Opinion ID: 165851
Heading Depth: 2
Heading Rank: 2

Heading: The Gold Certificates

Text: 11 Naylor's representations as to how he intended to realize the promised exorbitant returns were inconsistent. However, much of the evidence at trial centered on two gold certificates, supposedly worth billions of dollars at maturity.
12 The first certificate was purportedly redeemable for 1,000 metric tons of gold (the 1,000-metric ton certificate). Naylor claimed the International Foundation for Community Development (Philippines), Inc. (the Foundation) obtained the certificate, valued at approximately $9 billion, from the estate of the late Philippine President Ferdinand Marcos. According to Naylor, the certificate had been issued in 1983 and would mature in 2003, at which time it could be redeemed at the Union Bank of Switzerland (UBS). Evidence introduced by Naylor suggested that the Overseas Investment Bank, Ltd. originally issued the certificate, Lincoln Bank and Trust Co. subsequently reissued the certificate after the Overseas Bank dissolved, and the gold underlying the certificate was deposited at UBS after Lincoln Bank dissolved. 3 13 Naylor testified that the Foundation assigned the certificate to him so he could raise funds for a variety of humanitarian projects. According to Naylor, he intended to redeem, sell or draw a line of credit on the certificate and use the resulting billions of dollars to either (1) provide investors with their promised returns, or (2) invest in another trading program, which itself would yield the promised returns. Naylor would keep a sizeable commission on the funds he received. 14 Naylor's testimony is cryptic, at best, on how he actually would obtain money secured by the certificate. In the late 1990's, he retained Edmond Miles of Great Britain as a project consultant to assist in obtaining funding for the 1,000-metric ton certificate. Miles testified at trial via video deposition that neither his efforts to obtain funding in exchange for the certificate, nor any of the other ventures on which he worked with Naylor, ever bore fruit. In addition, Miles testified that the certificate would not be vouched for by UBS, and that any representations about the certificate for the purpose of inducing an investment would be improper. Miles nonetheless testified that he thought Naylor honestly believed in the bona fides of the certificate.
15 The second gold certificate was supposedly redeemable for 3,500 metric tons of gold (the 3,500-metric ton certificate). Naylor claimed he also obtained it from the Foundation. At some point in the mid-1990's, however, Naylor apparently entrusted the original certificate to Arne Lundh, a London businessman. Naylor testified that Lundh had prior experience trading in gold certificates and was assisting in obtaining money collateralized by the certificate. Unfortunately, according to Naylor, Lundh stole the original certificate. Naylor sued him in London in the late 1990's. A London barrister named Bitu Bhalla represented Naylor in the British action and testified by video deposition at Naylor's criminal trial. A British court issued an order requiring Lundh to return the certificate.