Last week, Senator Robert Menendez (D-NJ) was charged with bribery, honest services fraud and extortion among other corruption-related crimes, marking a second such indictment since 2015.
The powerful Senator, who until the indictment hit, chaired the Foreign Relations Committee, is accused of accepting hundreds of thousands of dollars worth of bribes and gifts in exchange for using his influence and connections to protect and secure favorable treatment for three businessmen with ties to the Egyptian government. The alleged bribes include cash, a luxury car, help with a home mortgage, compensation for low-or-no-show jobs and, gold bullion.
“Menendez performed a web search for ‘how much is one kilo of gold worth.’ As discussed herein, multiple gold bars provided by [co-defendant Fred] Daibes were found during the court-authorized June 2022 search of Menendez and [co-defendant and Menendez’s wife] Nadine Menendez’s residence,” the indictment reads.
(Spoiler alert: one kilo of gold is worth an awful lot of money.)
The Menendez prosecution isn’t the first time numismatics and/or bullion have played a central role in a court case. Here are some of the more notable recent examples:
Langbord v. United States Department of the Treasury (2011-2017)
With the stroke of a pen, President Franklin D. Roosevelt inadvertently created one of the rarest and most valuable coins in numismatics history.
In April 1933, to combat the ongoing Depression, Roosevelt signed Executive Order 6102 aimed at ending the excessive hoarding of gold coins, bullion and certificates. As we’ve seen, the hoarding of precious metals can distort their market value. Hoarding was also seen as a factor in worsening the Depression and stagnating economic growth. The order required all U.S. citizens to return most of the gold in their possession to the government or face criminal charges.
As such, the U.S. Mint halted production on the 1933 Saint-Gaudens gold double eagle and destroyed them before they could be officially released. However, a handful of 1933 coins were stolen, making them extremely valuable (as well as illegal to own or sell).
One of them ended up in King Farouk’s famous collection and was smuggled out of Egypt after the monarch was deposed in 1952. That coin may or may not have ended up in the possession of Stephen Fenton, a British coin dealer (Fenton said it was the Farouk coin, but it was never definitively proven). Fenton was arrested but charges were eventually dropped. He still faced civil forfeiture proceedings, and in 2001, he and the government made a deal so that the coin could be sold, with Fenton and the government splitting the profit.
And make a profit it did. The coin, which remains the only 1933 double eagle that is legal to own, sold for a then-record $7.59 million in 2002 and a current record $18.9 million in 2021.
So when Joan Langbord found a cache of ten such coins in 2004, she figured she could make a deal with the government similar to the one Fenton made. The coins had been hidden away in a safety deposit box belonging to her late father, famous coin dealer Israel Switt — a man long suspected of helping that unscrupulous Mint employee smuggle the coins out in 1933.
The feds, however, had considered the Fenton/Farouk coin a one-off since the monarch had been granted an export license for it, strengthening Fenton’s argument that he possessed it legally. That wasn’t the case for the Langbord coins, so the Mint argued, instead that the coins were their property and should be returned to their custody without the need for forfeiture proceedings.
The Langbords challenged that and the ensuing litigation took the better part of ten years to resolve. The long-running case had plenty of ups and downs. The Langbords lost at trial in 2011 but four years later, a Third Circuit Court of Appeals panel reversed the verdict after finding that the government failed to follow the Civil Asset Forfeiture Reform Act of 2000 and ordered the coins be returned to them.
The government appealed, and the following year, the Third Circuit Court of Appeals reheard the case en banc and reversed the panel’s decision, awarding the coins to the Mint.
“Taking all of this evidence together, the Government showed that Switt knew that the 1933 Double Eagles were embezzled or stolen and that it was illegal to possess them,” Judge Thomas Hardiman wrote for the majority. “Yet they were stored in a safe-deposit box for decades until his daughter disclosed their whereabouts soon after the Fenton-Farouk coin was auctioned for $7,590,020.”
The Supreme Court declined to hear the case, and that was that. The coins remain locked up in Fort Knox — time will tell whether the government will put any up for sale.
Time will also tell whether any more 1933 double eagles come to light. At around the same time as the Langbord case, the Mint took a similar hardline stance when the son of a former Mint official and a coin dealer tried to sell a 1974-D aluminum cent, a proposed coin that was cancelled and never officially released. In 2016, the two would-be sellers surrendered the coin to the Mint to settle their ongoing lawsuit.
Given the success the Mint has had at getting their coins back without having to split any proceeds with anyone, it’s possible that we won’t see any new specimens of these and other famous-yet-illegal coins (it’s probably why, if the mythical 1964-D Peace Dollar is out there, it has yet to see the light of day). After all, who has the time and resources to get into a long, drawn out lawsuit against the Mint?
Coingate Scandal in Ohio (2005)
How did rare coins bring down the governor of Ohio and several other powerful members of the state Republican Party?
The roots of the Coingate scandal date back to 1996, when Ohio enacted a new law relaxing restrictions on the types of funds and investment products state agencies could invest in. Before that, agencies could only invest in bonds — a safe, reliable, stable, low-risk/low reward vehicle.
With Ohio now open for business, lots of investors and brokers lined up to offer their services. One of them ended up being Tom Noe, an Ohio GOP fundraiser and rare coin dealer.
Noe’s numismatics credentials were impressive; he chaired the Ohio Commemorative Quarter Program Committee and was nominated to the U.S. Mint’s Citizens Coinage Advisory Committee (CCAC) by U.S. Speaker of the House Dennis Hastert, becoming chairman in 2004.
Hastert wasn’t the only political connection he had. Noe served as the chairman of George W. Bush’s 2004 presidential campaign in Northwest Ohio. Considering the 2004 election was decided by the Buckeye State, that meant Noe and others in the state had become big-time players in the Republican Party.
His interests in politics and coins would end up being his undoing. In 1998, Noe set up an investment fund and got the Ohio Workers’ Compensation Fund to invest $50 million. According to the Toledo Blade, which broke the story, Noe and his consortium of dealers and numismatic experts would invest in rare coins on behalf of the fund and then use their experience and connections to sell them at a profit, with the state getting 80% of the returns.
Typically putting its billions to work in the stock and bond markets, the bureau decided in 1998 to take a portion of its reserves and invest in rare coins. Among the bureau’s holdings: a 1792 silver piece estimated to be worth $2 million as well as 18th century nickels and pennies.
The Toledo Blade, “Ohio agency sinks millions into rare coins,” April 3, 2005
The Blade pointed out that this type of investment was unprecedented and raised all sorts of red flags. On the one hand, investing in rare coins seemed to be similar to investing in gold, silver, and other precious metals. Brokers and financial advisers will often invest in these types of commodities, either to diversify a portfolio or as a hedge against stocks and bonds.
But rare coins differ from bullion in the sense that the former’s market value is far more subjective than the latter. For instance, a gold bar (like the one found in Senator Menendez’s house) is worth whatever the market says it’s worth. An 1804 silver dollar, however, could be worth anywhere from $1.44 million to $7.68 million, depending on a host of factors, including grade, backstory, and how many wealthy people happen to show up to the auction.
Additionally, there were lots of ethical questions about Noe’s coin fund. Would Noe and his partners have to disclose its inventory of coins? Could the state use independent appraisers to grade and value the coins in their portfolio? Should Noe and his dealers be prohibited from buying coins using state funds for fear that they might sell them to each other or their friends (presumably at a discount).
Those fears proved to be well founded. In April 2005, The Blade reported that two coins, an 1855 $3 gold piece and an 1845 $10 gold eagle, had gone missing in 2003. The coins, worth approximately $300,000, had been mailed to an appraiser but sent back, only for the coins to disappear. State officials and watchdogs got suspicious and started looking into the fund, eventually discovering that $10-12 million had been unaccounted for. In February 2006, Noe and his partner were indicted for fraud, money laundering, theft and other financial crimes. In November of that year, he was convicted and sentenced to 18 years in prison.
Noe didn’t go down by himself, though. Ohio’s Republican governor, Robert Taft III, and several members of his administration, were convicted of crimes arising out of their connections with Noe. For Taft, scion of one of the most prominent political dynasties in America, his career came to a screeching halt as he became the first governor in Ohio history to be charged with a crime while in office.
The scandal also had the effect of giving Democrats a major boost in the 2006 elections — one they desperately needed in a state that has steadily trended Republican since the late 90s. Ted Strickland became the first Democrat to win the governor’s mansion since 1986 (to date, he’s the last Democrat to serve as governor of Ohio). Meanwhile, Democrat Sherrod Brown defeated two-term incumbent Senator Mike DeWine — a seat the former still holds, pending the results of next year’s elections. Democrats also won races for Attorney General, Secretary of State, and Treasurer and flipped a seat in the U.S. House of Representatives.
As for Noe, his sentence was commuted in 2020 by now-Governor DeWine due to COVID-19 concerns. I guess Noe still has friends in high places.
The Liberty Dollar and the Prosecution of Bernard von NotHaus (2009-2011)
When you have an organization called the “National Organization for the Repeal of the Federal Reserve and the Internal Revenue Code” (NORFED), you’re probably going to draw the attention of the authorities — especially the ones in charge of monetary policy, taxation and banking.
In 1998, NORFED founder Bernard von NotHaus of Evansville, Indiana started minting and producing “Liberty Dollars,” private currency that was issued in the form of silver rounds and gold and silver certificates. The currency bore images of the Statue of Liberty, although in 2008, the silver rounds had a bust of then-Presidential candidate Ron Paul on the obverse because of his antipathy towards the Federal Reserve.
“There are people in this country who are fed up with the government, and they’re looking for something different,” Terry Rice, a gun store owner who accepted the currency told Indianapolis Monthly in 2012. “Well, the Liberty Dollar was something different. It’s not like everybody who walked in the door had some in their hand, but when people saw them in the register, they wanted them as change. More than anything, it was an anti-government statement.”
The dollars and certificates were backed by actual silver or gold with one ounce of silver being equal to $20 and one ounce of gold being worth $500. NORFED members could buy Liberty Dollars and use them in commerce with other members at a discount. There was also a multi-level marketing system in place whereby members could get more Liberty Dollars for signing people up and getting them to pay for conferences and classes and whatnot. Von NotHaus and others would later be sued for allegedly running a $5 million Ponzi scheme.
There has been a long history of private currency in this country — for instance, Hard Times Tokens functioned, more or less, as a form of private currency or scrip and several cities in the country have created and used their own monetary systems. More recently, the rise of decentralized cryptocurrencies like Bitcoin, Ethereum and Dogecoin have led to an explosion of interest and investment in alternative forms of money.
What got von NotHaus in trouble with the feds was that his Liberty rounds looked a little too much like actual, authentic Mint-issued coins. There was the inscription of “Liberty” at the top of the obverse that many U.S. coins utilized. There was phrase “trust in God” on the obverse, which was similar to the standard “in God we trust” slogan that is inscribed on all U.S. currency.
And there was the Statue of Liberty design on the obverse that made the round resemble the Peace Dollar or the Platinum Eagle coins that were first issued a year before the Liberty Dollars.
However, despite their misleading appearance, NORFED “Liberty Dollar” medallions are not genuine United States Mint coins, and they are not legal tender.
The advertisements confusingly refer to NORFED “Liberty Dollar” medallions as “legal” and “constitutional.” However, under the Constitution (Article I, section 8, clause 5), Congress has the exclusive power to coin money of the United States and to regulate its value. The United States Mint is the only entity in the United States with the lawful authority to mint and issue legal tender United States coins.
U.S. Mint press release, September 14, 2006
But they weren’t copies of legitimate coins, which is what most people associate with counterfeiting. Instead, federal prosecutors maintained that von NotHaus intended to deceive people into using his Liberty Dollars in commerce in place of U.S. currency. As such, they indicted von NotHaus in 2009 for fraud, money laundering and uttering, passing, and attempting to utter and pass, silver coins in resemblance of genuine U.S. coins. He was convicted in 2011.
“Although Defendant admits to most of the facts alleged, namely, that he designed, minted, marketed, sold, and used the Liberty Dollar coins in commerce, Defendant disputes that his purpose or intent was unlawful,” trial judge Richard L. Voorhees of the U.S. District Court for the Western District of North Carolina wrote in a 2014 opinion denying von NotHaus’ motion for post-conviction relief. “The Defendant maintains that his purpose and intent was, and always has been, to promote use of a ‘local currency’ or ‘private barter currency’ and to repeal the Federal Reserve Act as opposed to attempting to compete with U.S. currency.”
In any event, his conviction was upheld but von NotHaus only ended up serving six months of house arrest and three years of probation — a far cry from the government’s recommendation of 22 years in prison. The sentence was celebrated in right wing circles. “People should be free to compete with government in the production of money, not attacked as criminals and called ‘terrorists,'” George Leef wrote in Forbes.
And von NotHaus gave them more to be happy about. In 2017, he started producing Trump Dollars. He seemed to have learned a lesson from his legal troubles, though. The rounds specifically say “not to be used as current money” and “free speech for political purposes” on the reverse. Guess he doesn’t want to take any more chances.
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