Liberty Dollar Trial and Coin Value

by Bill Rounds
How to Vanish

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What Liberty Dollar Should Have Learned From The Godfather

Don Corleone doesn't ask a second favor once he's been refused the first. Instead, he will make you an offer that you can't refuse.

The recent conviction of Bernard von Nothaus for making and circulating Liberty Dollars has little to do with tyranny and oppression, and a lot more to do with tactical and practical mistakes made by the Liberty Dollar organization. Although many would argue that tyranny is the logical and philosophical cause of Liberty Dollar's trouble, for the most part there are practical ways to exercise liberty, avoid making powerful enemies, and avoid incurring their wrath.

Philosophical Arguments Don't Address Actual Power

I am not addressing the philosophical or ideological arguments for two reasons. First, the state of monetary law is almost nonsensical. Court opinions, federal statutes and the Constitution are logically inconsistent with one another. As a practical matter it is worthless to try and argue with the reasoning behind arbitrary and capricious rules.

Until a law is changed, it is not recommended to break it, even if you think the source of its power is illegitimate. I imagine that a lot of characters thought that the source of Don Corleone's power was illegitimate too. But that does not change the fact that his power was very real (in the movie) and that such power must be respected.

That power will endure until enough people are convinced otherwise. So, even though Dr. Vieira clearly reveals the inconsistent and tyrannical nature of current monetary law (See Dr. Vieira’s Pieces of Eight pg. 1532), we will assume for the sake of argument that such laws are legitimate because we must deal with the actual power that they have.

Must Be Persuasive

Second, unlike Libya, the US is still a country where we are free to persuade anyone to change any law or replace any political leader. Failure to convince enough people is more a function of poor salesmanship than tyranny. Many Austrian economists have historically been unsuccessful at persuading courts, legislatures and neighbors. They are getting better. In any strategy, including legal strategy, it is important not to dismiss the actual power that your opponent has. Doing so will limit practical solutions.

Liberty Dollar Fraud

The Liberty Dollar case was about fraud. It was not about using gold or silver in commerce, it wasn’t about protecting government power, or even about using private money. There are all kinds of alternate currencies in circulation in the US. Ithaca Hours, Potomacs, gift certificates, and Chuck E. Cheese tokens can all be used to barter and transact instead of legal tender coins and bills. It is not illegal for a dentist to take payment in chickens or in sacks of potatoes. Liberty Dollar was investigated and indicted because it could, and did, fool some people into thinking it was something that it was not.

Resemblance to Legal Tender Coins

Two of the statutes that the jury thought were violated were 18 USC 485 and 18 USC 486. In a nutshell, to violate these statutes, someone has to make and use medallions that resemble official US government coin and intend to fool someone into thinking it is official US government coins. It is very unlikely that well informed Austrian economists, or even Ben Bernanke and friends, were fooled or were intended to be fooled.

Unfortunately, the jury pool and the American public are not always well informed Austrian economists. Thus the likelihood that someone might be fooled by the Liberty Dollar is much higher, and the intent can only be determined by other actions. The Department of Justice (DoJ) thought that there were too many elements of the Liberty Dollar design that might confuse an unsuspecting person and that there was intent to fool some people. A unanimous jury of peers agreed.

Notable Similarities Between Liberty Dollar Medallions and US Government Coins

Engraved with a “$” symbol;

Engraved with the word “Dollar”;

“$5 Liberty Dollar” is the same size as a Kennedy 1/2 Dollar;

“Trust In God” engraved on Liberty Dollars;

Engraved with the word “Liberty”;

Several images similar to those commonly used in US coins are engraved on Liberty Dollars;

“USA” is engraved on some Liberty Dollars.

To see all of those similarities, check out the Indictment, paragraphs 35-44. This was apparently enough to show the resemblance.

Liberty Dollar Indictment

Liberty Dollar Jury Verdict Form

Problems With Liberty Dollar Coin Value

The most serious issue with Liberty Dollars is probably the coin value and the denomination minted on the medallion. The value of the metal in the Liberty Dollar medallions was below what appeared to be the Federal Reserve Note (FRN) value minted on their face. The “$10” medallion contained less than $10 in FRNs of silver at the time they were in circulation. When the value of the silver in the medallion rose above $10, the medallions were recalled, and recast with a “$20” denomination. The same process would occur if the FRN value of the metal again exceeded the minted denomination.

It would not be hard for someone in the lowest quartile of intelligence to be offered a “$10” Liberty Dollar and think that the intrinsic metal value was $10 in FRN and that it might be a legal tender coin. The prosecutors and a unanimous jury agreed.

Some Actions Could Show Intent

A very important element of the indictment is the intent to defraud. There is no criminal trial in the world where anybody knows for certain the intent of anyone else. We can only deduce intent from surrounding circumstances. Therefore, like any jury trial, it is a complete crapshoot as to what the jury is going to think the intent of the defendant is. The politicians may consider gambling a harmless vice, but it is dangerous when your liberty is on the line.

Liberty Dollar actively encouraged merchants who traded Liberty Dollars to give them to unsuspecting customers as change. An unsuspecting customer might receive a "$10 Liberty Dollar" medallion instead of $10 in Federal Reserve Notes. The value of the silver in those medallions was less than $10 FRN, so the unsuspecting customer would receive less than the value they thought they were receiving. It appears that such an exchange was viewed by the prosecution, and the jury, as evidence of an intent to defraud.

Banking Is Boring

Another critical error might have been the amount of money that was being made by Liberty Dollar and its affiliates. Banking and bullion are supposed to be boring businesses. It is very difficult to make exciting profits on coin value. Liberty Dollar profits might have drawn attention. There is nothing wrong with finding a way to make enormous profits trading on coin value. You just need to be prepared to explain yourself very well. Liberty Dollar could not explain themselves well enough.

Avoid Trial

Given the unpredictability of a jury, it is advisable to avoid a jury trial in most situations. Only 2% of cases that are filed are ever brought before a jury. The certainty of an agreement is far easier to manage. Since the vast majority of US citizens are unconvinced of the fundamental flaws of our monetary policy, Liberty Dollar would have been wise to avoid a trial as well. They were given a chance to do just that.

The Department of Justice and the Mint issued a warning that they would prosecute the use and distribution of Liberty Dollars in 2006. Consider this like Don Corleone "politely" asking a favor. Rather than grant this favor to the very people who have the power to indict you, Liberty Dollar refused this favor, and were quite obnoxious about it, even though their legal counsel advised them to take it seriously.

Certainly Don Corleone would have followed up with an offer they couldn't refuse. The DoJ did too. The offer was an indictment which Liberty Dollar couldn't refuse. Had they complied with this “favor” they probably would not have had any legal problems.

What the Case Was Not About

Importantly, this case is not about trading or bartering in silver, gold, chickens or potatoes. It is not about offering or accepting silver instead of Federal Reserve notes at a store. It is not about the warehouse receipts for silver or about digital gold or silver transactions at all. It was not about the fact that Liberty Dollar was minting medallions out of silver to distribute into the marketplace. In fact, minting their own medallions was completely unnecessary because there are already many, many kinds of silver medallions that are perfectly legal to own, use, trade, barter with, and utter like Buffalo Silver Rounds, Canadian Silver Maple Leafs, Austrian Philharmonics, and Sunshine Mint medallions. All of these activities are far from the kinds of things that anyone would prosecute. Especially if they are taking care not to upset powerful enemies.

Conclusion

Like the Hollywood movie executive, in the Godfather, Liberty Dollar was asked a favor. Mr. Woltz was asked to cast Johnny Fontaine in a movie. Liberty Dollar was asked to stop using their confusing silver medallions. When Woltz refused, he woke up with an unpleasant surprise in his bed. He couldn’t refuse to cast Johnny in the movie. When Liberty Dollar refused the favor, they woke up with an indictment. They couldn’t refuse to stop using Liberty Dollar coins.

In his passion and zeal, Mr. von Nothaus failed to assess the power of his opponent intelligently. It ended up costing him dearly. Had he gone around using already existing silver rounds and offering them as payment instead of his own minted version, he would have been miles away from any legal trouble. Had he used medallions that contained none of the state regalia, like "USA", "$10," and other familiar markings, he probably would have remained free although if he had used actual legal tender like Kahre he still may have had issues. Had he transacted only with warehouse receipts for silver bullion, he would have avoided legal trouble. If he had only traded digital silver like with GoldMoney, backed by bullion in the vault, he could have avoided legal issues. Maybe if he had seen the Godfather a few more times, he would have realized that when you refuse a favor, you are going to get an offer you can't refuse.

Reprinted with permission from How to Vanish.

April 7, 2011

Bill Rounds, J.D. is a California attorney. He holds a degree in Accounting from the University of Utah and a law degree from California Western School of Law. He practices civil litigation, domestic and foreign business entity formation and transactions, criminal defense and privacy law. He is a strong advocate of personal and financial freedom and civil liberties.

Copyright © 2011 How to Vanish

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