Gold Coins: The Mystery of the Double Eagle

Tuesday, August 30, 2011

How did a Philadelphia family get hold of $40 million in gold coins, and why has the Secret Service been chasing them for 70 years?

The most valuable coin in the world sits in the lobby of the Federal Reserve Bank of New York in lower Manhattan. It's Exhibit 18E, secured in a bulletproof glass case with an alarm system and an armed guard nearby. The 1933 Double Eagle, considered one of the rarest and most beautiful coins in America, has a face value of $20—and a market value of $7.6 million. It was among the last batch of gold coins ever minted by the U.S. government. The coins were never issued; most of the nearly 500,000 cast were melted down to bullion in 1937.

Most, but not all. Some of the coins slipped out of the Philadelphia Mint before then. No one knows for sure exactly how they got out or even how many got out. The U.S. Secret Service, responsible for protecting the nation's currency, has been pursuing them for nearly 70 years, through 13 Administrations and 12 different directors. The investigation has spanned three continents and involved some of the most famous coin collectors in the world, a confidential informant, a playboy king, and a sting operation at the Waldorf Astoria in Manhattan. It has inspired two novels, two nonfiction books, and a television documentary. And much of it has centered around a coin dealer, dead since 1990, whose shop is still open in South Philadelphia, run by his 82-year-old daughter.
"The 1933 Double Eagle is one of the most intriguing coins of all time," says Jay Brahin, an investment adviser who has been collecting coins since he was a kid in Philadelphia. "It's a freak. The coins shouldn't have been minted, but they were. They weren't meant to circulate, but some did. And why has the government pursued them so arduously? That's one of the mysteries."
The story begins just after the inauguration of Franklin Roosevelt on Mar. 4, 1933, in the midst of the Great Depression. Thousands of banks had already gone under as people panicked and withdrew their gold and other deposits. As the gold supply—much of it kept at the Federal Reserve Bank of New York—dwindled, the country faced possible insolvency. On Apr. 5, Roosevelt issued Executive Order 6102, which prohibited the hoarding of gold and required citizens to exchange their gold coins for paper currency.
It was Roosevelt's distant cousin, Theodore, who had commissioned the sculptor Augustus Saint-Gaudens to design a high-relief $20 gold coin in the early 1900s. Teddy Roosevelt wanted an American coin that matched the beauty of the ancient Greek ones, and Saint-Gaudens completed the work just before his death from cancer in 1907. On one side is an image of Liberty, a figure reminiscent of a Greek goddess, hair flowing, olive branch in her left hand, torch in her right. On the other is an eagle in midflight, the sun rising behind it.
The Mint had produced the Saint-Gaudens Double Eagles almost every year since 1907, and 1933 was no different. By May, as the gold recall was under way, the Mint finished pressing 445,500 of the coins. None were issued. Instead the coins, weighing nearly 15 tons, were put into 1,780 canvas bags and sealed behind three steel doors in Philadelphia Mint Vault F-Cage 1. Only two were thought to have been saved, and they were sent to the Smithsonian.
In January 1934, Congress passed the Gold Reserve Act, which allowed the President to nationalize, in effect, the gold held by the Federal Reserve and increase the price of an ounce. This in turn devalued the dollar, which was supposed to stimulate the troubled economy. The director of the Mint then ordered all the nation's gold coins to be melted into bars. The bars would be kept in the newly constructed Fort Knox. The task was enormous: It wasn't until early 1937 that the Philadelphia Mint sent its $50 million worth of coins, including the 1933 Double Eagles, to the furnace.
Around this time, a 41-year-old Philadelphia jeweler named Israel Switt offered several 1933 Double Eagles to some of the most prominent coin dealers and collectors of the day, according to Secret Service documents since made public. Switt sold one, now Exhibit 18E, to a Texas dealer who then sold it to King Farouk of Egypt for $1,575. A royal representative in the U.S. requested an export license for the coin and, unbeknownst to the Secret Service, the Secretary of the Treasury issued one on Feb. 29, 1944.
That same month, Stack's, the rare coin dealer in New York, announced an auction for another Double Eagle. It wasn't until early March, though, that the Secret Service heard about the sale and realized that some of the coins had been taken out of the Mint. King Farouk's Double Eagle had already been delivered to him in Cairo by diplomatic pouch. Agents confiscated the second coin before Stack's could sell it and launched the investigation that continues today. "The government has been fanatical about seizing and destroying these coins," says Robert W. Hoge, curator of North American coins and currency at the American Numismatic Society. "They're famous because the government has been seizing them since the 1940s."
The first phase of the Secret Service investigation would trace 10 1933 Double Eagles to Switt, a reclusive jeweler and coin dealer who, like so many in this story, believed the coins possessed talismanic powers. His only child, Joan Langbord, who worked with him until his death in 1990 at age 95, told the Philadelphia Inquirer that her father "could be obnoxious or irascible. If he didn't like you, he'd throw you out." His business philosophy, she said, was that "the customer was never right; he was always right."
"You must understand the Philadelphia thing," says Brahin. "I'm from there, so I can say this: The dealers were crafty, they would do anything to get an edge. If you don't know that, you don't have the right amount of cynicism to analyze the story."
In Switt's statement to the agents, his only official pronouncement about the coins, he said that he didn't have any records of where, when, or how he had obtained the Double Eagles. But he claimed that he did not buy them from any employees of the Mint.
Nonetheless, after a 10-month investigation, the Secret Service concluded that it was more likely than not that Switt was the fence for a corrupt Mint cashier. In 1945, the Justice Dept. wanted to press charges, but by then the statute of limitations had run out.
Seven years later, in 1952, King Farouk was deposed and sent into exile in Monaco. The generals leading the new Republic of Egypt decided to auction off his belongings, including his renowned gold coin collection. It contained 8,500 pieces; one was the 1933 Double Eagle. Sotheby's won the right to hold the auction in Cairo in February 1954. As soon as U.S. Treasury officials saw the catalog for the Palace Collection of Egypt, as it was called, they asked the Egyptians to pull the coin from the auction and return it to Washington. At the last minute, the Double Eagle in Lot 185 was withdrawn. Then it disappeared.

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