The question is: where is the gold?
The name Loretta Preska may ring a few bells among regular NC readers, having graced these pages on a few occasions. The senior US district judge of the US District Court for the Southern District of New York is probably best known for her decision in 2020 to sentence Steven Donziger, the human rights lawyer who had helped secure a historic $9.5 billion judgment against the company ten years earlier over its pollution of the Amazon rainforest in Ecuador, to six months in prison — after more than two years of house arrest.
The ruling triggered a torrent of opprobrium from around the world. The United Nations Working Group on Arbitrary Detention said it was “appalled” by the U.S. legal system’s treatment of the former environmental lawyer and demanded the US government “remedy the situation of Mr. Steven Donziger without delay and bring it in conformity with the relevant international norms” by immediately releasing him. That didn’t happen.
Rick Claypool, research director for Public Citizen, tweeted at the time of Donziger’s imprisonment that the case “perfectly encapsulates how corporate power has twisted the US justice system to protect corporate interests and punish their enemies” — adding that as Donziger was ordered to prison for six months, members of the Sackler family won immunity from opioid lawsuits targeting their private company, Purdue Pharma.
Preska herself has faced multiple allegations of improper conduct and conflicts of interest, as Jacobin reported in 2021:
Preska’s conduct ha[s] been a focal point of the trial ever since she was, against local rules, handpicked to oversee the case by judge Lewis A. Kaplan, the Chevron-invested former tobacco industry lawyer who had blocked the judgement against the company and launched the contempt case. Preska denied Donziger’s request for a jury trial, barred Zoom access to the trial for the public, and consistently ruled against Donziger’s legal team. She refused to hear from Donziger’s lawyers about why he had drawn the contempt charge by not turning over his laptop and phone — namely, to protect attorney-client privilege — and at one point sat and read newspapers while presiding over the proceedings.
Critics pointed to Preska’s seat on the advisory board of the New York chapter of the Federalist Society, the right-wing judicial lobby of which Chevron is a donor.
“The Harshest Possible Ruling”
Now, Preska is back in the news (albeit mainly in Latin America), and once again for all the wrong reasons. The New York district judge is presiding over a case concerning the Argentine government’s 2012 expropriation of the 51% stake in YPF, Argentina’s national oil and gas company, held by the Spanish oil major Repsol. In September 2023, Preska ruled in favour of the plaintiff, Burford Capital, a Guernsey-based litigation funder/vulture fund representing two minority shareholders of YPF, Petersen Energía and Petersen Inversora, on the grounds that the expropriation violated YPF’s corporate bylaws.
This ruling was hardly a surprise, particularly given Preska’s pro-business reputation. What was a surprise was the size of the pay out: $16.1 billion. According to Bloomberg Linea, Burford Capital acquired the rights to the lawsuit in 2015 for $16.6 million from former YPF shareholders and could earn at least $6.2 billion if the full judgment is paid — a whopping 373-fold return!
Sixteen billion dollars is a sizable sum for any country to pay, let alone one that owes the IMF close to $40 billion, is in deep recession and constantly on the verge of default. What’s more, that sum is growing by an additional $1 billion per year due to unpaid interest and legal fees. As one Argentine news site put it, it was the “harshest possible ruling imaginable.” The magistrate also freed YPF from any responsibility, meaning it will be the country, and not the company (which has 49% of the shares in private hands), that will have to settle up.
This is not the first time that a decision in the US District Court for the Southern District of New York has harmed Argentina’s finances. In 2014, another senior judge from the district, Thomas Griesa, ruled that Argentina must pay two investor holdouts from its 2002 debt default– NML Capital and Aurelius Capital Management, both deep-pocketed vulture funds that had bought Argentine bonds at a fraction of their face value — before it could pay the other 93% of its bondholders, who had accepted debt-restructuring haircuts in 2005 and 2010.
The decision was so controversial that even the US Treasury, the French government and the IMF filed amicus brief cases with the Supreme Court, to no avail. As Michael Hudson said at the time in an interview with The Real News Network, the implications of the ruling went far beyond Argentina:
You have a case of the tail wagging the dog. And that’s why everybody from the U.S. government to Europe was insisting that the Supreme Court overruled Judge Griesa’s ruling. And the Supreme Court said, wait a minute, since the ruling is only local New York State bankruptcy contract law, it’s not a national law and a constitutional law, so we don’t have any ground to review it. And the other people said, wait a minute. It may be, of course, that it’s local law, but we’re dealing with an entire country and international relations, and the international relations means that other countries will now shun New York and the dollar market for bonds, and there goes Wall Street.
In the end, Argentina continued to refuse to pay — until the newly elected Macri government agreed in 2016 to settle with Paul Singer’s NML Capital by paying $2.4 billion in damages — a 1,270% return on its initial investment, according to an article in New Yorker.
Where’s the Gold?
For its part, the YPF case is considered one of the most significant disputes in recent history between a sovereign state and international creditors*. This week, Preska ordered the Argentine Republic to disclose the whereabouts of its state-owned assets abroad, including the central bank’s roughly $4.5 billion of gold reserves as well as, allegedly, the nation’s sovereign accounts in the US, including those belonging to diplomats, embassies and consulates, as well as the bank accounts of companies with which it has engaged in commerce.
Judge Preska also said that regardless of whether the gold reserves are in the custody of the Central Bank of the Argentine Republic (BCRA) or in some other jurisdiction, Argentina is obliged to provide documentation showing that these assets are, or are not, in its possession. According to Infobae, one of Latin America’s largest online news portals, this latest injunction underscores the Argentine State’s obligation to comply with the US court’s orders.[2]
“What the judge did was issue an order that obliges Argentina to report where the country’s gold is located and how much came out of the BCRA’s reserves,” Sebastián Marill, CEO of Latam Advisors and an expert in the case, told Ambito. It is estimated that at least 60% of Argentina’s gold reserves were sent to London in recent years. This includes, of course, all the gold bars that the Minister of Economy (and former JP Morgan exec), Luis Caputo, covertly dispatched last year (for further background, click here).
Michael Hudson suggested in response to a previous post that Milei may have sent the gold to the UK precisely so that it could be seized. Given Milei’s near-total devotion to the Anglo sphere, Economy Minister Luis Caputo’s loyalties to Wall Street as well as the UK’s seizure of Venezuela’s gold, this is is a very real possibility…
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Nick Corbishley 