Federal Court: No, the Government May Not Prevent Further Discovery of the Takeover of AIG

This week we broke the story of possible criminal wrongdoing in the government takeover of insurance giant AIG. In the last several months, the US government has tried, unsuccessfully, to throw out plaintiff Kevin Murray’s case, alleging that the government’s takeover of AIG puts it in the position of supporting and promoting Islam and Shariah finance.

In the discovery process attorneys for Murray, David Yerushalmi and Robert Muise (of the Thomas More Law Center), discovered that the takeover itself may have been illegal, and have attempted to get Treasury Secretary under oath to try and untangle this mess. Again, the Fed and the Treasury Department tried to stonewall.

This past Tuesday, Federal district court judge Lawrence P. Zatkoff rejected the Treasury Department’s and the Fed’s effort to prevent any further discovery while the government attempts to convince the Sixth Circuit Court of Appeals to overrule Judge Zatkoff’s earlier ruling rejecting the government’s motion to dismiss the federal lawsuit challenging the government’s takeover of AIG on First Amendment-Establishment Clause grounds.

Tim Geithner: The “extraordinary move to depose a sitting Treasury Secretary”

The lawsuit, captioned Murray v. Geithner et al., was brought by attorneys David Yerushalmi and Robert Muise, representing the plaintiff, Kevin Murray, a tax payer and former combat Marine who served in Iraq. The federal lawsuit alleges that the U.S. government’s takeover and financial bailout of AIG was in violation of the Establishment Clause of the First Amendment.

Specifically, at the time of the government bailout (September-December 2008), AIG was (and still is) the world leader in promoting Shariah-compliant insurance products. Shariah is Islamic law, and it is the identical legal doctrine that demands capital punishment for apostasy and blasphemy and provides the legal and political mandates for global jihad followed religiously by the world’s Muslim terrorists. By propping up AIG with tax payer funds, the U.S. government is directly and indirectly promoting Islam and, more troubling, Shariah.

After the court rejected the government’s motion to dismiss the case and granted Plaintiff’s attorneys until May 2010 to conduct discovery into the AIG takeover, the government filed a motion asking Judge Zatkoff to certify the case for immediate appeal of his denial of the motion and to stay all further discovery. Today the government got its answer: No and no.

In what is an extremely well-written opinion, Judge Zatkoff scolded the government lawyers for filing the wrong motion at the wrong time and then proceeded to tell them they would have lost in any event because his earlier denial of the motion to dismiss was proper and well-considered.

The Court’s recent decision is especially timely and critical for Plaintiff Kevin Murray because his attorneys had previously filed a motion to compel Secretary Timothy Geithner to sit for a three-hour deposition. The basis for the “extraordinary move to depose a sitting Treasury Secretary” arose because Plaintiff’s counsel had earlier deposed the witnesses provided by the Treasury Department and the Federal Reserve Board and the government witnesses either testified inaccurately or feigned ignorance. The only one with all the answers turns out to be Secretary Geithner.

While forcing high government officials to sit for a deposition in civil litigation is extraordinary, federal rules allow a court to take this step when the government official has personal knowledge of a relevant element of the litigation and where the moving party has no reasonable alternative. In this case, attorneys Yerushalmi and Muise argued in their court papers that this exception fits their circumstances in spades.

“The witness designated by the government to testify on behalf of the Fed was less than forthright in his sworn testimony,” Plaintiff’s counsel Robert Muise of the Thomas More Law Center explained. “To his credit, he admitted he had prepared for his deposition by reading media reports and not actually reviewing the relevant documents. That might suggest that his lack of candor was willful blindness.”

David Yerushalmi, who is co-counsel with Robert Muise, laid out the grounds for the motion:

At the time of the takeover decision, Secretary Geithner was the head of the Federal Reserve Bank of New York and he was the leading advocate of the AIG takeover.

Moreover, he designed how the U.S. government would not only bail out AIG with tax payer dollars, but how the government would illegally take control of 80% of the voting shares through what was patently an illegal and invalid trust arrangement. It is apparent from the discovery we’ve conducted to date that this was done purposefully and with an intent to conceal the illegal takeover with a fraudulent trust.

* Why he forced AIG to take on so much debt that AIG’s credit rating, already in peril, was sure to collapse without yet additional government funds, essentially guaranteeing AIG would remain a ward of the state?

* Why he imposed such Draconian terms on AIG that there was no way it could survive without additional billions from U.S. tax payers?

* Why he then used AIG to secretly funnel 100% payoffs to AIG’s counterparties, including his colleagues and friends at Goldman Sachs, Merrill Lynch, and the European giant, Société Générale. In other words, why did Geithner decide to destroy AIG’s chances of survival as a private entity while surreptitiously saving and preserving private ownership of other domestic and foreign financial companies? And,

* Why he took control of 80% of AIG’s voting shares without legal authority to do so and used a fraudulent trust arrangement to conceal the illegal takeover?

BREAKING NEWS:

The court just today granted plaintiff Murray’s motion for leave to amend the complaint to include yet additional TARP funds provided to AIG after the filing of the complaint. While the court did not allow the plaintiff to add AIG as a defendant as he had also requested, Murray’s attorneys tell us that they had accomplished enough discovery to know where to look for the skeletons in AIG’s closet in any event.

I evaluate the quality of the argument without regard to the identity of the speaker.

LOL! You don't say.

My primary point is that the Founders, as a group, were light years ahead of our current federal politicians in their understanding of money and banking.

Yeah, those Articles of Confederation were a ringing success.

My reference to the Louisiana Purchase was based on your baffling insistence upon bringing it up, as if some larger meaning might be divined from it.

I brought up the LP as a specific example of Jefferson's use of banks to accomplish something great. Your reply:

The cause of a Free Republic is doomed if everyone thinks well, just because we had the Louisiana Purchase, the federal government can do anything it wants, and the Constitution poses no constraints.

And you're the one who's baffled? Clue me in on how you made the leap from bank financing to an unrestrained federal government that can do anything it wants.

Wrong question. What part of the Constitution empowers the federal government to print money? None. The Founders loathed paper money and specifically decreed that no State could make anything but gold and silver legal tender.

They never imagined that the federal government would arrogate unto itself any power to declare anything legal tender; that power, like most others was a power remaining in the states, except to the extent limited by the Constitution to avoid the whole paper money problem. Not until President Grant packed the Supreme Court was the tender power suddenly found in the Constitution, having been decisively rejected but a few years earler by an earlier Supreme Court.

It seems obvious to me that once the government has power to print money that is “legal tender”, the wherewithal to spend is there, and then all you need are some politicians to spend it.

You might find this article, written by Warren Buffett’s father in 1948, of some interest:

http://www.fame.org/PDF/buffet3.pdf

A more extensive explanation of the problem, in the form of a critique of the Supreme Court’s opinion by a Harvard professor at the time, may be found here:

http://books.google.com/books?id=z1HPAAAAMAAJ&printsec=frontcover&dq=wounded+in+the+house+of+its+guardians&source=bl&ots=CqI_JmuruD&sig=4zhuvWRhmjyXbsUuoSCbPwQT7Qc&hl=en&ei=ITZzS_CpF4HAsQOZ4uWrAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CAkQ6AEwAA#v=onepage&q=&f=false

Wrong question. What part of the Constitution empowers the federal government to print money? None.

You might want to check up on bills of credit.

The Founders loathed paper money and specifically decreed that no State could make anything but gold and silver legal tender.

Some Founders loathed paper money. Yes, the Constitution forbids states from coining money or making anything but gold or silver legal tender. It also forbids states from issuing bills of credit, but there is no prohibition on Congress.

Again, see bills of credit. Congress also declared the Piece of Eight as legal tender. The horror.

Not until President Grant packed the Supreme Court was the tender power suddenly found in the Constitution, having been decisively rejected but a few years earler by an earlier Supreme Court.

LOL! Are you saying all the Justices rejected it? Or was it closer than that. Did Congress expand the court or US Grant...somehow, I think it was Congress.

It seems obvious to me that once the government has power to print money that is “legal tender”, the wherewithal to spend is there, and then all you need are some politicians to spend it.

I guess you would feel better if they coined steel slugs and called them $100. That, too would be entirely appropriate under the constitution.

You are helping cure me of hyperbole.

With respect to "necessary and proper," please read it in context: "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers...". The contextual and other evidence is overwhelming as to the correct frame of reference: unless the power is expressly granted to the federal government, the federal government doesn't have it. Inferring additional powers does great violence to the Constitutional design.

That you would refer to a "magical time" without legal tender laws indicates a frame of reference somehow assuming that such a government power is necessary. But it is utterly unnecessary, and commerce proceeded for thousands of years without it. A free people can choose to accept or reject what others proffer as money. Gold and silver stood the test of time, paper had ignominiously and repeatedly failed, and hence the Constitutional restriction that no American government could ever force the acceptance of anything else but gold and silver.

Once this restriction was lifted, the evils foreseen by the Founders were all but inevitable; things took a long time to fall apart because the system still worked between governments, until Nixon closed the gold window and forced everyone to take American paper. Now the end is in sight.

Inferring additional powers does great violence to the Constitutional design.

Actually, they are called "implied powers". I'll side with the Founding Father (Alexander Hamilton) who was actually instrumental in the design and ratification of the Constitution. I guess you believe that Hamilton had trouble "reading in context" and he had a "poor frame of reference". No?

That you would refer to a "magical time" without legal tender laws indicates a frame of reference somehow assuming that such a government power is necessary.

I asked for the magical time in U.S. History when there was no legal tender. Not a thousand years ago...just in the "frame of reference" called U.S. History.

...hence the Constitutional restriction that no American government could ever force the acceptance of anything else but gold and silver.

How about specfically citing where this is located in the U.S. Constitution?

Once this restriction was lifted, the evils foreseen by the Founders were all but inevitable.

You might want to practice that whole hyperbole thing some more. Are you removing Hamilton, Madison, Marshall and Washington from your list of "Founders"?

This is not going well. Powers might be implied, but only insofar as they are necessary to execute an express, enumerated power.

Hamilton, writing in The Federalist (No. 32), explained: “as the plan of the convention aims only at a partial union or consolidation, the state governments would clearly retain all the rights of sovereignty which they before had, and which were not, by that act, exclusively delegated to the United States”.

Hamilton also wrote in 1783 (before the Constitution was drafted): “To emit an unfunded paper as a sign of value ought not to continue a formal part of the constitution, nor ever hereafter to be employed; being, in its nature, pregnant with abuses, and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people.”

And the Constitutional restrictions having been abandoned, we now have a corrupt government and an immoral people. And when you ask me about “specifically citing where this is located in the U.S. Constitution,” the clearest instance is Art. I, section 10: “No state shall ... make anything but gold and silver coin a tender in payment of debts”. The ability to make something a tender was part of the “rights of sovereignty” retained by the states, and which had to be limited because of the extraordinary evil of paper money. Any one of the Founders of which I am aware would be appalled to think that somehow the Constitution had been twisted into conferring such a power on the United States government.

This is not going well.

Indeed, it is not. Most would have stopped at the inflation/deflation quote.

Powers might be implied, but only insofar as they are necessary to execute an express, enumerated power.

Tell it to Chief Justice John Marshall. Or is he de-Founder-ed?

...the state governments would clearly retain all the rights of sovereignty which they before had, and which were not, by that act, exclusively delegated to the United States”.

That's right. The States, for example, could no longer coin money, or regulate the value thereof...nor could they emit bills of credit. Boy, they must have been ticked when they found out the Federal govt. cold do all of those.

Hamilton also wrote in 1783...

Did he? Considering the track record, I think I'll need to see a real citation.

Clearest? How about only. I guess you were busy hyperbolizing and missed the word "State" (I even bolded it in post #129!)

Any one of the Founders of which I am aware would be appalled to think that somehow the Constitution had been twisted into conferring such a power on the United States government.

I'd be appalled to find out any Founders read section 10 and didn't realize it applied to the States.

Well, I will persist with this because I have had this problem before, and I continue to hope that if more people could understand the Constitution correctly, it might advance the cause of a Free Republic.

You do not dispute that the “necessary and proper” language refers to carrying out the enumerated powers by the plain language of the Constitution. Instead, you say “tell it to Chief Justice John Marshall”. Since you seem to regard the authority of individuals to exceed the authority of the language and structure of the Constitutional text itself (not a helpful attitude for anyone interested in promoting a government of laws, rather than a government of men), I will appeal to Marshall’s own words on the issues set forth in this thread.

“This government is acknowledged by all to be one of enumerated powers. The principle, that it can exercise only the powers granted to it, would seem too apparent to have required to be enforced by all those arguments which its enlightened friends, while it was depending before the people, found it necessary to urge.” McCulloch v. Maryland, 17 U.S. 316 (1819).

As the historian to whose book I referred you explained,

“The inflexible adversary of paper money, detesting it with a hatred almost amounting to a passion, was the chief justice of the United States, John Marshall. While he was on the bench, no case could come before him, in which power was claimed for the United States to issue bills of credit; because at that day he and everyone else understood and willingly acknowledged that the power to emit bills of credit was withheld from the United States, was forbidden by not being granted.” (p. 94; emphasis added)

That hostility is evident, for example, in Craig v. Missouri, 29 U.S. 410, 432 (1830), in which Chief Justice Marshall wrote:

“At a very early period of our colonial history, the attempt to supply the want of the precious metals by a paper medium was made to a considerable extent; and the bills emitted for this purpose have been frequently denominated bills of credit. During the war of our revolution, we were driven to this expedient; and necessity compelled us to use it to a most fearful extent. The term has acquired an appropriate meaning; and ‘bills of credit’ signify a paper medium, intended to circulate between individuals, and between government and individuals, for the ordinary purposes of society. Such a medium has been always liable to considerable fluctuation. Its value is continually changing; and these changes, often great and sudden, expose individuals to immense loss, are the sources of ruinous speculations, and destroy all confidence between man and man. To cut up this mischief by the roots, a mischief which was felt through the United States, and which deeply affected the interest and prosperity of all; the people declared in their constitution, that no state should emit bills of credit. If the prohibition means any thing, if the words are not empty sounds, it must comprehend the emission of any paper medium, by a state government, for the purpose of common circulation.”

But you seem to think that Chief Justice Marshall would have supported the power of the United States to emit bills of credit. Why on earth do you think so? How then, could he possibly believe that the mischief had been cut up by the roots? Surely you do not think that he would have regarded federal officials by their nature as so much more enlightened than state officials, that they would not abuse such a power?

To appeal to another early giant, albeit not a founder, as Daniel Webster explained in a speech before the Senate on December 21, 1836, on the subject of the Specie Circular (from that magical time before the tender laws):

“Most unquestionably there is no legal tender, and there can be no legal tender, in this country, under the authority of this government or any other, but gold and silver, either the coinage of our own mints, or foreign coins, at rates regulated by Congress. This is a constitutional principle, perfectly plain, and of the highest importance. The states are expressly prohibited from making anything but gold and silver a tender in payment of debts; and although no such express prohibition is applied to congress, yet as congress has no power granted to it, in this respect, but to coin money and to regulate the value of foreign coins, it clearly has no power to substitute paper, or anything else, for coin, as a tender in payment of debts and discharge of contracts. . . . The legal tender, therefore, the constitutional standard of value, is established and cannot be overthrown. To overthrow it, would shake the whole system. The constitutional tender is the thing to be preserved, and it ought to be preserved sacredly, under all circumstances.”

This quote is from pp. 93-94 of the book I hyperlinked to; the citation to the 1783 Hamilton quote previously provided is also from that book (he cites Hamilton’s Works, II, 271.)

I do not dispute that in Julliard v. Greenman, 110 U.S. 421, 446 (1884), the Supreme Court held that the prohibition on making anything other than gold and silver coin legal tender applied only to the States, and not the federal government. So if you are of the school of thought that says that the law is what the Supreme Court says it is, then there is no point in further discussion.

But if you wish to understand how that opinion was dead wrong, and a monstrous inversion of the whole fundamental idea and design of the Constitution, then you ought to learn more about what the Founders really thought. Because it is the widespread ignorance of what they really thought, and how the Constitution was really supposed to work, that has fueled the cancerous growth of the federal government.

Since you seem to regard the authority of individuals to exceed the authority of the language and structure of the Constitutional text itself...

More strawman arguments? Then you quote McCulloch v. Maryland, lol! I guess Maryland could tax the Bank of the U.S. and there was no implied power to establish an National Bank...that, get this, emited notes. Perhaps you should have read all of McCulloch v. Marylsnd:

Among the enumerated powers, we do not find that of establishing a bank or creating a corporation. But there is no phrase in the instrument which, like the Articles of Confederation, excludes incidental or implied powers and which requires that everything granted shall be expressly and minutely described.

...the people declared in their constitution, that no state should emit bills of credit. If the prohibition means any thing, if the words are not empty sounds, it must comprehend the emission of any paper medium, by a state government, for the purpose of common circulation.”

Gee, a lot of talk about prohibiting states from issuing bills of credit..thanks.

I'm very much of the school that frowns on strawman arguments. Congress passed the Legal Tender Acts, not the Supreme Court. Now, if you have a problem with judicial review, you can also take that up with John Marshall (that's humor).

Last paragraph = lotsa hyperbole.

As to McCullough v. Maryland, of course Chief Justice Marshall defended the proposition that the federal government could establish a bank, but that is an entirely different question than the question of whether the federal government could make any particular thing besides gold and silver legal tender.

Marshall defended the bank as, in substance, a mere instrumentality for moving money about in furtherance of other federal purposes:

“It is not denied, that the powers given to the government imply the ordinary means of execution. That, for example, of raising revenue, and applying it to national purposes, is admitted to imply the power of conveying money from place to place, as the exigencies of the nation may require, and of employing the usual means of conveyance. But it is denied, that the government has its choice of means; or, that it may employ the most convenient means, if, to employ them, it be necessary to erect a corporation.”

Marshall’s views on the Bank were not of course uniformly shared, albeit shared by the majority, at least until the ascendency of Andrew Jackson. Jackson’s criticisms resonate today; he criticized the Bank of the United States as a corrupt entity that preyed upon the people and influenced elections; today Fannie and Freddie bought the likes of Barney Frank and Barack Obama, and imposed a half-trillion dollar lien upon the taxpayers. So if I were drafting a Constitution today, I would expressly prohibit Congress from chartering banks or corporations mostly to prevent corruption.

But Marshall himself distinguished between the power to create a bank, a mere instrumentality, and the power to force acceptance of government paper as money. I have shown you his antipathy to paper money.

Remember that in the Articles of Confederation, the power to emit bills of credit was given to Congress, yet the Constitutional Convention expressly rejected (9-2) a proposal to give the same power to Congress under the Constitution. So while you are generally correct that the Articles of Confederation were perceived as creating a government of inadequate powers, in this instance the trend was in the opposite direction.

Marshall had occasion to write on the question of emitting bills of credit under the Articles of Confederation, but not, as far as I know, under the Constitution. As to the former question, he wrote: “Congress emitted bills of credit to a large amount, and did not, perhaps could not, make them a legal tender. This power resided in the states.” Craig v. Missouri, 4 Pet. 410, 435.

I am baffled by your last statement that Congress passed the legal tender laws. Of course. So what? Are you saying that just because Congress passed a law it is constitutional? It seems a strawman for me to suggest it, but I don’t know why else you mention it.

I leave you with a challenge: let us suppose a state passed a law saying we make gold and silver coin the only legal tender in payment of debts, action in perfect congruence with the Constitutional language. Congress, however, declares that Federal Reserve Notes are legal tender for all debts (as it says right on them), and the case comes to the Supreme Court as to whether Congress’ command can supplant the state’s law. Would you really argue that the federal government’s inherent powers, such as you imagine them, trump the express language of the Constitution?

As to McCullough v. Maryland, of course Chief Justice Marshall defended the proposition that the federal government could establish a bank...

Hurray, you're finally getting it.

...but that is an entirely different question than the question of whether the federal government could make any particular thing besides gold and silver legal tender.

Crap, you lost it.

I am baffled by your last statement that Congress passed the legal tender laws. Of course. So what?

Dude, go back and read your own post. You clearly erected a strawman argument where the Supreme Court legislates Legal Tender Laws from the bench...and somehow I approve of that scenario.

I leave you with a challenge: let us suppose a state passed a law saying we make gold and silver coin the only legal tender in payment of debts

Suppose you indicate what their legal tender law would force me to pay for. Turnpike tolls, state income tax? Make sure you come up with a good specific example, because we already know that govt is not going to force me to put gold coins in a vending machine. Also, where does the state get these gold and silver coins if they can't coin money?

Besides, you never did answer my earlier question: "When was the last time you were forced to use legal tender?"

If I put up a strawman argument about the Supreme Court legislating I didn’t mean to. What I meant was that in upholding Congress’ tender law, the Supreme Court failed in its duty to uphold the Constitution.

I have not personally been forced to use legal tender in circumstances where I do not want to. But where the rubber meets the road is in the situation rapidly approaching, wherein the paper which the government demands you take as legal tender is rapidly depreciating in value because the government has issued too much of it.

It’s not about forcing you to pay for anything (cf. the lastest constitutional assault: mandatory health insurance). It’s about killing the power of the market to hold governments accountable for issuing too much paper. Without legal tender laws, if the government bank decided to emit too many bills, they would start to trade at a discount to gold and silver. That is begining to happen now. Right now, I can still hold gold to avoid this problem. But the power to force legal tender for paper is hand and hand with the power to outlaw any substitute, such as gold.

This is all about freedom. If you don’t have the freedom to demand to be paid in gold and silver, or to have a contract promising payment in gold and silver enforced, you have lost a vital attribute of freedom. You have lost the ability to protect yourself against government theft. When Roosevelt seized American’s gold, it was a theft of the precise sort the Constitution was designed to protect against. The road that led to Roosevelt’s seizure started with the assertion and upholding of legal tender laws.

Or think about what just happened in North Korea: suddenly all the old currency was called in to be exchanged for new currency at a fraction of the former value. This has happened over and over again throughout history (indeed, there is not a scheme for paper money that has ever succeeded in history), and the Constitution was designed to protect us against things like that.

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