WASHINGTON — Federal regulators are preparing to resume proceedings accusing the Hunt brothers of Texas of manipulating the silver futures market now that the jury in a federal court case in New York has ruled that the brothers participated in a conspiracy to corner the silver market in 1979 and 1980.
The New York jury Saturday ordered the Hunts and two other parties to pay more than $130 million to Minpeco SA, the Peruvian government's silver mining company, which lost millions of dollars in the silver market squeeze nearly a decade ago.
A Commodity Futures Trading Commission case against Nelson Bunker Hunt, William Herbert Hunt and Lamar Hunt had been put on hold in February by U.S. District Judge Morris Lasker, who presided over the Minpeco suit.
CFTC's civil complaint, the biggest market-manipulation case ever filed by the agency, accuses the Hunts and others of rigging the price of silver futures between the fall of 1979 and March, 1980, when the price of silver collapsed. CFTC enforcement director Dennis Klenja said the government's case could be helped by Saturday's jury verdict, which covers many of the same issues raised by government commodity regulators. "We may be able to utilize some part of the verdict," Klenja said.
If CFTC wins its civil case, the Hunts could be permanently banned from trading in all futures markets and fined up to $100,000 for each violation of federal commodity laws. The case accuses the Hunts of violating the law over a period of months, but the agency has not yet specified how many separate violations occurred.
Lawyers for thousands of private investors who lost money in the silver market said this week that they, too, hope to piggyback on the Minpeco verdict.
"It looks as if that has established central parts of our case," said Ganine Gambale of the New York law firm of Deutsch & Frey, which is handling two lawsuits on behalf of some 18,000 investors who sold silver futures short, hoping the price would fall.
Other Investor Suits
The price of silver climbed from $9 an ounce to $52 an ounce starting in the fall of 1979 as the result of what the jury in the Minpeco case said was a conspiracy by the Hunts and others to corner the market.
Gambale said many small investors "thought the price seemed to be too high, it had to go down. They didn't know the game was rigged, and they lost everything."
The Hunts also face a series of lawsuits from investors who tried to ride along as silver prices were rising and lost money when the price skidded from $52 an ounce on Jan. 21, 1980, to $10 an ounce two months later. Those lawsuits blame the Hunts for the market collapse.
Saturday's verdict brings to $198.6 million the damages won for Minpeco in a series of legal proceedings by the Washington law firm of Cole, Corette & Abrutyn. Attorney Shawn Corette said his clients have already collected $64.6 million in a series of out-of-court settlements with brokers and banks involved with the Hunts.
Those settlements include $34 million by Prudential-Bache and Merrill Lynch & Co., $11.5 million from E. F. Hutton, $9.5 million from Banque Popular Suisse, $6 million from the commodity trading arm of Continental Grain Co. and $3.65 million from ACLI, a commodity firm now owned by Donaldson, Lufkin & Jenrette.
Although those settlements put millions of dollars in Minpeco's coffers and built up the pressure on the Hunts, they did not have the legal impact of Saturday's verdict, which went beyond any previous proceedings in holding the Hunts responsible for silver's roller-coaster ride.
The jury found that the Hunt brothers and others violated antitrust laws and the Commodity Exchange Act and committed fraud in trying to corner the market in silver.
The jury said the market manipulation also involved Mahmoud Fustok, a member of the royal family of Saudi Arabia, and International Metals Investment Co., a Bermuda firm controlled by Bunker and Herbert Hunt and two Arab sheiks.
All the defendants except Lamar Hunt were also found guilty of violating provisions of the Racketeer-Influenced Corrupt Organizations Act.
Hunt spokesmen issued statements Monday saying the verdict will be appealed.
The jury ruled that Minpeco has suffered $66.2 million in damages, and that because of the antitrust, RICO and fraud violations it was entitled to treble damages, a total of $198.6 million.
The amounts already collected in the out-of-court settlements will be deducted from that, leaving $133.95 million to be paid by the Hunts and the other defendants, Corette said. He said his firm began handling some U.S. corporate matters for Minpeco in 1980 and was then asked whether the government-owned company might be able to sue.
He would not say how much the law firm would make on the suits, which were handled on an hourly basis rather than the contingent-fee approach that sometimes gives lawyers up to one-third of the settlement. "It was very expensive litigation," he said.