The Silver Bears

by Paul E. Erdman

  The English solicitor was the first to speak out.

  “As I understand it, then, Mr. Foreman, these Americans who sold you the Swiss bank represented to you that the Swiss bank owned a very valuable silver mine in Iran. And there is no such mine.”

  “That is correct.”

  “Well, this should be quite simple. We merely inform the authorities here, have the men arrested, and block the funds you paid out. You said that the entire arrangement was done at Winthrop’s?”

  “Yes.”

  “We will, of course, need the documents in which all the representations were made in regard to that silver mine, especially the value at which it was given in the Swiss bank’s balance sheet, and after that, it should prove quite simple.”

  “But there lies a problem.”

  “Explain, Mr. Foreman.”

  “The basis for the entire deal was the audit report made on the Swiss bank by my employee, Donald Luckman.”

  “Yes.”

  “No mention is made of any silver mine.”

  That, to put it mildly, caused some raised eyebrows. How could that be?

  George Foreman said he could not explain it himself. He had never really read that audit report carefully. He had depended almost completely upon the oral statements of that fellow Luckman. No reason to mistrust him. What was there in place of the silver mine? Some stuff about oil storage facilities, which also did not exist, obviously.

  “So,” said the solicitor, “we do have evidence that the balance sheet of the Swiss bank was deliberately falsified.”

  “No,” replied Foreman, “we have only evidence that Luckman’s report on the balance sheet of the bank was incorrect.

  “What do you mean?”

  “I had the definite, very definite, impression that the people who formerly owned that bank, and sold it to me, were also convinced that there was a very valuable silver mine in Iran, and that it belonged 100 percent to their bank. I’m sure the true records of that bank will reflect this.”

  “But surely,” interjected the lawyer from New York, “they must have noticed that no mention of it was made in Luckman’s audit report.”

  George Foreman shrugged, and then expressed the opinion that it would be most difficult to proceed against the former owners of the Swiss bank. He felt that they all were taking the wrong approach. Obviously fraud was involved. But who was responsible? He, George Foreman, had given the matter a great deal of thought. There was— there could be—only one logical answer: he had been betrayed by his own employee, Donald Luckman. Luckman must have been operating in collusion with the people in Iran. He must have found out, somehow, about the hoax, and made a deal to conceal it long enough to make sure the Iranians were paid off for their share of that nonexistent mine, by the former owners of the bank. He also made sure it remained concealed until such time as the First National Bank of California had bought that Swiss bank. Probably the Italian prince that was Chairman of the Swiss bank had also been involved in the conspiracy. But he, along with all the other former executives of the bank, were no longer in Switzerland. And it would be very difficult to get them back, he assumed. The lawyer from Geneva confirmed this. It was almost impossible to extradite people on suspicion of fraud. Every country had a different definition of that crime. So, concluded Foreman, one had to be realistic. Fraud could be proven. Against Luckman. Did everyone in the room concur? They did. Good. That would mean that they could collect at least $15 million insurance. Was that right? The insurance lawyer from San Francisco said he thought so. And probably the remaining loss chould be charged off as a taxable expense. Or? The tax lawyer from New York was sure it could be, which would mean that Uncle Sam would essentially pick up 50 percent of the bill. So although George Foreman had shelled out $60 million, when all was said and done, the write-off which the First National Bank of California would ultimately have to make would probably be no more than $25 million. A lot of money, but it could have been worse. What about the bank in Lugano? After such a fiasco, the only logical thing to do was close it up. Liquidate it. That would probably mean another $10 million additional loss. Better that, suggested the lawyer from Geneva, than getting involved in a major scandal with the Swiss banking authorities and face bad publicity around the world for God knows how long. He could arrange that the Swiss Banking Commission cooperated in full—provided the First National Bank of California guaranteed that no depositors would lose any money. And provided that the guilty man—Donald Luckman— be properly punished for his criminal activity in Switzerland. This would mean that Mr. Foreman would have to prefer formal charges against him. Was Mr. Foreman prepared to do so? Foreman was.

  And the next day he did through his Geneva lawyer. Donald Luckman had been on Swiss soil no more than five minutes after returning from the Near East when he was picked up by the police. That same day, the doors to the Bank of Sicily and America in Lugano were sealed. The Swiss bank secrecy laws were called into force, and George Foreman began preparations for his return to California, surrounded by his battery of lawyers.

  The only person on earth who knew the truth, and wanted to tell it, was Debbie Luckman. The day after her husband’s arrest—the same day that the Foremans were scheduled to return to the United States— after frantically telephoning every ten minutes, she finally got hold of George Foreman. He listened for two minutes to her garbled plea for help. Then he said: “I’m afraid it’s out of my hands, Mrs. Luckman. There’s no sense in your trying to contact me again.”

  Marjory was standing beside the phone while he took the call. After he had hung up she made her first, and last, comment on the entire affair: “I never did like them, you know. She was the one that probably pushed him into it.”

  Debbie’s last resort was Doc Smythe. He came to the Hilton, and when he left, Debbie left with him. But there was nothing, of course, that either could do to help Donald.

  The Swiss authorities spent two years investigating the matter, and in the end sentenced Donald Luckman to ten years at hard labor. He had, after all, engineered a monumental fraud, involving tens of millions of dollars. Which was bad enough. But the fact that he had perpetrated it against a bank—a Swiss bank—was unforgivable. So he got the maximum the law allowed.

  Especially damning for Luckman were his weird attempts to defend himself. First, he claimed that he had only followed the orders of his Chairman. Of course, Luckman could not produce one document to prove this allegation. Anyway, the Swiss knew full well that a man of the format of George Foreman would never involve himself in such a thing. Three of Switzerland’s leading bankers, when discreetly approached on the subject, all testified to this. So that line of investigation was dropped almost immediately. Then Luckman insisted that the billionaire, Frank Cook, and one of his employees, Nicholas Topping, had been behind the entire affair. The Swiss, after exhaustive investigation, found no evidence whatsoever—not a shred of paper—that either party had had the slightest thing to do with either the bank, or that fictitious mine. When Luckman claimed that one of the bank’s former executives, a Mr. Marvin Skinner, was a professional counterfeiter, and that he was the one who had manufactured the phony documentation Luckman had employed in his audit report, the Swiss had no choice but to also investigate that. It was determined that, indeed, a Mr. Marvin Skinner did exist. He lived in a place called Penn, about thirty miles northwest of London, where he bred dogs. Alsatians. Both his reputation, and that of his dogs, the English police said, were beyond reproach. After that the Swiss arranged for Luckman to be submitted to extensive psychological examination. The results were, unfortunately, inconclusive.

  The trial itself was very brief. Since bank secrecy was involved, it was, of course, held in camera. No witnesses from abroad were present, since none were called. It did irritate the Swiss considerably that they were unsuccessful in their attempts to track down Luckman’s co-conspirators: that Iranian and that Italian prince. But both had disappeared. So the matter was dropped.

  The ban
k itself was liquidated in a very slow, though proper, manner. All in all, it took around three years. One of the bank’s major assets, a large agricultural property in Iran, was sold off to Middle Eastern interests, represented by a bank in Kuwait, for an exceptionally good price. But the unexpected gain from that source was more than offset by the unexpected losses which turned up in the commodity department. The reason was that the Swiss bank had held a rather large number of silver futures contracts for its own account. The liquidators decided to hang on to them for a while, even roll them over, because— as they later argued when criticized by the Bank Commission—they had felt that silver was a solid investment. Everyone, but everyone, they had consulted, had expected the price to go up. But for some inexplicable reason, it had done just the opposite. In the end they had been forced to cover their longs right at the bottom of the most spectacular bear market in the history of silver—on October 22, 1971, when the price hit $1.29 an ounce.

  Part 3

  (1975)

  Epilogue

  EVERY year, on October 22nd, Frank Cook put on a little luncheon at the Atheneum Club in London in commemoration of the day the silver bears had achieved total victory. At the first such affair, Agha Firdausi and the prince had been in attendance. But after that, no longer. The reason was that their silver operation on the Gulf ceased to exist. For, as had been predicted by Albert, the gold-silver trade between India and Dubai eventually dried up. During the good old days in 1968, and even 1969, when the price of silver had been $2 an ounce or more, and the price of gold had stayed between $35 and $40 an ounce, the Indians could hardly get rid of enough silver. After all, for each ounce of gold they only had to give up 17 or 18 ounces of silver. But then the gold price soared—to $100 an ounce and above—while the price of silver slumped ever further. By the early 1970’s it took 60, sometimes 70, ounces of silver to get an ounce of gold in return. That killed it. Of course, the London silver consortium had covered all their shorts well before this point. And had, naturally, then gone long. Because they knew full well that the silver shortage—which had been there all along—would now appear in full force. And it did. The morning silver fixing in London on this anniversary day was $6.25 an ounce! The London consortium was ahead by well over a half billion dollars by this stage.

  Doc, Albert, Marvin, and Frank Cook, however, ate frugally. At the Atheneum Club it was difficult to do otherwise, since a large number of its members were Bishops of the Church of England who considered extravagance in any form improper, but especially frowned on public displays of gluttony. So it had been, as usual, lamb chops, with three side dishes of soggy vegetables. The fact that it was served on long wooden tables did not help. One of Frank Cook’s rules was that no business be discussed over lunch. That had to wait until coffee and cognac was served in the library on the second floor.

  Nick Topping, perhaps deliberately, arrived too late for lunch, but in time for cognac. He had a pensive look as he entered the upstairs room and took a seat beside Doc. He made his usual abeyance toward Mr. Cook, accepted a cognac, and then started talking to Doc.

  “How’s it going?” was his opener.

  “Fine. How were things over at the Metal Exchange this morning?”

  “Quiet. Where’s Debbie?”

  “She’s having lunch with a friend at Fortnum and Masons.”

  “Her friend anyone I should know?”

  “In fact, yes. It’s Shireen Siracusa.”

  “I guessed as much.”

  “How?”

  “Because of the latest gossip on silver.”

  Now everyone around the coffee table, even Frank Cook who had been dozing, lent at least a partial ear.

  “You see,” continued Topping, “there’s a new story that’s making the rounds at the Metal Exchange today. Want to hear it?”

  Of course they wanted to hear it.

  “It seems there is this Sicilian prince. He’s the partner of a royal, or some such thing, from Iran. He, the Sicilian, is married to the Iranian’s sister, who is, naturally, a dark beauty. They are in town this week, looking for a partner who will provide them with a little venture capital. The figure of fifty million pounds is being mentioned.”

  Now Topping had the full attention of everyone.

  “Why, you ask, does he need this capital? I will tell you. It seems that a few years ago these people bought a large agricultural property in Iran—from a Swiss bank that had been put into forced liquidation. And guess what? On that property they have made one of the richest silver strikes of the century. At a location called Choga Zambil. It’s in Khuzistan, right next door to a place called Susa. Now here comes the amazing thing. If you look up Susa in the Bible, you will find out that it was loaded, really loaded, with silver. You can read it in the Book of Esther—‘the beds were made out of gold and silver.’ Right? But where did the silver come from? Answer: Choga Zambil. Now according to the boys down at the exchange, it could amount to as much as 100 million ounces, and . . .”

  No one said a word until Topping’s tale was completed. And then a spirited discussion followed. Because although no one, it was agreed, had ever seen that silver mine in Persia, no one had ever proven that it wasn’t there. And if it was, hell, all that silver coming onto the market could wreck the price!

  The only one who refused to be drawn into the speculation was Albert. Why? Just before the party broke up, he explained. He’d only met Agha Firdausi three times, but he had learned of his favorite piece of poetry—over drinks in Teheran a few years back. It was not from the Scriptures but rather from Omar Khayyam. Although written in the twelfth century, Albert considered it enlightening:

  Take the cash. And leave the sound of distant drums.

  All agreed. It was enlightening. Perhaps even pertinent. Omar Khayyam was no doubt right.

  But could the Bible be wrong?

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