First off, over a decade ago, i satisfied myself regarding the feasibility of substantially displacing gold directly with tungsten. This provided a plausible methodology that could easily be used to steal the majority of the gold. My interest in this was based on my continuing observation of the gold market from the late 70's through to 2000 in particular. I had come to the conclusion that the USA was selling off its gold stores into the open market during this time period.
The tungsten method provided a plausible route for an agency independent of the USA government to actually steal this gold.
Now this provides us with continuity of custody that would have allowed exactly this event to take place. Of course the folks involved were all CIA who by then had firm control of the Presidency under Bush and Clinton who likely did not need to know either. Of course the auditor knows exactly what the story happens to be and is likely on a death watch now.
1990's Arclein Conjecture: Most of the gold in USA storage has been sold into the open market during the Bush and Clinton administrations.
Trump does not know this in particular.
All the gold will need to be completely remelted and recast into much smaller standard sized ingots as the Chinese chose to do once they got wise to the problem. I suspect other holders are also quietly remelting their gold in order to confirm amount. That is also why it took so long for the Germans to regain possession of their own gold.
US Official Gold Reserves Auditor Caught Lying
Wed, 12/18/2019
Submitted by Jan Nieuwenhuijs of Voima Gold
https://www.zerohedge.com/commodities/us-official-gold-reserves-auditor-caught-lying
In my previous post, from March 2018, on the audits of US official gold reserves, I have exposed that during the audit procedures of the US official gold reserves from 1974 through 2008, repeatedly audit staff deviated from the auditing protocol, while internal control meant to prevent this was failing. Many audits and assay reports have been
destroyed. For decades a significant share of the metal was excluded
from verifications for no apparent reason. And, the US government went
to great lengths in withholding information and spreading false
information about the audits, among other findings in documents obtained
through Freedom of Information Act (FOIA) requests. All in all, these
findings made me question the integrity of the auditor.
After my last publication, I have obtained more documents from the US
Treasury through FOIA requests, which expose another falsehood that
puts the auditor in an even more peculiar position. In conflict with the
audit protocol, the permanent seals of the vault compartments have been
broken, time and again. In addition, the auditor has lied about these
events, and when confronted, it’s unable to explain its actions. By now,
I have lost faith in the auditor fully.
Prologue
It’s been a very long investigative journey that has led me to make
bold statements, such as the ones above, about the auditor of the
world’s largest gold holding. I wouldn’t claim anything of this
magnitude if I didn’t thoroughly do my homework and research every
single possibility that could have caused the auditor to have accidentally spread inaccurate material, including asking the auditor for an explanation.
If any of their statements appeared to be false, surely, they would
be able to explain what I was missing. The head auditor said during a
congressional hearing in 2011 (source video 42:50):
Transparency is our business.
Who would disagree? The US official gold reserves, weighing over
8,000 metric tonnes, deserve nothing less than an accurate audit.
My journey started in 2014, when I first discovered—in contrast to what I was accustomed to reading on blogs and in newspapers—that the US official gold reserves are audited every year. I published an article on my discoveries, titled A First Glance At US Official Gold Reserves Audits,
which was basically a summary of all publicly available documents about
the audits. Logically, these documents present a narrative that looks
to be credible at the surface, but I found some questions left
unanswered, and wrote in my article “this post will be part one of a
series.” (Little did I know what I got myself into.) Given the
importance of the subject, I intended to submit FOIA requests at the US
government, in an open-minded attempt to have my concerns removed.
Since 2014 I have been prosecuting the US government. I have emailed
staff of all related institutions—the US Treasury, The Office of
Inspector General of the Treasury, the US Mint, and National
Archives—that were initially replied, but as I got closer to the
details, ceased altogether. I have submitted several dozen FOIA requests
to all related institutions, some of which were honored, some not. In
search of answers, I repeatedly called the Inspector General. In one of
those calls, my contact simply hung up while I was talking. This
incident is emblematic of this whole investigation.
On one occasion, the Mint wrote me a specific FOIA request would cost
$3,145 “based on an estimate of 1,200 pages of responsive documentation
and the duplication costs associated with the requested documents. This
estimate also includes 40 hours of estimated search time and 8 hours of
estimated review time…” The costs seemed outrages to me, but I got
financed through a crowdfunding campaign and paid the Mint. A few months
late(r), I received 223 redacted pages that contained 68 pages of
reports I didn’t ask for and 21 pages that were copied twice.
Effectively, I got 134 pages for $3,145. After some pressure on the
Mint, they agreed the costs had been estimated too high, and I got the
full amount refunded. (And I ordered my crowdfunding platform to refund
all my donors.) The barrier of the costs was used to keep me at bay. To
no avail, instead, I got some essential pages in my possession.
In total, I have written nine articles to inform my audience about the developments (I, II, III, IV, V, VI, VII, VIII, IX).
After the last one, which was a comprehensive overview of every piece
of information I had found (published on March 28, 2018, at the
BullionStar website), a reply to another FOIA request came into my
mailbox. I received a document that irrefutable reveals a lie by the
auditor.
Today’s article is about this falsehood, and numerous other false
statements by the auditor, that all have one thing in common: they hide
the fact that most vault compartments have been re-opened multiple times
after being put under permanent seals, which were meant to prevent
re-opening of the doors. Upon request, the auditor provided me one
argument for these actions—the “re-opening” of compartments. Alas the
argument is in conflict with another statement by them, made under oath,
so the auditor still stands as unable to answer a critical question.
Unfortunately, and contrary to how it could have been done, the
entire audit process from 1974 until 2008 is extremely complicated. The
account below is simplified—I can’t discuss every detail in every
article—but for the ones that want to know the details I have added
external sources (in parentheses with hyperlinks),
which can be used to cross-check my statements. (Also, you can read my
previous posts, and if anything is still unclear, I invite anyone to ask
me to expand on my conclusions in the comment section below this
article. I’m willing to substantiate any findings—as one should when
making bold claims.)
Let’s start with some background information, and then we will discuss the heart of the matter.
Introduction
The US official gold reserves are the largest globally at 8,134
metric tonnes (owned by the US Treasury). Although this gold does not
back the US dollar at a fixed parity as it did before 1971, it does
provide essential support as a final backstop to the dollar and thus
credibility to the present world reserve currency.
The majority of the gold is located at the US Mint depository at Fort
Knox. Smaller amounts are stored at US Mint depositories in Denver and
West Point. Aggregated this metal is referred to as Deep Storage gold
and is captured within 42 sealed vault compartments. The remainder is at
the Federal Reserve Bank of New York.
When the audits commenced in 1974, the protocol designed was simple (page 534). The following excerpt is from the first auditing committee:
In performing the audit, the gold bars are physically moved from one vault compartment to another. During this operations [sic], the melt numbers and the number of bars in each melt are verified with an inventory listing, and one in fifty melts is randomly selected for weighing and test assay.
One melt averages about twenty bars cast from one crucible of molten gold.
The audit protocol follows that “these
actions, having once been performed by an authorized committee, in
accordance with established procedures, will not have to be repeated as
long as the assets verified remain under an unimpaired joint seal.” Compartments physically verified were placed under Official Joint Seal (OJS) to “avoid the necessity of verifying all assets in each annual or special settlement (audit).” The US Treasury pledged to do a “periodic, cyclical inventory” to “ensure that about 10 percent of the gold” was physically inspected annually, eventually to have audited “all the gold for which the US government is accountable” “by 1984.” The essence of the “established procedures” was to open, audit and seal each compartment once. We will return to this fundamental topic later on.
Since the stated purpose of joint sealing was to avoid the need of
“re-audits,” all the gold could (after 1984) be verified by simply
checking if the seals were unimpaired. Great intentions, but this is not
what happened.
The current auditor of the US monetary gold is the Department of the
Treasury’s Office of Inspector General (OIG). Representing the OIG, Eric
M. Thorson attended the congressional hearing for the Gold Transparency Act (not enacted) that was initiated by Ron Paul in 2011. Mr. Thorson’s testimony at
the hearing serves as the official statement by the government on the
audits. Having weighed his words carefully, Thorson spoke under oath:
… 100 percent of the U.S. Government’s gold reserves in the custody of the Mint has been inventoried and audited. … I can say that without any hesitation, because I have observed the gold and the security of the gold reserves myself.
… the Committee for Continuing Audit of the U.S. Government-owned Gold [The Committee that started the audits] performed annual audits of Treasury’s gold reserves from 1974[*] to 1986. … by 1986, 97 percent of the Government-owned gold held by the Mint had been audited and placed under joint seal. So once you have done that, and that seal remains unbroken, then I am not sure what other benefit there would be to going back into it at that point. …
Since 1993, when we [OIG] assumed responsibility for the audit, my office has continued to directly observe the inventory and test the gold. In fact, my auditors signed the official joint seals … placed on those compartments, inventoried and tested in their presence. At the end of Fiscal Year of 2008, all 42 compartments had been audited by … the Committee for Continuing Audit of the U.S. Government-owned Gold, or my office, and placed under official joint seals.
Thus, in summary:
- From 1974 until 1986, 97 percent of the gold at the Mint had been verified by the Committee for Continuing Audit.
- In 1993 the OIG became responsible for the audits, and by 2008 all compartments had been verified and sealed.
The conclusions we derive from Thorson’s testimony:
- From 1987 until 1992, there were no audits.
- From 1993 until 2008, the remaining 3 percent of the gold was verified.
Thorson doesn’t mention anything about vault compartments having been re-opened.
The Problem
First of all, the OIG did not assume responsibility for the audits
since 1993, but since 1982 as disclosed in one of the few documents that
survived the 1980s (page 2).
Effective October 1, 1982, the Internal Audit Staffs of BGFO and the United States Mint [Committee for Continuing Audit] were reorganized under the Department of the Treasury, Office of the Inspector General [OIG].
Ever since the OIG became part of the audits in 1982, exactly what
was not supposed to happen, did happen: vault compartments that had been
physically verified and sealed were re-opened. Read with me, from the
1986 audit report regarding the Fort Knox (page 8) and Denver (page 9) depositories:
For some reason, starting in 1983, “re-audits” were performed over
1,929 tonnes “in accordance with the plan approved by the Treasurer.”
However, in 1983, both depositories had already been fully audited,
while West Point had not. Why were these compartments re-opened when the
protocol stated that, “these actions” (physical verification) “having
once been performed … will not have to be repeated as long as the assets
verified remain under an unimpaired joint seal”? The OIG can’t explain
this to me, and neither can it explain to me what “the plan approved by
the Treasurer” was.
What Thorson carefully refrained from mentioning under oath, he
mentions in a written statement for the Gold Transparency Act. At the
surface, his official testimony seems identical to his written
statement, but when I compared both word for word, the latter crosses a
topic that’s excluded in the former. Thorson never spoke about this in
the congressional hearing (page 45):
From 1987[**] to 1992, the Mint continued to perform an annual inventory and verification of the gold reserves in accordance with its own policies over those compartments that had not been placed under Official Joint Seal…
Note that from the quote above, we learn that the US Mint—mind you,
the custodian of the gold—audited the US monetary gold “in accordance
with its own policies” from 1987 through 1992. This is arguably like a
bank opening its customers’ safety deposit boxes. According to universal
auditing principles, a custodian is not authorized to audit its
client’s assets. An independent entity should audit custodial gold. This
might explain why Thorson failed to mention this in the congressional
hearing.
Note also that Thorson writes that the Mint exclusively opened “those
compartments that had not been placed under Official Joint Seal.” This
is false, and I can prove it.
I have obtained copies of the seals that were placed by the Mint on 5
Deep Storage compartments (together containing 795 tonnes of gold)
between 1987 and 1992 (download here).
Thorson’s written statement is false, as these compartments had, for a
fact, already been verified and sealed, because they were all at Fort
Knox and Denver, which were fully audited by 1982. Let’s have a look at
one of the seal copies.
We can see the “date sealed” at the top, “July 25, 1990,” and the
depository is “Fort Knox, Kentucky.” Thus, Thorson lied to us when he
said that the Mint was only verifying “those compartments that had not
been placed under Official Joint Seal,” because we know Fort Knox was
fully audited, and thus all of its compartments put under Official Joint
Seal, by 1982.
We can also see on the seal when this compartment was “sealed
previously.” It was in 1976 (underlined in red). Confirming it was a
“re-audit.” If it was the first audit, the “sealed previously” date had
to be prior to 1974, before any audits were performed.
Last but not least, at the very bottom of the seal, we see a date,
“February 16, 1993” (in the red oval), which is when this seal was
removed by the OIG (presumably for yet another “re-audit”). More
evidence that the OIG must have known what happened to these
compartments in between 1987 and 1992. As, removing the seal in 1993 by
the OIG, clearly would have shown the history of this compartment.
Attentive readers might see a pattern emerging.
From 1993 until 2008, additional compartments were “re-audited.”
Thorson, again, did not mention these “re-audits” under oath, but in
this specific period, more than 2,000 tonnes*** of gold saw the light of
day again. I know through an excel sheet (download here)
the OIG sent me in response to a FOIA request. When I asked the OIG for
confirmation on how much they audited since 1993 they replied (source):
[Since 1993]…we observed the counting of 246,203 bars, which equates to 81,638,569 FTOs (or 2,539 tonnes).
When I asked my contact at the OIG why thousands of tonnes had been “re-audited” in periods from 1983 until 2008, he replied:
Unfortunately, the OIG stopped responding to my emails by late
2016. Everything had to be submitted through FOIA requests, I was told,
which made my investigations take a few years extra.
Notice that the OIG doesn’t mention “the plan approved by the
Treasurer,” which at least could have explained the “re-audits” from
1983 until 1986.
An explanation of why so many compartments had been “re-verified (in
some cases) was because occasionally vault contents would have to be
moved.” However, this argument makes no sense. It is true that since
1974, when the audits started, gold has been moved. Roughly 1,900 tonnes
were moved from the New York Assay Office to West Point. But this
movement occurred in 1982 before any “re-audits” began. There have been
no other substantial movements of gold (read the chapter “Problem 11”).
Additional evidence indicating there hasn’t been any movement of Deep
Storage gold comes, ironically, from Thorson. Let’s go back to the
congressional hearing with Paul and Thorson in 2011. After Thorson’s
testimony, a Q&A follows wherein Paul asks Thorson about the audits
from 1974 until 1986, and if it would be “worthwhile to inventory and
assay [audit] this portion of the gold” again. Thorson replies that
would be unnecessary because (39:00):
. . . there is no movement. Those doors aren’t opened. There is nothing there that can happen. Because once those doors are sealed … it’s very obvious if those seals are ever broken. … There is no movement. Those doors are not opened.
A strange thing to say, for Thorson, as this is exactly what he was
continuously doing: re-opening the compartment doors. With this
statement, Thorson confirms that any compartment should never have been
re-opened. Not only is this what happened time and time again, but it
also started precisely from the moment Thorson’s department (OIG) became
involved with the audits in 1983.
In trying to think of any legitimate reason why compartments have
been re-opened, ever, I decided to submit a FOIA request for the audit
protocols that prevailed after 1992. Maybe the audit approach had
changed? If the OIG can’t explain it to me, maybe I can find the answers
in some documents? What if I’m still missing something?
Eventually, I received the Mint’s 2005 audit directive that
shows us whenever a compartment has been “verified. . . the annual
verification [i.e., audit] will be limited to inspection of the Seals.”
Put differently: once physically verified the doors remain closed (from page 11):
Makes sense as this auditing approach matches the one from the 1970s.
Like Thorson said during the congressional hearing in 2011: “So once
you have done that [physical verification], and that seal remains
unbroken, then I am not sure what other benefit there would be to going
back into it at that point. . . . There is no movement. Those doors are
not opened.” (Note in the quote above that “An OIG Representative must
be present for any subsequent opening.” The issue isn’t whether it’s
possible to re-open a compartment. Gold inside a compartment that can
never be opened again has no value. You might as well put it in a rocket
a blast it into the sun. The point is that barring legitimate reasons
to re-open a compartment (e.g., selling the metal inside), they should
remain closed.)
Conclusion
Altogether, the vast majority of Deep Storage vault compartments have
been re-opened for dubious reasons. (For exact data on “re-audits,” see
my article “Audits Of US Monetary Gold Severely Lack Credibility.”)
After years of prosecuting, these are the facts as they lay in front of us:
- The majority of Deep Storage vault compartments have been “re-opened” for unknown or dubious reasons. (Again, for details, see “Audits Of US Monetary Gold Severely Lack Credibility.”)
- Under oath, the auditor, Thorson, carefully avoided the subject of “re-opening” compartments.
- In another written statement, the same auditor lied about the subject of “re-opening” compartments.
- When this auditor was asked for an explanation regarding the “re-opening” of compartments, it could only muster an unfitting one.
I find it astonishing that all falsehoods the auditor (OIG) has
spread have in common that they hide the fact compartments have been
“re-opened.”
My investigation concerns the audits, which appear to have been
executed with an inadequate degree of integrity. Accordingly, there
should be a new audit authorized by Congress, which, incidentally, is
also the opinion of former US Mint Director Edmund C. Moy (see tweet below).
@HereTizz @EdmundCMoy @KoosJansen a "qualitative" audit where Dr. Ron Paul selects a bar randomly for assay? How much would that cost?
@NotoriousCLO @HereTizz @KoosJansen Not much but wouldn't satisfy him. IMO there should be a comprehensive audit authorized by Congress.
Naturally, if the OIG or Treasury wants to respond to my findings,
that would be more than welcome, and I would be happy to engage with
them.
Notes
*: The original documents states “1975” but for the sake of simplicity I have changed it into “1974”. Officially, the Committee for Continuing Audit of the U.S. Government-owned Gold started in 1975, but because they accepted the audit performed in 1974 in their program effectively their program started in 1974.
**: The original documents states “1986” but to improve the readability of this post I have changed it into “1987.”
***: An overview of the “re-audits”:
– From 1983 until 1986, 1,929 tonnes were “re-audited.”
– From 1987 until 1992, 796 tonnes were “re-audited.”
– From 1993 until 2008, 2,296 tonnes were “re-audited.” (By 1986 only 243 tonnes at West Point were not audited. According to the OIG, from 1993 until 2008, 2,539 tonnes were audited. 2,539 minus 243 is 2,296, which is the amount “re-audited” from 1993 until 2008.)
Altogether from 1983 until 2008, 5,021 tonnes have been “re-audited” for unclear reasons.
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