The Secret Gold Treaty

The fact is that Johnston and his partners were in the process of negotiating this and other certificates, and the Bank of England knew it. I have spoken to a number of gold traders who, at the time of the press release, were keen to buy several of Johnston's certificates, including the disputed 740 MT. All were fully aware of the circumstances of his earlier arrest and his forthcoming trial. [iii]  They were also aware of the "extremely sensitive " background of the certificates.

One of these individuals was Bruce Mead, Managing Director of the Millsmead Group. Mead told me quite openly that the reason he pulled out of the deal was due to the negative publicity. Since the Bank of England press release was the only article that had appeared at that time (at least to my knowledge) the potential sources for his fear are sharply narrowed.

Mead and his partner, Mary Mills, represent a number of major European banks. Figuratively speaking, they act as fig-leafs to eclipse the banks’ involvement in black market gold transactions. In this instance, Mead was the mandate for Michael J. Summers, an authorised bullion dealer on behalf of the giant French state- owned bank, Credit Lyonnais. In this capacity, Mead -- nine months after Johnston's arrest -- had issued a full corporate offer to purchase the 740 MT certificate after Summers had scrutinised the various documents. 

Mead's letter of offer, a binding contract of intent (and financial ability) to purchase the bullion on behalf of his principals (Summers/Credit Lyonnais) was dated 13 December 1995. Intriguingly, this was just two days before publication of the article in the London Times to which reference is made above. [iv]  Could this be the real explanation of the extraordinary BoE press briefing? 

Mead told me that he had conducted a "soft probe" on the certificate and the results strongly indicated it was genuine. [v]  The probe was carried out by the Bank of England, I was told. [vi]  Having pulled out of the deal, Mead then made various attempts, on Johnston's behalf, to get related papers back into Johnston's custody. He told me he believed "Peter was innocent" and was subject to a political intrigue and added, "Peter had good paperwork." Moreover, he continued to express interest in purchasing other certificates in Johnston's possession right through to February 1996 but for a variety of unrelated reasons this wasn't possible. [vii]

In an article published in the Irish Times on Monday, 6 May 1996, reporter Denis Staunton states that Dr. Patrick Hillery, the alleged owner of the 740 MT certificate "expressed astonishment" that his name was linked to the certificate. Hillery then added that the signature on the certificate "wasn't anything like my signature." The former Irish president added an unusual afterthought: "It wasn't even an attempt to be my signature."

This statement was further enforced in Dr. Hillery's brief letter to Johnston's solicitor dated 27 November 1995, which says: "I have examined the documents which you enclosed with your letter and wish to state that the signature on them is not my signature." This is entirely correct. None of the signatures on this or other certificates are -- or even contrive to be -- facsimiles of the signature of the stated holder. However, in the mysterious world of government secrets, there may be an explanation for this. 

The 740 MT certificate actually constituted numerous documents: the certificate itself plus supporting documents, heritage certificates, supporting documents and government documents. One of these “heritage” certificates refers to another party in the form of the guarantee “holder” – whatever that means. Under the heading “B.L.D. GUARANTEE HOLDER” is the name “Hassan King II,” undoubtedly a reference to King Hassan of Morocco, who became King in 1962 following the death of his father. Hassan died in July 1999. 

Johnston's instructions from "The Legal Last Holder" were that all these documents would have to be forensically proven at the time of sale. Just one missing page would void all the other papers. Validating the certificates also meant validating the heritage documents, and it was these that identify the actual holder -- albeit by various codes. This procedure, as Jentsch made clear in his deposition (see Chapter 1.1), is designed to protect the identity of an "unpopular regime" and also avoids embarrassment to the bank and/or government for dealing with unsavoury characters. 

In this regard, Johnston had earlier been in contact with another gold trader, Tirath Ram, an Indian citizen resident and trading in the North of England. Gold plays a large part in Indian life and, in fact, the global jewelry fabrication business is centred in that country. Ram had undertaken to "probe" the validity of the 740 MT certificate [for the purpose of exploring a purchase] and on 14 February 1995, sent Johnston a copy of a fax he claimed had been sent to him by a "contact" in the Bullion Department of the Bank of England. I doubt that this fax -- which had the top and bottom removed to avoid identifying the source, did originate with the Bank of England. For one thing, it is customary in England to always date a letter by day, month and year.  In this instance, the fax was dated in the American style with the month, day and year, in that order, and, moreover, contains word usage common in America.

Ram was clearly protecting his source, which is understandable, but appears to have made a critical error in his haste to impress Johnston (a flaw common amongst gold brokers). Hoping to buy the gold represented by the certificates and other associated documents, Ram, it seems, had meanwhile offered it for sale through one of the largest US bullion banks -- Citibank -- which evidently originated the fax.

In any event, the author of the fax was clearly in possession of highly confidential and sensitive information that no one else associated with this transaction was aware of -- including Johnston and his partners. The full text of the letter is as follows: 

Mr. Tirath Ram February 14 1995

Friends Corporation

By fax 

Dear Mr. Ram,

AU BULLION CERTIFICATE 

Further to our discussion this evening I make the following comments from our experience with UBS certificates which may or may not prove to be relevant in this instance. 

It is imperative that when the Government requests authentication through Citibank it has all the correct data which may include but may not be limited to: 

#The original Heritage Document - this is a document declaring non-beneficial ownership between the named party on the certificate and the real owner. 

#Any "code-words", "code-letters" & key bars that have to be disclosed to demonstrate ownership. 

#Any other special arrangements made between UBS and the owners. 

You will understand that these arrangements in the main were designed by UBS not so much to protect the holder from loss, but to ensure that UBS never lost the AU BULLION from its control. 

Please have the seller provide as much detail on the background of the certificate etc. 

Yours sincerely 

Even a brief examination of Dr. Hillery's statement causes admiration for the ingenuity of political wordplay. At no point (either publicly or privately) did Dr. Hillery state the certificate was fraudulent, only that it did not represent (or even attempt to) his signature.

In fact Hillery's statements to the press and to Johnston's lawyer are brief and possess the air of one entirely disinterested with the affair. A strange reaction for a retired statesman whose name is being bandied about in a fraud case. A measure of Dr. Hillery's unusual disinterest is encapsulated in the following remark. Telling Denis Staunton that he has "never heard of Dr. Damanik," and that the only time he has visited Indonesia "was in 1985” when he “stopped in Jakarta on his way to Australia for a state visit," he added "I'm just retired now playing golf."

However, the holder of these certificates, Dr. Damanik, appeared to know Patrick Hillery well enough when he referred to him as "that crazy Irishman." Damanik also told Johnston that he (Hillery) would require US$2 million to clear the transaction. Sadly, this can no longer be confirmed, because Dr. Edison Damanik, the "Last Legal Holder," died in America in 1997. His death was from illness, it is said, and followed his sudden "disappearance" months earlier from his residence in Jakarta. At all times, Damanik appeared to be kept on a short leash. An American, Frederick Robinson, who resided in Dr. Damanik's house, was clearly disliked by both Dr. and Mrs. Damanik -- who referred to him in private as the "Black Sparrow." Another American, Paul V. Morse, lived in a nearby hotel and was Damanik's "signatory." Johnston, who had visited Damanik at home a number of times, understood these two individuals to be CIA or similar, but had no way of knowing this for certain. [viii]

Staunton in his article also mentions that "One British trader came close to buying the gold earlier this year. He withdrew after the UBS questioned the certificate's authenticity."  A good and honest reporter, Staunton had either made a critical factual mistake or had been misled[?] [ix]  The "trader" he mentions in his article is, in fact, Bruce Mead, who (as I stated earlier) told me he withdrew due to the negative publicity. [x] A former member of British Army Intelligence, Mead was fully aware of Johnston's legal complications with the UBS. Critically, Mead had issued his RWA letter months before Staunton ever spoke with him and nine months after Johnston's arrest.  [xi]  Moreover, during this telephone conversation, Mead said he did not think well of the UBS. This came as no surprise to me. In my previous incarnation in the City of London, the UBS in Switzerland was often discussed for what some believed to be its unethical conduct and deviousness.

Footnotes

[i] Dated 15 December 1996.

[ii] On the certificates, Hillery's name appeared as "Patrick J. Hillery" and was also rendered as "Patric J. Hillery."  The typographical "error" is typical of other certificates in Johnston's possession.

[iii] I have read (and have copies of) the correspondence between Johnston and these other parties. There is no question that they knew precisely and fully what had and was transpiring. All believed the arrest and trial were politically motivated. All accepted the certificates to be genuine but "extremely sensitive."

[iv] I am in possession of a copy of the Ready, Willing and Able to purchase letter (known simply as RWA), dated, signed and sealed. It was valid, curiously enough, until 23.00 hours on 15 December 1995.

[v] A soft probe is a mechanism where the certificates identifying numbers and other codes are verified "on screen" by the issuing or controlling government. In this case it was the Federal Reserve Bank of America. The probe was conducted via a third party (the broker's European bank) with the Bank of England.

[vi] I directly asked Mead, whom the probe was conducted by. He refused to name the party. I then suggested that it might have been "an authority in Threadneedle Street?"  Mead's response was "I wouldn't disagree with that." Telephone conversation with this writer 5 December 1996.

[vii] During a telephone conversation almost a year later, Mead said that "Damanik" did not have the authority to sell the gold, but would not elaborate on this. However, see further on the story regarding Sources "A" and "B" and the 1972 meeting.

[viii] Morse lived in the nearby Citraland Hotel. His room cost $120.00 a day and he remained in residence for 8 months, leading Johnston to question “who paid his expenses?”

[ix] There are reasons to suspect the latter.

[x] Unknown to Mead and numerous others, Johnston had given me his entire files on these transactions, including copies of all correspondence, telephone notes etc.

[xi] In his letter dated 6 November 1995, to a colleague, he states (in part) "Mr. Johnston freely admitted that he had trouble when he showed these documents to the UBS in London and that they tried to call in the UK police saying he was carrying false documentation." He continues "I think it is a balance between a crooked offer, but they do not realise it is crooked, or the real thing but the UBS do not want to admit it.  You know our views on the UBS and we shall therefore approach this subject very carefully.  I always groan when I see gold offers that involves that particular bank because we all know that their appearance in the transaction materially reduced the chance of there ever being a conclusion." Just over a month later his caution had given way to some confidence when he issued his letter confirming he was "ready, willing and able" to buy the gold.