PHILADELPHIA (CN) – As a forfeiture trial over 10 rare gold coins valued at roughly $80 million began, the presiding judge told jurors: “This will be infinitely more interesting and fascinating intellectually than anything you will see on TV.” The U.S. Mint calls the 1933 Saint-Gaudens Double Eagles “one of the most sought-after rarities in history.”
A single Double Eagle sold for more than $7.5 million at a Sotheby’s auction in the summer of 2002, making it at the time the most valuable coin ever auctioned.
Augustus St. Gaudens, a sculptor and artist, designed the coin, which many collectors consider the most beautiful U.S. coin ever.
In 1933, during the depths of the Great Depression, 445,500 such coins were struck at the Philadelphia Mint, a few blocks from the Federal Courthouse where the trial is occurring.
Before the coins entered into circulation, however, President Franklin D. Roosevelt ordered the nation’s banks to abandon the Gold Standard and outlawed the use of gold coins as American currency.
The overwhelming majority of the 1933 Double Eagles were melted into gold bars.
Only two, which were sent to the Smithsonian, were supposed to have survived.
But in 2003, the daughter and grandsons of storied Philadelphia jeweler Israel Switt drilled open a safety-deposit box. Inside that box, nestled among Switt’s belongings, sat a gray paper Wanamaker’s department store bag.
In the bag, wrapped in tissue paper, were 10 1933 Double Eagles.
Now, nearly 80 years after the coins were struck, “The government simply wants its coins back,” Assistant U.S. Attorney Jacqueline Romero told jurors in her opening statement on Thursday.
The United States says the coins are stolen property.
“It’s really very simple,” she said. “No 1933 Double Eagles left the Philadelphia Mint through lawful channels.”
A small number – roughly 20 – were pilfered with help from a corrupt Philadelphia Mint cashier, Romero said.
“The only reason for their existence outside the Philadelphia Mint is that they were stolen,” Romero said. “Israel Switt was somehow involved.”
Romero told jurors: “At the close of this case, the government will do exactly what it has done for the last 70 years … and finally bring them home to their rightful owner: the people of the United States of America.”
The Secret Service, charged with protecting U.S. currency, has spent decades trying to track down the missing 1933 Double Eagles.
All the while, Romero said, agents were trying to answer the question: “Who’s the source? Who’s the fence?”
“The search led them to one person: Israel Switt,” she said.
“The distribution chain started here.”
Switt, a jeweler and scrap-metal dealer who died in 1990, was considered the patriarch of Philadelphia’s Jeweler’s Row, where his store remains.
The government says he was also a hoarder of illegal gold.
The October 1929 stock market crash shook Americans’ confidence in the banking system. Fears of total financial collapse precipitated a frenzy of gold withdrawals from U.S. banks.
“There were hundreds of millions of dollars [in gold] literally bleeding from the nation’s banks,” Romero said.
To stop the losses, FDR prohibited banks from issuing gold payouts to accountholders, and demanded that paper money, silver or checks be issued instead.
Americans were required to surrender their gold to the Treasury in exchange for an equivalent amount of nongold U.S. currency.
With a few exceptions, all gold coins became property of the federal government. Coin collectors and some industrial users of gold were exempted. Americans returned their gold en masse, and the price of gold skyrocketed.
However, Romero told the jury, “There were other people who didn’t respond and continued to hoard their gold.” Israel Switt was one of the hoarders, she said.
Switt was arrested in August 1934 at Philadelphia’s 30th Street Station, when the Secret Service caught him “lugging a bag of $2,000 worth of gold coins,” Romero said.
But Switt’s involvement in the gold-hoarding black market was far from over, according to court records.
In 1944, a journalist informed the U.S. Mint about a 1933 Double Eagle set for auction in New York, Romero said.
Since no 1933 Double Eagles had been permitted to enter circulation, the coin had to be either counterfeit or stolen, the Mint reasoned.
Months of investigation led Secret Service agents to Switt, who told the agents that he had sold nine 1933 Double Eagles to various collectors, according to court records.
All were ultimately confiscated by federal agents when they surfaced in the 1940s and 1950s.
A tenth coin, also linked to Switt, was obtained by Egypt’s King Farouk in 1944 thanks to a bureaucratic blunder involving an erroneous export license.
Farouk was later deposed, and the coin went missing for decades.
It reappeared in the mid-1990s, when an unwitting British coin collector was snared in a sting operation at the Waldorf Astoria Hotel in New York.
The government initiated a federal forfeiture proceeding, but voluntarily dismissed its claim and settled with the collector, who received some of the $7.59 million the coin fetched at a June 2002 auction.
To this day, the buyer remains anonymous, known only as “Mr. Big.”
The Secret Service concluded in the 1940s that Switt had obtained the coins through a corrupt former cashier at the Philadelphia Mint, who in 1941 was convicted of stealing coins, according to court records.
So in August 2004, when an attorney for Switt’s daughter and two grandsons – claimants Joan, Roy and David Langbord – told the U.S. Mint what they had discovered in the safe deposit box, the Secret Service was suspicious.
The Langbords allowed the Mint to take possession of the coins to confirm their authenticity.
But in what the Langbords call an unconstitutional seizure, the coins were not returned, but were stashed in a vault at Fort Knox.
The Langbords’ attorney, Barry Berke with Kramer Levin Naftalis & Frankel in New York, was told by the U.S. Mint’s chief counsel in 2005 that the Langbords would not be offered a cash settlement for the coins.
So they sued the Department of the Treasury and the Bureau of the Mint in December 2006, demanding return of the 10 Double Eagles.
In July 2009, U.S. District Judge Legrome Davis concluded that the government had seized the coins in violation of the Langbords’ due process rights.
If the government wanted to take permanent possession of the coins, it would have to initiate formal forfeiture proceedings, Davis ruled.
Two months later, the United States did just that, and filed a civil complaint for forfeiture.
Attorney Berke told jurors on Thursday that they would be asked to uphold the same principle that was at issue in the forfeiture trial over the 1768 British seizure of John Hancock’s sloop Liberty: “the right of a citizen to only have their property forfeited if the government can prove in a court of law that they are entitled to it.”
Joan Langbord, a wizened woman in her 80s with close-cropped blond hair, “wanted to do the right thing” when, through her attorney, she notified the government about her discovery, Berke said.
“The government only learned about it because our clients told them,” Berke said.
Switt was “a colorful person with strong views,” he acknowledged, but “let’s be clear, the claimants have no burden here.”
Berke told jurors that the government would present them with a case that is based on “suspicion, theory [and] innuendo.”
“Two-hundred-thirty-five years from our independence, I submit to you that a theory is not good enough to take a citizen’s property,” Berke said.
He said the government’s case was “like a three-legged stool” based on an “assumption of absolutes.”
The government, he told jurors, will try to convince them that “a gate came down and no gold could go out” when the FDR administration instituted its gold policies.
“Not only is this not so, it’s very much not so,” Berke said.
Historical records show that government workers told Americans to “feel free to exchange gold for gold” and that exceptions to the ban on gold were being made for coins that held special value to collectors, Berke said.
The other unfounded assumptions made by the government are that Mint personnel “absolutely followed every procedure” during the FDR years and that documentation from the U.S. Mint was “reliable, accurate and complete.”
Berke told jurors that “all three legs are weak” and that the government’s forfeiture case “essentially is them trying to rewrite history.”
He lampooned the notion that the voluntary surrender of the nine 1933 Double Eagles reclaimed by the Secret Service reflects negatively on the Langbords’ case.
The people who had those coins had been threatened with criminal prosecution, he said.
“When faced with that, people become pretty good volunteers.”
Decades ago, when Switt sold the nine 1933 Double Eagles, he did it in a way that shows he was unaware they were ill-gotten, Berke said.
Switt advertised in newspapers and made arrangements with “the most prominent and respected people of the day,” he said.
“He did it in a way that he knew would bring attention to these coins.”
Everyone with firsthand knowledge of how the coins were smuggled from the Mint is dead, Berke told jurors.
“The government, at the end of the day, has a theory of how they left.” What it doesn’t have, he said, are conclusive facts about “when the 1933 Double Eagles left the Mint, how the 1933 Double Eagles left the Mint, or by whom the 1933 Double Eagles left the Mint.”
Fortunately, he told the jury, “when our government tries to take someone’s property, we have you as a safeguard.”
The trial is slated to last two to three weeks.
Both sides are expected to present numismatists as expert witnesses.