the J.F. Bell coin and the previously mentioned Barnard and James A. Stack specimens.
More recently, in 1996, the government sued Fenton and coin dealer Jasper ?Jay? Parrino after a sting operation brought criminal charges (later dismissed), seizure of the Farouk coin and a halt to a $1.5 million private sale. (Fenton had acquired the coin in London in 1 995.)
In all, until the latest confiscation of 10 Langbord-Switt specimens, the Mint has seized at least nine other specimens of the 1933 $20 gold piece ? making the only ?legal? ones in the government?s view the specimens held in the Smithsonian Institution national coin collection in Washington, where it is on display, plus the one sold at auction (the Farouk specimen) in 2002.
In the late 1930s and early 1940s, a number of specimens were traded on the sly, often at relatively high prices. The beginning of the end came when one example of the ?33 $20 appeared as Lot 1681 in the Col. John W. Flanagan sale sold by Stack?s March 25, 1944.
Flanagan had purchased the coin for his collection for $2,200, equivalent to about $25,000 in today?s dollars. At around the same time, L.G. Barnard purchased a specimen from J.F. Bell. Stack?s publicized the sale, calling it ?Excessively rare and in great demand.?
The Flanagan coin was seized by the Secret Service, no compensation was offered, and the coin reportedly melted. At the time of its proposed sale, Stack?s claimed in the auction catalog to know of eight or ten pieces that had been sold privately. One cataloger queried as to whether they may have been ?all different??
David W. Akers, the respected expert on gold coins, picks up the story. ?According to Abe Kosoff, Treasury Department agents then asked various coin dealers for the names and addresses of collectors to whom they had sold 1933 double eagles. Kosoff, and possibly others, preferred to contact their customers privately, return their money, and then turn over the returned coins to the agents.?
In 1952, Col. Gamal Abdul Nasser led a coup d?etat against Egypt?s King Farouk, deposing him and sentencing him to a life in exile. (He died in Italy in 1965 at the relatively young age of 45.)
As late as 2001, his three daughters were still litigating with the Egyptian government over a palace.
Nasser?s provisional government seized all of these assets and ordered that they be sold for the benefit of the people of Egypt. Included in the items seized: about 8,500 coins (comprising 2,798 lots), some of which were offered for sale in 1954 as ?The Palace Collections of Egypt Catalogue of the Highly Important and Extremely Valuable Collection of Coins and Medals.?
One lot offered a complete set of double eagles, 1850-1933. John Jay Pittman, later a president of the American Numismatic Association, went to Egypt for the sale together with Abe Kosoff, Hans M.F. Schulman and many others. (Kosoff and Schulman had an unusual credit arrangement, since they had sold Farouk many coins, still unpaid for, that were being auctioned off; Pittman had to pay pure cash.) Pittman reflected years later how astonishing it was to see a complete collection of double eagles with dates and mintmark runs from 1850 to 1933.
According to Polly Pittman, his daughter, the 1933 coin was removed from the lot at Pittman?s suggestion because of the problematic history that was apparent by 1954 ? the government had, after all seized nine coins from private collectors and destroyed them. Pittman wanted to buy some of the coins, but not the problems associated with the 1933 $20.
(What many of the Americans did after they bought these larger lots was buy, sell and trade among themselves so that each got some portion of what they wanted in the first place ? a task made easier by the removal of the 1933 $20).
The Farouk coin was different from the other coins seized, however ? at least in one view. This was a coin whose pedigree had an impact on American-Egyptian international relations, and whose export from the United States was documented ? though in difficult-to-access documents.
Those facts, however. would not come out for nearly 50 years, and still remain largely hidden. But other facts, not previously known, affect the government?s claim that the coins never officially entered circulation ? as if something labelled money is anything other than completely fungible, which is its primary intent.
Collecting any gold used to hold risk
The hazards of holding gold were learned by millions of Americans in 1933 when they awoke to find that President Franklin D. Roosevelt had essentially ordered gold nationalized, and Treasury Secretary Henry Morgenthau had prohibited private gold ownership of all but ?rare and unusual coin.?
By the time that the Gold Reserve Act of 1934 was passed, title to all gold bullion, gold coin and gold notes (including Federal Reserve Notes) was taken from the American people, not to be in their hands again for two generations, until 1974. (The effective date was actually Dec. 31, 1974, though most associate it with the coming of the new year, 1975).
Historically, the Mint claimed that none of the 1933 double eagles coins was ever placed into circulation, and that none had been authorized for release from the Mint ? but the most recent double eagle coin case involving Fenton, Parrino and the Farouk coin proved just the opposite.
Farouk case revealed new facts
It showed a pattern of bureaucratic deceit that spanned over five decades and of conduct that was contemptuous of the legal system, not to mention the collecting public. In an undated letter from the secretary of the Treasury to the secretary of State, the Treasury chief represented the coin to be ?the only one of its kind in the hands of the general public.?
Evidently, King Farouk?s agents located the coin for him in the 1940s, and he made application for it, through diplomatic channels, to be exported from the United States to Egypt.
This request went to Nellie Tayloe Ross, director of the Mint during the entire Roosevelt and Truman Administrations, a period of some 20 years. Ross received the coin along with a request that it be authorized for export as a ?rare and unusual? coin.
Coming in wartime, when Egypt was a badly needed ally in North Africa, it was the request of a young king (Farouk was just 23 in 1943) and it was well known that he pursued all of his collections diligently. This appears to be the reason that a coin export license was given him.
Fenton, a British national who acquired either the coin itself or the rights to it two generations later, ultimately tried to sell it in the United States, and got caught up in a sting operation worked up by the Federal Bureau of Investigation.
His counsel, Berke, proved the government?s duplicity in this when he made civil discovery demands on the Mint in the litigation. (The government had both criminal and civil charges pending against Fenton, and they went on for years at great expense.)
Fenton obviously suspected that the coin was Farouk?s, and the information must have been from more than a catalog description, since Sotheby?s 1954 Palace Collection sale offered the 1933 coin as part of a larger single lot constituting a late-date starter set of double eagles, 1924-1933.
Pursuant to the Freedom of Information Act and Rule 26 of the Federal Rules of Civil Procedure, Fenton?s lawyers were entitled to all of the information that the government had, pro and con on the case ? in order to prevent trial by ambush or surprise.
They demanded documents that had been in dead storage for decades, and one of the surprising results is that they found official Treasury Department documents dating to the tenure of Mint Director Ross which referred to the 1933 $20 gold piece and an export license issued for Farouk.
One can only imagine the diplomatic intrigue that was going on; Farouk was a playboy, but a potential ally in the struggle for Middle-Eastern hegemony. The actual export license itself has never been found, Berke confirmed to me in a Jan. 30, 2001, interview, but the documentary evidence refers to it, and shows that the Treasury Department issued it ? License No. TGL-11-170 ? thus acknowledging that the government?s position, then, was that the coin could be sold and exported.
Ross sent the coin to Theodore Belote of the Smithsonian national collection, to examine it and determine if it was ?rare and unusual,? the criteria for permitted ownership. He nodded in the affirmative, and Ross authorized the issuance of Export License TGL-11-170 in March 1944.
Dr. Leland Howard, acting director of the Mint, later tried to gloss over this action, but the fact remains that an export license was issued to Farouk, the coin traveled to Egypt, was curated into his collection and eventually was seized by the junta that kicked Farouk out.
When Farouk?s collection was then sold by Sotheby?s on behalf of the provisional government, the U.S. government formally asked for the coin?s return. Sotheby?s withdrew the coin (but not the lot ? for the other double eagles, 1924-1932 sold intact). The 1933 double eagle?s fate remained unknown until it surfaced in Fenton?s hands, though rumors of its existence pervaded Europe in the 1970s.
Other seizures that took place were at a different time and under differing rules. Prior to 1974, when private gold ownership was illegal, the coin itself was suspect. Today, as Berke showed, skilled counsel caused a different result ? based in large part on the export permit, which in essence made the government guilty of laches, or lulling someone into a disadvantageous position by virtue of the passage of time, inaction, or as the case here shows, affirmative action.
More than 30 years ago, Hugo Ranta, then assistant general counsel of the Treasury Department, was asked by me in an interview if he believed that the government?s theory behind the 1933 $20 extended to coins like the 1913 Liberty Head nickel, and that the government could seize them. He answered in the affirmative. His theory was that every coin had to be ?monetized? or legally issued by the Mint.
When I put the question to Aubrey Bebee, who owned major rarities of this caliber (the 1913 Liberty Head nickel), and told him that the government thought it could seize the coinage, he said, ?Let them just try!?
Berke cites the 1913 nickel in his 2006 court papers.
What I did not know until very recently is that Ranta, in a Dec. 23, 1953, memo to a Treasury official, had termed it ?politically inadvisable? to ask for the return of the 1933 $20 from Egypt. It turns out it was legally inadvisable, as well.
Legal background of gold ban
In early 1975, I first wrote extensively about the 1933 double eagle in the pages of Numismatic News. My comments then: ?there is still hope that the 1933 coin may once again be owned ? legally. Congress, when it passed the legislation authorizing private gold ownership at year?s end, specifically included language that would negate all of the legal impediments and restrictions to the 40-year-old prohibition. Quite possibly, this could be interpreted as including the ban on coinage and hence ownership of the rare double eagle.?
What was involved in legalizing private gold ownership anew was Public Law 93-373 which provided: ?(b) No provision of any law in effect on the date of enactment of this Act, and no rule, regulation or order in effect on the date subsections (a) and (b) become effective may be construed to prohibit any person from purchasing, holding, selling or otherwise dealing with gold in the United States or abroad.?
If interpreted literally, its meaning is clear: all of the executive orders banning gold are tossed out the window, assuming that they were legally issued in the first place. (Professor Henry Mark Holzer wrote compellingly in the Brooklyn Law Review in 1975 that the ban on gold ownership itself was an illegal action by FDR.)
Origins of the legal prohibition against owning the 1933 $20 gold piece date back to 1917, when Congress passed a ?Trading With the Enemy Act? that gave the President authority to ban the holding, and disposition, of gold, silver and a plethora of other items and objects.
The aim at that time was to limit trading with Imperial Germany, which was not then at war with the United States (though it would soon be).
Some 16 years later, in 1933, FDR issued Executive Order 6120 (based on the 1917 law) to prohibit private gold ownership except for ?rare and unusual coin,? which was then defined by regulation to permit collectors ? numismatists only ? to hold up to four examples of each date and mintmark.
The 1933 $20, according to some sources, had been produced by the Mint, but not yet released into circulation at the time of the Roosevelt decree. An unknown quantity left the Mint ? to this day it is unclear whether they left in other coin bags or were secreted out ? and eventually, some went into collectors hands.
What is clear enough, as a time line shows, is that virtually all of the coins known at one time passed through the hands of Israel Switt.
Actions regarding 1933 $20
Here?s a rough chronology of events that is common to all of the 1933 $20 gold pieces, and unique to others. It begins with FDR?s inauguration on March 4, 1933. The following day, the Mint was still shipping out gold coins. On March 6, FDR issued Presidential Proclamation 2039, which declared a bank holiday and incidentally said that payment of gold coins was prohibited.
Between March 15 and March 24, 1933, the first 100,000 1933 double eagles were struck at the Philadelphia Mint. Presumably, the coins Switt subsequently acquired came from this batch ? though who can be sure after 70 years?
On April 5, 1933, FDR issued Executive Order 6102 which required the return of all gold coin with specific exceptions ? specifically ?rare and unusual coin,? of which the 1933 $20 surely qualifies. Next, even as gold ownership is being prohibited, the Mint continues striking.
From April 7-April 27, 1933, some 200,000 1933 double eagles were struck in Philadelphia. Then, from May 8-19, 1933, another 145,500 1933 double eagle Saints were manufactured. Not until Jan. 30, 1934, did the Gold Reserve Act declare right and title to all gold to the federal government ? again excepting rare and unusual gold coin.
Some of the next bit of evidence is hazy, but Mint records show that on Feb. 2, 1934, a quantity of double eagles ? 34 in all ? all 1933 double eagles, were extracted from Assay Holding and added to Vault F, cage 1 holding; or kept in cashier?s vault. another 20 were segregated for U.S. Mint laboratory testing and evidently melted during testing
As is customary, and as the law required, on Feb. 14-15, 1934, the federal U.S. Assay Commission met at the Philadelphia Mint. Records disclose that they examined and tested 446 1933 double eagles (nine were destroyed in testing). On Feb. 20, 1934, 437 1933 double eagles returned to Mint from Assay Commission. Their place of storage: the cashier?s vault
Oct. 2, 1934, is the next milestone date for the Saint-Gaudens designed coin; two 1933 double eagles sent to Smithsonian Collection by George McCann, the Mint cashier, on that date. Then, from Feb. 6-March 18, 1937, thousands of 1933 double eagles sent to refinery for melting
In early February 1937, Israel Switt acquired an unknown quantity of 1933 double eagles through purchase. By Feb. 15, 1937, Switt sold the first one, to well-known Philadelphia coin dealer James Macallister.
There are many intervening events, but one key one is March 30, 1944, when Secret Service Agents Harry Strang and George Drescher interviewed Switt, who admitted that at one time he had possession of nine 1933 double eagles. The agents reported that Switt told them that he had sold five to James Macallister; two to Ira Reed; two to Abe Kosoff ? all well-known dealers.
Switt professed no recollection of his source for the coins; but admitted he had been to Philadelphia Mint frequently in the capacity of a ?gold dealer.?
Focus may be on present, not past
The fight in 2006 may well be whether the coins may be lawfully owned now ? not when they were first acquired.
A starting point in that analysis may well be the Coinage Act of 1965, which retroactively made the Trade dollar legal tender and could have done the same thing to a series of unknown 1933 $20s.
The essence of legal tender is its ability to pass as currency without challenge, without examination as to date, mintmark, errors or otherwise ? i.e., it has the generic composition of money that is fungible, and completely replaceable, one for the other.
The components of what constitutes ?currency,? the beginning point in legal tender definition, is found in Black?s Law Dictionary (4th edition) as an item which does ?in fact circulate from hand to hand as the medium of exchange.? Typically, it refers to a design, a weight, a metal composition, but nothing more specific.
It may include elements such as legal- tender status as common usage. The first key factor related to the legal-tender status is that which connotes that a coin may be used for all debts, public and private, public charges, duties, taxes and dues.
The coinage of the United States is not a promise to pay (as is currency); rather, it simply is money. Congress took this precise position in 1982 when it revised the U.S. Code to make Title 31 (coin and currency) positive law. H. Rep. No. 97-651, 97th Cong., 2nd sess. 148 (1982) (31 USC A§5103) makes this clear.
The ?power to ?coin money? ... is a prerogative of sovereignty,? something that the U.S. Supreme Court enunciated more than 80 years ago in the case of Ling Su Fan v. US, 218 U.S. 302, 310 (1920).
While the Internal Revenue Service has noted that ?currency in its usual and ordinary acceptation means gold, silver, other metals,? it notes, additionally, that ?paper [may be] used as a circulating medium of exchange.?
So the battle of the 1933 double eagle starts anew. This time, a trial is likely, and as it progresses in stages, it seems likely that numismatic secrets of another era will hold its key. In the meanwhile, the government has 60 days to respond to Berke?s complaint.