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Manipulation on trial

The unprecedented movement in the price of silver during

1979 and 1980, from $8 per troy ounce to $50 and back
to $10, resulted in charges of monopolization and market
manipulation being brought against the Hunt brothers of
Dallas. These charges led to a lengthy trial in 1988 and a
judgment against them of some US$200 million.
This book seeks to elicit broadly applicable lessons from
this complex and fascinating case. Drawing upon inter-
views with the judge, jury, attorneys, and expert witnesses
(the author having so served), Manipulation on trial
focuses on the economic analysis of the Hunts' large pos-
itions in futures contracts and the Hunts' alleged influence
on the price moves. The author investigates the elusive
definition of manipulation in sophisticated markets, the
difficulties of interpreting statistical evidence, the impre-
cision in calculating damages, and the hidden assump-
tions behind inferences concerning intent. He concludes that
these problems induce courtroom procedures to oversim-
plify the economic analysis and cause the law on market
manipulation to be created retroactively. Yet the failure
lies not with the legal institutions, but with the futures
exchanges, which have not developed in advance the rules
to minimize large-scale trading during periods of unusual
price moves.
This book will be of interest to all academic economists
working on commodity and financial markets. It will also
be of interest to the staff of futures exchanges and regula-
tory agencies, and to lawyers who practice or teach in
commodities, securities and antitrust law.
Manipulation on trial
Economic analysis
and the Hunt silver case

Jeffrey Williams
Stanford University

*****
CAMBRIDGE
UNIVERSITY PRESS
CAMBRIDGE UNIVERSITY PRESS
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao Paulo

Cambridge University Press

The Edinburgh Building, Cambridge CB2 2RU, UK

Published in the United States of America by Cambridge University Press, New York

[Link]
Information on this title: [Link]/9780521440288
© Cambridge University Press 1995

This publication is in copyright. Subject to statutory exception

and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without
the written permission of Cambridge University Press.

First published 1995

A catalogue record for this publication is available from the British Library

Library of Congress Cataloguing in Publication data

Williams, Jeffrey C.
Manipulation on trial: economic analysis and the Hunt silver
case / Jeffrey Williams
p. cm.
Includes bibliographical references and index.
ISBN 0 521 44028 9
1. Silver - Prices - United States. 2. Commodity exchanges - United
States. 3. Commodity futures. 4. Commodity futures - United
States - Case studies. 5. Speculation - United States - Case studies.
6. Hunt, Bunker, 1926- . 7. Hunt, Herbert, 1929- . 8. Hunt,
Lamar, 1932-. I. Title.
HG307.U5W55 1995 332.64'42421'0973 - dc20 94-44565 CIP

ISBN-13 978-0-521-44028-8 hardback

ISBN-10 0-521-44028-9 hardback

Transferred to digital printing 2006

 Contents

List of figures page vii

List of tables ix
Preface xi
Foreword by Thomas O. Gorman xvii

1 Why the Hunt silver case? 1

1.1 What is "manipulation"? 4
1.2 Why the emphasis on circumstantial evidence? 9
1.3 Why the need for economic analysis? 11
1.4 Why the legal ambiguities? 15

2 Turmoil in the silver market 20

2.1 The nature of the silver market in early 1979 23
2.2 Growth of the Hunts' positions in the summer of 1979 29
2.3 Exchanges' worries during the fall of 1979 32
2.4 Silver dealers' worries during December 1979 and
January 1980 38
2.5 The Hunts' worries during February and March 1980 45
2.6 Recriminations and controversies 50
2.7 Legal maneuvers 55
2.8 Ambiguities and complications 60

3 Identifying a manipulation 64
3.1 The perspectiv e of deliverable supply 67
3.2 Potential profits from a manipulation 73
3.3 Extent of the bullion market 77
vi Contents

3.4 Distortion of intertemporal price relationships 82

3.5 Distortion of the coin/bullion differential 87
3.6 Distortion of the gold/silver ratio 92
3.7 Consistency in the manipulation identified 96

4 Testing for the cause of the price rise in silver 100

4.1 Measurement of the Hunts' effect on daily price changes 103
4.2 Measurement of the Hunts' effect over time 107
4.3 Measurement of the effect of political news 113
4.4 Measurement of silver's effect on other metals 118
4.5 Measurement of simultaneous causes 127
4.6 Limitations on econometric tests of causality 129
4.7 Econometrics and proximate cause 132

5 Determining the appropriate price of silver 135

5.1 Models of supply and demand for silver 138
5.2 Models of the Hunts' direct price effect 145
5.3 Models of distant futures prices 150
5.4 Models of expectations feedback 153
5.5 Models as necessary simplifications 158

6 Inferring manipulative intent 161

6.1 Deliveries taken on futures contracts 165
6.2 Exchanges for physicals 171
6.3 Lamar Hunt's switch trades 175
6.4 Changed patterns in trading 179
6.5 Relations with regulators 184
6.6 Intent in commodity markets 186

7 The predicament of economic analysis in the courtroom 190

7.1 Economic evidence and the Hunt jury 194
7.2 Economic evidence and the Hunt verdict 200
7.3 Economic analysis and opposing expert witnesses 205
7.4 Economic analysis and manipulation cases 210

Glossary of commodity market terms 216

References 227
Index 237
 Figures

1.1 Silver prices, 1986 through 1987 page 2

2.1 Silver prices daily from May 1979 through April 1980 22
2.2 Comparison of liquidity within Comex silver market 37
2.3 Daily Comex silver high, low, and close, November 26,
1979 through January 18, 1980 39
2.4 The Hunts' and Conti group's profits and composition of
positions in silver from May 1979 through April 1980 46
2.5 The price decline during March 1980 and the Hunts' and
Conti group's variation margin payments 48
3.1 The Hunts' (and Conti group's) call on deliverable stocks
of silver 69
3.2 The Hunts' (and Conti group's) share of open interest in
the "target" contracts 70
3.3 Bullion stocks as of December 31, 1979 71
3.4 Profits depending on the amount of "overhang" taken
in delivery 76
3.5 Comparison of three-month spreads below full carrying
charges for six metals 84
3.6 Mocotta Metals' bid for coins relative to its ask for
silver bullion 89
3.7 Algebraic relationship between coin refining margin and
carrying charges for bullion 91
viii List of figures

3.8 Gold/silver ratio, 1968 through 1987 93

3.9 Algebraic relationship between the gold/silver ratio and
carrying charges for silver 95
4.1 Day-by-day changes in the Hunts' positions related to
day-by-day changes in the price of silver, May 1, 1979
through April 30, 1980 106
4.2 The Hunts' position related to the price of silver, daily,
May 1, 1979 through April 30, 1980 108
4.3 Weather in Buenos Aires related to the price of silver,
daily, May 1, 1979 through April 30, 1980 112
4.4 Reaction of silver to the Soviet invasion of Afghanistan 115
4.5 Price movements of four commodities from May 1979
through April 1980 117
4.6 Price movements in silver "explained" by price movements
in other metals 119
4.7 Gold and silver price movements on Comex and the timing
of Handy & Harman's gold and silver quotations 123
5.1 Supply and demand representation of silver price
movements during 1979 and 1980, according to the
CFTC's A Study of the Silver Market 141
5.2 Annual production and consumption flows (excluding U.S.
coinage), 1960 through 1987 142
5.3 An estimate of the Hunts' price effect, during January
1980, using regression analysis 146
5.4 Gold and silver prices for deferred delivery, close of
trading, January 16, 1980 151
5.5 Activity in silver futures, all delivery months 155
6.1 Deliveries on principal Comex silver contracts, 1976
through 1987 168
6.2 Comex straddle and spot month markets, December 31,
1979 177
 Tables

2.1 Trading in silver futures on May 1, 1979 page 26

2.2 Futures and forward positions of alleged conspirators on
August 31, 1979 33
2.3 Major actions by exchanges in the silver market, September
1979 through April 1980 53
2.4 Major actions in the silver market by Bunker Hunt, Herbert
Hunt, and the Conti group, May 1979 through April 1980 61
3.1 Bullion forthcoming from December 1979 through May
1980 according to estimates by Charles River Associates 75
3.2 Correlations among bullion prices at four locations, May 1,
1979 through April 30, 1980 79
4.1 Changes in the price of silver related to the Hunts' daily
trading 105
4.2 Relationship between the Hunts' trading and the price of
silver 109
4.3 Weather in Buenos Aires and the price of silver 113
4.4 Granger causality tests between silver and gold 121
4.5 The plaintiffs correction for the Hunts' influence on the
price of gold 125
4.6 The plaintiff's technique applied to the weather in Buenos
Aires 126
4.7 The Hunts' trading in relation to gold and changes in the
price of silver 128
 List of tables

6.1 Average deliveries on futures contracts for various

commodities 167
6.2 A hypothetical speculator's delivery decision in various
tax situations 170
6.3 Text of EFP between Phibro and Bunker Hunt, January
16, 1980 173
6.4 Futures positions of Bunker Hunt and Herbert Hunt on
February 15 and August 15, 1979 181
6.5 IMIC's positions on August 31, 1979 183
 Preface

The Hunt silver case refers to the trial in 1988 in which the jury found
Bunker Hunt, Herbert Hunt, Lamar Hunt, and several of their associates
liable for manipulating the silver market during 1979 and 1980 and
awarded the plaintiff Minpeco, a Peruvian government-owned metals mar-
keting firm, $192 million in damages. The Hunt silver case unites the
extraordinary price moves of a major commodity, the esoteric trading
strategies within futures markets, the remarkable Hunt family, and the legal
fencing culminating in a six-month trial. Minpeco v. Hunt and the com-
panion proceedings brought by the Commodity Futures Trading Commis-
sion's Division of Enforcement will always attract people wanting to under-
stand commodity markets or complex litigation.
Because my main academic interest is commodity markets, and because
I, who served as an expert for the defense, have continued to be intrigued
by the litigation initiated against the Hunts, I have written this book. I may
be suspected of bias, but the experts for the winning side, not surprisingly,
are less inclined to reflect on the strength, consistency, and hidden assump-
tions of the various types of economic analysis I describe here. To be sure, I
continue to believe that much of the economic evidence did not indicate a
"corner" of the silver market and I continue to be troubled that some little-
understood but perfectly normal aspects of commodity markets were por-
trayed as perversions. To me, now, the issue worthy of reassessment is the
nature of economic argument in a courtroom setting, namely the selection
of economic evidence, its style of presentation, and its influence on the
verdict.
My service as an expert witness has given me access to many documents,
from the Hunts' daily trading records to the trial transcripts, necessary for
any account of the case. More important, I have had the cooperation and
interest of many individuals involved with the litigation. The attorneys with
whom I worked, besides sharing the lessons they learned about the role of
xii Preface

economic analysis, have provided me with their pre-trial and post-trial

motions concerning economic analysis. The principals on the other side,
lawyers as well as economists, have discussed candidly with me what they
considered to be the strengths and weaknesses of the various arguments
used and have given me any documents I have requested. Similarly, the
CFTC Division of Enforcement's two experts have discussed their
approach to the economic analysis. The presiding judge, Judge Morris E.
Lasker, has offered some insights into the case. Most of the jurors were
interviewed a few months after the trial by Minpeco's attorneys, who have
shared with me what they learned about the jury's reception of particular
expert witnesses. Minpeco's attorney chiefly involved with expert testi-
mony, Thomas Gorman, has kindly written the Foreword that follows this
Preface.
Because this book is not an attempt to fight the case again, I have not
mirrored the trial's adversarial nature by devoting entire chapters to the
plaintiff's case and others solely to the defense. Instead, after an introduc-
tory chapter putting the Hunt silver litigation into the legal context of
manipulation cases and a second chapter chronicling the events during 1979
and 1980, the book offers five essays on central issues in the case, organ-
ized and divided in ways not in parallel with the trial. The five essays dis-
cuss the identification of manipulation, the testing for causes of the price
rise, the determining of what the price of silver would have been without
the Hunts' trading, the inferring of manipulative intent from the Hunts'
actions, and the predicament of economic analysis in the courtroom. In each
of these essays, my intention is to clarify the main arguments employed by
either side through a discussion of the broader issues those arguments raise.
In each of these essays, my hope is to offer an insight about the case not
obvious during the course of the trial.
All the legal professionals involved with the Hunt silver litigation have
remarked on its exceptional complexity in regard to both laws and facts. In
addition to manipulation law, the Hunt case involved antitrust law, racket-
eering law, and fraud-on-the-market doctrine. All lawyers interested in
these specific legal areas should find this book relevant, as should any law-
yer involved in a case in which expert witnesses are important. Likewise,
all economists specializing in futures markets, securities markets, monopo-
lization, and antitrust should find this book useful, as should any econo-
mists who might serve as an expert witness in another field. Although the
specific legal setting and the specific commodity markets have a U.S. focus,
those readers from outside the U.S. should find that the substantive issues
are universal. Any lawyer or economist concerned with how technical ideas
can be communicated to non-specialists should find lessons in this book.
Economists played an unusually prominent role in Minpeco v. Hunt and
the case brought by the CFTC Division of Enforcement. Economists were
 Preface xiii

needed as expert witnesses because the main victim of the alleged offense,
namely the silver market, could not speak for itself. Not only did the
economists' points of view figure strongly in both the testimony and clos-
ing arguments, but the economists themselves served as the link through
several changes of attorneys for the defense and provided a key legal strat-
egy for the plaintiff. Mr. Gorman has credited his economist expert, Pro-
fessor Hendrik Houthakker, with recognizing the arguments regarding
fiduciary responsibility that forced a number of brokerage houses to settle
on generous terms, spurring Minpeco's case against the Hunts. Economists,
he has concluded, if hired as experts, should play a more integral role in
determining legal strategy.
The prominence of the economists does not, of course, imply that they
were the most important witnesses. Holding that distinction are the Hunts
themselves. Even so, the economists' various arguments are both suffi-
ciently separate from the other testimony and sufficiently relevant to other
litigation to justify the emphasis in this book.
This book is not, however, an expose of expert witnesses as mouthpieces
for lawyers. All the economists in the Hunt case approached the subject
objectively and determined their own testimony. I sometimes name indi-
viduals, because specific individuals originated particular ideas and because
specific individuals impressed the jury. Yet my emphasis is on the nature of
the arguments and the style of presentation.
Nor is this book a complaint about the power of juries with no back-
ground in commodity markets, econometrics, or finance. The jurors made
considerable effort to follow complex testimony and to reach a reasonable
verdict. The pertinent issue is why scrupulous academics differed so much
in their conclusions and why the jurors interpreted those conclusions as
they did.
Rather, this book is a response to those who refer to the Hunt case in a
few sentences of sweeping judgments and broad generalizations. The evi-
dence was voluminous and often ambiguous, and the economic arguments
often nuanced if not inconsistent. Those attempting to learn from the Hunt
silver litigation should be helped by a concise record of the economic
analysis presented.
In studying the Hunt case, it must always be remembered that the trial
itself was unusual, since most civil cases settle, as Minpeco v. Hunt itself
nearly did just before the trial started and again as the jury deliberated. That
the case did not settle magnifies certain issues, such as the presentation of
statistical analysis to the jury. Fortunately, for at least two reasons, this
danger of magnifying particular issues is less acute when analyzing the
nature of economic evidence and the role of economist expert witnesses in
the Hunt silver litigation, in which, from an early stage, the economists'
testimony looked to be significant. First, even if trials are rare, the likely
xiv Preface

course of expert testimony influences the lawyers' objective analysis of the

strength of a case when they discuss any settlement with their clients.
Second, had Minpeco v. Hunt settled, the CFTC Division of Enforcement's
case against the Hunts would likely have proceeded to a public verdict.
With the filing of experts' official written reports, the substance of the
Division of Enforcement's case can be examined, the very style of its
analysis being of interest for future manipulation cases.
A complication for the recapitulation of evidence here arises from the
separate allegations made by the CFTC Division of Enforcement and Min-
peco. Because the CFTC hearing was delayed in deference to Minpeco v.
Hunt and then halted after Bunker and Herbert Hunt declared bankruptcy,
the text emphasizes Minpeco's strategy and the testimony of its expert wit-
nesses. The text likewise follows Minpeco's definition of the supposed con-
spirators.1 (The CFTC Division of Enforcement did not, for example,
include Lamar Hunt.) 2 Because the largest holdings by far were those of
Bunker Hunt, Herbert Hunt, and their investment arm IMIC, who were
included whatever the list of the supposed conspirators, none of the graphs
or tables here would be materially different whatever the list of conspirators
followed. (To avoid awkward locutions such as "the Hunt brothers and the
alleged co-conspirators, who might not be defendants," the text here uses
the shorthand "Hunts.")
Given that the expert witnesses differed slightly in the starting and end-
ing dates for their analysis, for convenience and clarity, I have standardized
everything to the year May 1, 1979, through April 30, 1980, in the graphs
and tables here. All evidence after 1979-1980 ends with 1987, to recon-
struct the information available at the time of the trial. These choices affect
none of the controversies, which concern the methods of analysis rather

Minpeco's list of the supposed conspirators can be divided into two groups. In the so-
called Hunt group were the brothers Bunker, Herbert, and Lamar Hunt; certain family
members, Elizabeth (Hunt) Curnes, Houston Hunt, Ellen (Hunt) Flowers, Barbara
(Hunt) Crow, Douglas Hunt, Lyda Hunt, Albert and Mary (Hunt) Huddleston, and
Dale Huddleston (father of Albert); and Hunt-controlled entities, particularly Interna-
tional Metals Investment Company (IMIC), Hunt Holding, and Hunt Minerals. In the
so-called Conti group were Naji Nahas and accounts controlled by him, particularly
Litardex Traders; Mahmoud Fustok; Banque Populaire Suisse (BPS), which acted as
agent for Fustok and others; various corporations and individuals domiciled in Swit-
zerland, particularly Gillion Financial; and Norton Waltuch and his personal accounts
at Conti Commodity Services, Inc. In all, Minpeco identified 48 separate accounts.
Also, as noted by Judge Lasker in his decision on defendants' motion for judgment
notwithstanding the verdict, there was insufficient evidence of the defendants' control
over all 48 accounts. Any of those to be excluded (such as Dale Huddleston's) are,
however, too small to have altered the economists' analysis or the jury's verdict.
 Preface xv
than the specific period, and permit the methodologies to be compared more
easily.3
Although some technical terminology is inevitable, I have provided a
glossary of commodity market terms and have kept the discussion of
futures markets and econometrics as accessible as possible. One of my con-
clusions, presented in Chapter 6, is that the intercession by experts to
explain futures markets hid from the jury the experts' own assumptions
about those markets. Another of my conclusions, presented in Chapter 4, is
that the defense underutilized a major idea about tests for causes of the
price rise because the economists expressed the idea only in the idiom of
econometrics. I hope not to make that mistake here.
Because some of the interpretations presented here derive from inter-
views, another concern is the ex post rationalization of the trial. Just as the
witnesses' statements, especially the Hunts', had been hardened by deposi-
tions and the passage of time, the lawyers and economists interviewed later
may have become rigid in their understanding of the course of the trial and
the persuasiveness of particular types of evidence. (All remember, even
after six years, some of the tiniest details of the evidence.) Even the mem-
bers of the jury when interviewed some months afterwards must have sim-
plified their description of their deliberations, if only to make some order
out of a chaotic process. Such selective memory is especially likely in a
case with so much evidence and such myriad connections.
I distributed the entire manuscript (differing from the published version
by minor copyediting) to the economist expert witnesses and legal profes-
sionals, asking them whether they were comfortable with my characteriza-
tion of their arguments. Those whom I had interviewed I directed to spe-
cific passages, for I had offered as a condition of the interview their right to
approve any such material. Several of them suggested changes in wording
or emphasis, which I have made. This circulation in advance does not, how-
ever, mean they necessarily agree with my interpretation of the effects of
their various arguments, let alone the broader lessons I propose in the
essays.
As I hope I have made clear, I have received much specific information
and many general insights while interviewing those involved in the silver
litigation. For such help, I wish to thank Hendrik Houthakker, Robert Kolb,
and Pablo Spiller, Minpeco's economist experts; James Burrows and Pete

3
To avoid encumbering the text, I do not provide page references to trial testimony or
reports to the CFTC unless the subject is specific. Nor do I reference those data from
public sources such as exchanges' yearbooks. Nor do I document the Hunts' trading
records. Although incredibly time-consuming to reconstruct (a task that was done
separately by the CFTC Division of Enforcement, Minpeco, and the defense), these
were not in dispute at the time of the trial. The phrase "has said recently" indicates the
source as an interview.
xvi Preface

Kyle, the CFTC Division of Enforcement's experts; Robert Pindyck, the

brokers' expert; David Copeland, Joel Katcoff, Aaron Rubinstein, and
Robert Wolin among the Hunts' attorneys; Thomas Gorman, one of
Minpeco's attorneys; and Judge Morris E. Lasker. My particular apprecia-
tion goes to Joel Katcoff and Thomas Gorman, for without their coopera-
tion and encouragement, this book would not have been possible.
The individuals who participated in the silver litigation at least had a rea-
son to be interested in my manuscript. To those friends and colleagues on
whom I inflicted every detail of the Hunt case, I give my special thanks:
Heidi Albers, Thomas Cauley, Stephen DeCanio, Roger Gray, Robert
Lurie, Anne Peck, Diana Strazdes, Kris Waumans, and Brian Wright. Diana
Strazdes worked so long and with such determination editing the text (any
felicity of style is due to her) that she deserves to be called this book's co-
author.
Nalini Kuruppu and Daisy Sanchez on the staff at the Food Research
Institute typed the initial text. Nalini Kuruppu and Liz Robinson, enduring
endless revisions, made the graphs all I could desire. Anne Dunbar-Nobes
did an excellent job with the copy-editing. I thank them all.
 Foreword

At the conclusion of Minpeco v. Hunt, Judge Morris E. Lasker said that

books could be written about the novel procedural and evidentiary issues
involved in the case. Expert witnesses on both sides of the case agreed that
the economic issues developed in the case were also novel. Yet little of the
extraordinary scholarship from the trial has been preserved.
Fortunately, Jeffrey Williams, in this remarkable volume, records
important segments of the knowledge developed in the Hunt silver litigation
and raises significant questions for future discussion. The book is based not
only on his own work as an expert witness in the silver litigation, but also
the trial transcript and post-trial interviews with the lawyers and economist
expert witnesses who served on both sides. We all owe Professor Williams
a debt of gratitude for his efforts and achievements.
The discussion of the economic issues developed in the silver litigation is
clearly of great significance. In scope and complexity, those economic
issues and their intersection with the legal concepts of manipulation under
the commodity laws and price fixing and monopolization under the antitrust
laws may be unprecedented.
Perhaps more important than the preservation of the economic issues,
however, are the questions raised by Minpeco v. Hunt and by Professor
Williams in this volume: (1) What is "manipulation"? (2) What is the role
of the expert in litigation and at trial? (3) What is the role of the jury in
complex trials? Each of these questions has been the focus of considerable
debate. Each is raised and discussed at length here.
Initially, in discussing the definition of manipulation, Professor Williams
highlights many of the key concerns. The book correctly points out the
divergent views adopted by the lawyers for each side and the approach
taken by the Court to this question. The defendants repeatedly focused on a
"classic corner" in the commodity markets where the shorts come "hat in
hand" to the longs to cover their positions. The defendants largely ignored
the price-fixing and monopolization issues in the case. In contrast, the
xviii Foreword

plaintiffs generally ignored the defendants' "classic corner" argument. The

plaintiffs chose to focus on a broad conspiracy/manipulation/price-fixing
scheme that created an artificial price. The Court employed a different
approach, using in its instructions to the jury the traditional legal intent-
based definition.
As Professor Williams notes, these positions do not precisely define
"manipulation." Rather, the divergent positions of the parties and the court
appear to be like Justice White's famous statement about pornography. As
Professor Williams notes, that position can leave market participants, and
later judges and juries, to speculate about what is prohibited by the law.
Yet there is merit in the present legal position of using a flexible, rather
than a precise and rigid definition of manipulation. Rigid definitions are
easily circumvented and effectively disregarded by the market place - fre-
quently by the time they are drafted. For this reason laws dealing with
manipulation frequently do not precisely define the concept. For example,
not long ago the Congress and the Securities and Exchange Commission
expended a great deal of effort trying to craft a statutory definition of
insider trading, which is currently prohibited by a broad anti-fraud rule. No
acceptable definition was ever crafted. Similarly, an American Bar Asso-
ciation task force has spent a great deal of time trying to define the concept
of manipulation under the securities laws. But a precise definition has not
been drafted.
The reason the Congress, the ABA, and the courts have not crafted an
all-encompassing definition of "manipulation" (or even insider trading) is
suggested by Minpeco v. Hunt: The concept is a constantly evolving one.
Prior to the debacle in the silver markets, it was thought that the silver mar-
ket was too large to manipulate. Clearly, that idea was correct if manipula-
tion was thought of in terms of a classic corner. Yet, the price in the silver
market skyrocketed and the Hunt jury had little trouble determining that the
Hunts and their allies fueled the skyrocket.
If the jurors in Minpeco v. Hunt were correct - and I believe they were -
their decision suggests that the Hunt manipulation accomplished what mar-
ket professionals had previously believed to be impossible. Achieving what
was thought to be impossible clearly points to a new form of manipulation.
Viewed in this context, Minpeco v. Hunt teaches more than the simple fact
that the wisdom of market professionals was wrong or even that the Hunts
and their allies should be credited with crafting a new type of manipulation.
The silver litigation suggests that the flexible, open-ended concept of
manipulation should continue to prevail over any fixed formula rigidly
defining manipulation. Otherwise, the creation of the next new form of
manipulation will be encouraged rather than deterred.
This is not to suggest, however, that the concept of manipulation should
be vague and undefined. Market participants, and later judges and juries if
 Foreword xix

necessary, are entitled to know what is prohibited. There must be guide-

posts that define prohibited conduct. Professor Williams points out many of
the guideposts and cogently explores the pluses and minuses of each. These
factors, tested in the crucible of a major trial, provide invaluable guidance
for the future and merit further thought and research.
Two additional questions concern the role of the expert witness and the
use of lay juries in complex trials. It is popular lore among many lawyers
that "experts cancel each other out." Frequently each side in litigation tries
to hire the most experts with the best credentials, invoking an alternative to
the "cancel out" theory: "the more the better" theory. Both theories suggest
that expert witnesses are not of real significance.
The jury's decision in Minpeco v. Hunt suggests that both theories should
be discarded. The plaintiffs only presented one expert on the merits while
the defendants offered the testimony of three. All the expert witnesses had
impeccable credentials. Clearly the jury did not follow either the "cancel
out" or the "more the better" theory.
Post-trial interviews with the jury suggest that the testimony of the expert
witnesses was carefully considered and dissected by the jurors. The jurors
diligently evaluated both the material that was presented and the credibility
of the witness presenting that material. Those interviews suggest that, if
properly presented, expert testimony can be of substantial assistance.
The jury's reaction is confirmed by my own experience in the case. The
economic experts made a very significant contribution, not only on the pre-
cise economic issues but in shaping the factual and legal questions. Under-
lying the complex facts and the commodity and antitrust law questions was
the futures markets and the business of using those markets. The economics
of those markets from the viewpoint of economists and market participants
permeated every facet of the litigation and trial.
The participation of the experts, not only at trial but at each stage of the
case, was critical. For example, in opposing motions for summary judgment
made by the defendant brokerage houses, one of the key issues was the
knowledge of the brokers about manipulation. A key element in Minpeco's
successful opposition to those motions (and the later favorable settlements
with the brokers) was information from David Lloyd Jacobs, former
Chairman of Consolidated Goldfields. As an expert witness, Mr. Jacobs
provided a businessman's view of what a market participant must have
known based on information about the markets that would have been avail-
able to market professionals at the time. Mr. Jacob's insights, coupled with
those of one of Minpeco's economic experts, helped build the factual record
establishing the brokers' knowledge.
The silver litigation thus suggests that expert witnesses are far more
important than many believe. The assistance by experts from both academia
and business is not only important but may be critical in resolving complex
xx Foreword

commercial cases. Those experts should, in my view, be involved at an

early stage in the litigation to help focus the discovery. Focusing the dis-
covery at an early stage should have the added benefit of facilitating the
litigation and perhaps cutting down on some of the needless discovery cur-
rently conducted in many large cases. The cost of employing the experts
may be offset by the savings in discovery expenses and the enhanced
results.
Likewise, during the trial the experts can provide substantial assistance in
shaping the fact arguments, presenting testimony, and assisting in preparing
cross-examination. For example, although Minpeco only offered the testi-
mony of Professor Houthakker on the merits, Professors Kolb and Spiller
provided invaluable assistance throughout the trial in formulating the
issues, preparing the economic testimony offered, and developing the cross-
examination of the defense experts.
Finally, as Professor Williams suggests, there is a question of whether a
lay jury can understand and decide complex issues such as those involved
in the silver litigation. Interviews with the jury suggest that they can.
Yet, as Professor Williams notes, frequently the economic issues in the
silver litigation were not completely developed for the jury or were pre-
sented in a truncated or conclusory fashion. The explanation for this may be
based more on the fear of the lawyers than the limitations of the jury. Over
and over, as Professor Williams documents in this book, there was a grave
concern that "the jury will not understand" because an issue is too complex,
too difficult. Those fears are contradicted by the interviews with the jury.
The fears persist, however, based largely on anecdotal evidence. In my
view, "the jury will not understand" myth should be discarded. One of the
vital tasks of a good trial lawyer is to present the case in a clear, concise,
cogent fashion so that the trier of fact (whether it is a lay jury or a judge)
can understand it and be persuaded to return a favorable verdict.
Too often the claim that "the jury will not understand" is either a cover-
up for the fact that the lawyers do not fully understand their case (and who
can effectively present what is not understood) or a substitute for the time
and effort it takes to present the case properly, or both. Effective presenta-
tion by the trial lawyers coupled with innovations by the judges, such as
"mini-summations" at defined points in a long trial and note-taking by the
jurors (techniques used by Judge Lasker in Minpeco v. Hunt), will facilitate
jury comprehension and an effective presentation of the case - the trial
lawyer's job.
As a final note, I should acknowledge that it is unusual for a lawyer from
one side to make a contribution (no matter how small) to a book by an
expert who was on the other side in a trial. The issues raised by the silver
litigation and the scholarship that was involved in the case, however, should
go beyond being on opposite sides in a legal dispute. Questions concerning
 Foreword xxi

the definition of manipulation and the proper role of an expert or the use of
a jury in complex litigation are important issues. Although the silver litiga-
tion did not resolve any of those questions, it did suggest some answers and
provides ideas for future discussion, as Professor Williams demonstrates in
this book.

Thomas O. Gorman
Cole Corette & Abrutyn
Washington, DC
December 1994
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