Hunts Guilty of Scheme to Corner Silver : Texans Ordered to Pay $130 Million to Firm in Fraud Convictions
The flamboyant Hunt brothers of Texas, whose combined riches once totaled an estimated $6 billion, were found guilty in federal court Saturday of attempting to illegally corner the silver market eight years ago--a move that marked the beginning of a downward financial spiral that has eroded much of their vast fortune.
The three Hunts--Nelson Bunker, William Herbert and Lamar--were ordered by a New York jury to pay more than $130 million in damages to the Peruvian government’s mineral marketing company, which contended in its civil suit that it was ruined by the brothers’ investments.
The company, Minpeco S. A., alleged in the suit that the Hunts broke antitrust and racketeering laws by scheming to corner the silver market--and then trying to do so by buying a third of the world’s supply in 1979 and 1980.
Two Guilty of Racketeering
Jurors in the trial, which began last February, found the three brothers guilty of violating fraud, commodities and antitrust laws. In addition, Nelson, 62, and William, 59, were found guilty of racketeering charges, but the civil case verdict carries no criminal penalties.
Only Lamar, 56, the owner of the Kansas City Chiefs football team, was found not guilty of racketeering. The jury also found that International Metals Investment Co. and Mahmoud Fustok, a prominent race horse owner, had participated in the conspiracy.
The metals investment company was owned by two Arab sheiks and two of the Hunt brothers. Fastouk is the brother-in-law of the Saudi Arabian crown prince. Another defendant was a Lebanese businessman now living in Brazil. The sheiks and the Lebanese businessman, Naji Nahas, have no U.S. holdings and did not challenge Minpeco’s court papers.
Lost $1.5 Billion
During the Hunts’ buying spree, the price of the precious metal went from $9 an ounce to more than $50 an ounce between September, 1979, and January, 1980. Then the bottom fell out of the market and prices plummeted to $10 an ounce. The Hunts bought 59 million ounces of silver in less than a year, but instead of making $4 billion, as they had projected, the brothers ended up losing $1.5 billion.
The jury delivered its verdict after six days of deliberations. It determined that the Hunts had cost Minpeco $63 million in short silver futures contracts, $24.5 million in interest on loans to pay for its losses and $12.2 million in future trades. The jury said, however, that damages should be offset by $33.4 million Minpeco earned on silver it held during the same period.
Lawyers for the Peruvian national company said they arrived at the $130-million figure because some of the judgments will be trebled because of the racketeering convictions. The company had originally sought $450 million in damages.
The Hunts had denied charges of trying to corner the market, contending that world political events drove up the price of silver.
One of the Hunts’ lawyers, Paul J. Curran, said there would be no comment on the verdict. Mark Cymrot, a lawyer for Minpeco, told the Associated Press that the jury rewarded the company’s perseverance and “faith in the U.S. system. Minpeco is very happy.”
Swiss Bankers, Arab Sheiks
During the trial, testimony was spiced with descriptions of meetings in far-flung parts of the globe, as well as the doings of Swiss bankers, Arab sheiks and Wall Street commodities traders. Six financial institutions were named in the suit, but they settled out of court for $64.6 million. They included Merrill Lynch & Co., E. F. Hutton & Co. Inc., Banque Populaire Suisse, Prudential-Bache Securities, ContiCommodity Services Inc. and AML Futures Inc.
The verdict against the Hunts is the latest in a long line of setbacks that, according to a court document, has eroded the wealth of the brothers to about $1 billion. The silver market debacle might have been weathered if it were not for the fact that the Hunts’ major source of wealth is oil, which also went into a tailspin four years ago.
Last month, they filed a bankruptcy reorganization plan for their Placid Oil Co., just as they did in June for their Penrod Drilling Co. Placid is among the world’s biggest independent producers and Penrod is one of the largest drillers. Court approval of both plans is pending.
Accuse Banks of Fraud
In 1986, the Hunts began a bitter battle with bank creditors after oil prices skidded and the brothers defaulted on $1.5 billion in debts. When negotiations to restructure the debts failed, the Hunts filed suit in the Dallas federal court, accusing the banks of, among other things, fraud and breach of contract. The banks, in turn, demanded full repayment of all loans and the Hunts filed the first of their bankruptcy petitions.
Recently, Lamar Hunt sold his 13-acre Dallas estate and last September, Nelson Bunker sold his stable of race horses for $47 million.