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A Not Very Expert Witness

As I began to reach my riper years, I was sometimes surprised at the roles I was invited to undertake. ‘I think it might be my father you are looking for’, I heard myself say. But, mercifully, that was only in my head.

The invitations included two funeral orations at which I appeared to have usurped the deceased’s close relatives. Another was a request from the Department of Material Science at Oxford to speak about rhenium, which did not appear to square with the third-rate literature student I had once been.

Back in the 1990s, travelling in the CIS, nervous of speaking in public, it was assumed that anyone from the UK was a visiting ambassador from the West. On one occasion, in Kiev, my host, a newly minted oil baron, who had recently paid to gold-leaf the onion-dome of the Orthodox church next to his office, asked me to speak. In the audience was the gun-toting bishop, whose weapon could be plainly seen in its holster. Amazingly, he didn’t shoot me.

Into this category of co-option into unexpected parts, I can now add ‘being invited to be expert witness in a rare earth metal fraud case’.

It was apparent to me, when asked, that I was not expected to agree to the job. The fact that I might have been on the Z-list did not put me off either. What was required, I was told by the solicitors, was an expert in the subject of rare earths.

Although I have traded in minor metals for a number of years, rare earths was not a particular speciality. Most minor metal people, possibly rightly, disdained the subject, unable to fathom how it would be possible to trade something in which China alone held such a dominant position. We were one of them.

But then along came 2008, and out of a clear blue sky the National Academy of Sciences in Washington issued a report entitled Minerals, Critical Minerals, and the U.S. Economy which included the infamous phrase – ‘the United States is essentially 100% dependent on imported Rare Earths’. From this moment, the rare earth ball started rolling, and the rare earth bubble began taking in oxygen.

By chance, the following year, I attended a conference in Washington where I had been invited to give a talk on the history of metal stockpiles. I tried to enliven the discussion by going back to the Bandoeng Pool in the 1920s which sought to control tin, while giving mention to the emergence of the GSA (General Services Administration) and its transformation into the DLA (Defense Logistics Agency), and making comparisons with metal stockpiles in the USSR of the past, Japan, France and China. What I had not expected – and it gave insight into the events to come – was that the conference would transform in front of my eyes into a discussion about China and Rare Earths. How was the USA going to react to China’s intention to hold the USA to ransom over the delivery of neodymium? The atmosphere in the room was hostile and I feared for the one Chinese delegate who had to listen to lobbyists working themselves into a fever that appeared to stop little short of recommending bombing.

Well, scroll forward a bit and we know what happened. The lobbyists I had witnessed using the hymn sheet provided by the National Academy launched jihad on Chinese rare earth suppliers in self-induced hysteria. The rare earth barmy army band-waggon rolled out of town. And by 2010, while having my hair cut, I was asked by my barber whether ‘I could recommend an investment in rare earths’?

While MMTA rules forbid members from selling metals to investors, others in the investment community, with perhaps less good will, thought to satisfy the public interest. We stood by and watched as companies were founded as fast as mushrooms growing in a cellar, to offer groups of rare earth elements in themed units of ‘Tech’, ‘Green’, ‘Electronics’, ‘Batteries’  dressed up for retail, like posies of cut financial flowers.

Those behind the schemes were often located offshore in sunny places such as Malta, Gibraltar or the British Virgin Islands, holding rare earths in stock in warehouses and issuing warrants to be marketed to widows and orphans, spinning the tale that the world was about to run out of these elements. ‘Look at the National Academy report’, was the gist of it in magazines and newspapers. ‘The Chinese are plotting our destruction by holding back Rare Earths’. No one appeared to question, if that was the case, how it was that investment funds were able to provide supply? The sales literature followed a similar banal pattern, claiming that rare earths were un-substitutable in various applications, and investors could anticipate handsome 20-50% returns.

Those who believed in the rare earth boom were not just potential victims – there were plenty of sound metal people who became wrapped up in this too, let alone governments of various nations rubbing their heads and wondering what to do. Indeed, both Congressional and Parliamentary Select Committees were set-up to look into the matter. By 2010-11, one hundred rare earth mining projects were seeking funding; of which only one, Lynas of Australia, has survived to limp into production.

So, last year, when I was invited to assist in the fraud trial, my interest was piqued, and I was excited to be involved. Minutes after the call, my spirits were somewhat dampened when I realised I was to be witness for the defence. Taking time to reflect, I reasoned that even a murderer is entitled to a fair trial, so I accepted. It seemed like an enjoyable challenge.

To assist me prepare notes for the solicitor, I employed one of the bright young men who pass through our door on work experience. His name was Josh. Josh only had experience of the theatre but was entitled to feel this assignment was better than making the tea. So, we gathered together what I knew about rare earths from our office filing cabinets; prices and charts going back to the 1990s, production figures, market views, a host of worthy reports issued by consultants who had been employed during the bubble to advise governments, investors, traders, consumers – all with the aim of seeking defence arguments for the accused.

Putting it melodramatically, it was a bit like being on the Washington Post at the time of Watergate – but only in our heads. At one point, we were trying to track down a phrase that I was certain I remembered from the National Academy of Sciences paper, citing that the USA depended upon China for 96% of all its rare earths. We just couldn’t find the quote anywhere, and I was beginning to doubt my memory, until Josh, after many hours of googling, found the exact sentence. It turned out that the search engine wouldn’t bring me the answer because the actual figure was ‘97.6’%! It was a eureka moment with much punching of the air.

So, off went our 12-page report.

We had done our best; but, having read the transcript of Metropolitan Police interviews, and the statements from the widows and the bewildered who had been duped, I did not give much credence to our success.

In 2017, the case was heard and went on for a number of weeks, no doubt to the mind-numbing boredom of the jury. And then, a week or so after, I judged it would be the right moment to ring the solicitor, as I was curious to know how many years the defendant might have got.

‘He got off’, the solicitor said.

Clutching at straws, I asked, ‘But was the defendant a little bit chastened at least?’ ‘Do you think perhaps he will mend his ways?’

‘No’, the solicitor said, ‘he has retired back to his home in the suburbs and will most likely do it all over again.’

Friends and family had surprised me prior to the case by asking ‘Why are you acting for the defence?’, as if an accused should only receive a defence in the event that society feels like it.

I now had a much harder question to answer. ‘What could I say (hypothetically) to all those who lost money?’

It was not an easy question.

The only answer that came to mind was ‘Get a better prosecuting lawyer’.

Published June 21st 2017 on www.lord-copper.com