How heirs of alleged rare coin thief won gamble against U.S. Mint

April 20, 2015

(Reuters) – Way back in October 2005, I had lunch with an entertainment lawyer named Roy Langbord and Langbord’s own lawyer, Barry Berke of Kramer Levin Naftalis & Frankel, to talk about a cache of exceedingly rare gold $20 coins known as 1933 Double Eagles. 1933 Double Eagles were minted in the midst of President Roosevelt’s gold recall, and all of them were supposed to have been melted down. A handful of the coins nevertheless disappeared from the U.S. Mint, in a theft the federal government believed to have been masterminded by Langbord’s grandfather, a Philadelphia jeweler named Israel Switt.

Switt was never prosecuted and his supposed caper would have been long since forgotten had it not been for a 1996 Secret Service sting operation to recover the only 1933 Double Eagle known to have evaded U.S. authorities. That coin, once owned by King Farouk of Egypt, was seized from a British coin dealer who brought it to the Waldorf-Astoria hotel in New York City, expecting to make the biggest sale of his career and instead ending up face down on the Waldorf’s carpet with his hands cuffed behind his back. Berke had represented that British coin dealer and not only got the criminal case dropped but managed to push the U.S. government into a historic deal in which the Farouk 1933 Double Eagle would be deemed the only one permitted to be owned privately. (Two are owned by the Smithsonian.) The government agreed to sell the Farouk coin at auction and to split the proceeds – $7.6 million, as it turned out – with Berke’s client, the British coin dealer.

Roy Langbord knew nothing of his grandfather’s past life as a suspected gold coin thief until the 2002 auction of the Farouk coin. But when he noticed a brief account of the coin’s history, he urged his mother to search the jewelry store she had inherited from her father. That search turned up the astonishing discovery of 10 additional 1933 Double Eagles, which had apparently never been removed from the hiding place where Izzy Switt stored them. The Langbords, who knew what Berke had accomplished for the British coin dealer, immediately hired him to advise them what to do with their 10 1933 Double Eagles.

The Mint had pledged in the Farouk auction that private ownership of any other 1933 Double Eagle was illegal. The government was also convinced that Switt had gotten away with stealing the coins, even though he’d been  identified as the architect of the scheme in a 1940s Secret Service investigation. Berke and the Langbords knew there was no way the Mint would willingly permit Switt’s family to keep the newly discovered stash.

So Berke counseled the Langbords to send the coins to the U.S. Mint to be authenticated but to specifically preserve their ownership rights. That’s what the family did in 2004. At the time of my 2005 lunch with Berke and Langbord, when I was finishing up a book about the Farouk coin, Roy Langbord told me the family believed they’d made the best choice. “What else could we do?” he said.

The Langbord family made one of history’s great gambles when they turned over those 10 1933 Double Eagles to the Mint for authentication. On Friday, a split panel of the 3rd U.S. Circuit Court of Appeals ordered the government to return the coins to the Langbords. The U.S. Attorney’s office in Philadelphia told my Reuters colleague Jon Stempel that the government is considering its options for appeal, but if the decision holds up, the Langbord family will be the proud owners of 10 coins worth millions of dollars, even though both a judge and a jury have determined that their father and grandfather stole the coins.

That outcome is the direct result of smart litigation calculations by Berke and the Langbords and corresponding mistakes (albeit understandable ones) by the government.

Start with the family’s initial decision to cede the coin to the Mint for authentication. Berke and the Langbords surely knew the government wouldn’t simply authenticate the coins and hand them back over to the family of an accused swindler. The government, after all, believed the coins were the property of the United States to begin with, since they had never officially been released to the public.

Berke had insisted in litigation over the Farouk coin that 1933 Double Eagles might have left the Mint legally in the first few days after the coins were produced. He and the Langbords could have filed a declaratory judgment suit, asking for a court ruling that the family owns the coins. That would have placed the burden of proof on the Langbords, however. Instead, by baiting the government to bring a forfeiture action, Berke and the Langbords shifted the burden of proof to the government. In the best-case scenario for the Langbords, the government might have agreed to a settlement similar to the Farouk coin deal, in which the Langbords received compensation for the 10 1933 Double Eagles. But in the worst-case scenario, the government would have to prove its ownership of the coins based on 80-year-old documents and double hearsay evidence from long-dead investigators.

After the Mint authenticated the coins, Berke requested their return to the Langbords. The Mint, in so many words, said that was never going to happen. It also said it had no intention of bringing a forfeiture action because the coins had always been the government’s property to begin with. (The chain of events is outlined in the 3rd Circuit decision.)

Berke then filed a seized asset claim demanding the return of the coins. Under Civil Asset Forfeiture Reform Act of 2000, his filing started the clock on the government’s 90-day deadline to bring a forfeiture action or return the coins. The Mint once again said it was keeping the Double Eagles and was not obliged to seek the forfeiture of its own property.

That was the government’s fatal mistake, although it didn’t look that way for a long time. Berke filed a suit for the Langbords, arguing that the government had violated their Fourth and Fifth Amendment rights by seizing the coins without due process. U.S. District Judge Legrome Davis of Philadelphia agreed that the family’s constitutional rights had been breached. But he refused to return the coins. Davis said the 90-day clock hadn’t begun to run on the forfeiture. His remedy to the ownership mess was to permit the government to file a forfeiture action and declaratory judgment suit. Judge Davis sided with the government on key evidentiary questions, including the admission of old Secret Service reports concluding Switt was the mastermind of the theft of the 1933 Double Eagles. A Philadelphia federal jury delivered a verdict that the coins should be forfeited to the government. Davis entered a declaratory judgment that the Double Eagles belonged to the feds.

But the 3rd Circuit majority decided that the case never should have gone to a jury verdict and declaratory judgment. According to Chief Judge Theodore McKee and Judge Marjorie Rendell, in an opinion by Rendell, the government surrendered its rights to the coins when it failed to bring a timely forfeiture action in response to the Langbords’ seized asset claim. “Because the government failed to do so, the Langbords are entitled to the return of the Double Eagles,” Judge Rendell wrote. (In a dissent, Judge Dolores Sloviter agreed that the government blew its deadline but said its failure shouldn’t result in the return of the Double Eagles to the Langbords.)

So what happens now to the coins? A split panel decision usually means a request for en banc review by the losing party, in this case, the government. And considering that the government has been litigating over 1933 Double Eagles since 1996, when the Secret Service seized the Farouk coin, it doesn’t have much to lose from an en banc petition. The Justice Department also may have an institutional interest in striking down precedent holding that if it doesn’t bring a forfeiture action within 90 days of receiving a seized asset claim, it surrenders its right to the disputed property.

It would be intriguing if the anonymous winning bidder for the Farouk coin – who paid $7.6 million under the Mint’s assurance that the Farouk coin would be the only 1933 Double Eagle permitted to remain in private hands – were to bring an action against the government since 10 more coins have been legitimized. I suspect that Berke – who is now best known as defense counsel for former SAC Capital portfolio manager Michael Steinberg – has had enough of Double Eagle litigation after 19 years. But maybe his Kramer Levin partner Eric Tirschwell, who worked with Berke on the Langbord case, is up for another round.

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