Jake picked up Agent Ken Bartholomew from the Secret Service office on his way to the airport. Ken was the Secret Service’s top document expert. He was African-American, skinny as a rail with short-cropped hair and a struggling mustache.
“Thanks for the invite,” Ken said. “You said gold bearer bonds?”
“Yep, ten of ‘em. I’ve never seen one before. I’m hoping you have.”
“Oh yeah,” Ken replied. “If they are what I think they are, you’re in for an education.”
“That good?”
“That good. Rare as hen’s teeth.”
Jake looked over at him and chuckled.
Going through security at the airport reminded Jake of the watch in his coat pocket. He placed it in the gray plastic tray with his other belongings. The fact that he had two watches went un-noticed by the TSA.
Being a federal agent probably prompted a lower level of scrutiny.
He decided that wearing the watch was the safest place for it, even though it meant having two watches on his left wrist, his own, for telling time, and the other, running backwards, counting down to some mysterious event.
They caught the U S Airways 11:00 a.m. shuttle from Dulles to La Guardia. Jake had known Ken for eight years now. Ken was an Ole Miss grad with a degree in Accountancy and a minor in Art History. His attention to detail and uncanny ability to spot fakes drew the attention of not only the Secret Service, but the FBI, as well. In the end, Ken had selected the Secret Service instead of the FBI.
Too bad. Ken would have made a great agent.
It was 12:20 p.m. when they reached the Customs Office.
“Secret Service?” the Customs officer asked when they showed their credentials. “I thought you guys protected the President.”
“Some of us do,” Ken replied. “The Secret Service also investigates all crimes involving currency and counterfeit financial documents.”
“Huh,” the officer replied.
“The two Chinese nationals. What’s their story?” Jake asked.
“They haven’t said much,” the officer said. “They handed their passports to us and said they were here on business. They said they had nothing to declare. A quick check of the briefcase produced these.” He showed Jake and Ken the bearer bonds. “That’s when we took them into custody. They haven’t said a word since.”
“May I?” Ken asked, reaching for the bearer bonds.
“Yep,” the officer replied. “We don’t even know if the bonds are real. We need a determination before they can be charged.”
“That’s why I’m here,” Ken said.
“The bonds look old,” Jake noted.
Ken picked one up and held it to the light. “Is there a room we could use to examine the bonds?”
“Sure, right in here.” The officer led them across the hall to a small office.
“This could take a while,” Ken said. “We’ll let you know what we find.”
The officer seemed put off, but turned and left. Ken pulled a jeweler’s loop from his pocket and began to examine the bond in detail. Twenty minutes later he had looked at all ten bonds.
“Well, what do you think?” Jake asked.
Ken took a quick look around the room, checking for a listening device or camera. “Okay, here’s the deal. I’ve seen some of these bonds before. The story is that when the Japanese army was invading China in the run-up to World War II, wealthy families were being murdered and their possessions were plundered by the Japanese Army — Gold, jewels, artwork, anything of value. Many of the families in China had their gold shipped to the Federal Reserve Bank in New York for safe-keeping. After the war, wealthy Japanese families did the same thing. The bank issued gold bearer bonds as a receipt for the gold. The bearer bonds could be redeemed by anyone possessing the bond, supposedly, no questions asked.”
“Okay, so what’s the problem?” Jake asked.
“Take a look right here.”
Jake looked at the bond closely. “The word annual is misspelled.”
“Right, and over here…”
“That isn’t even a real word. This is a fake.”
Ken held the bond up to the light. “And this do-hicky?”
“It’s a watermark,” Jake said.
“Yes, it is. The watermark and the paper are authentic.”
“That doesn’t make any sense. You’d think if someone went to the trouble of using authentic paper and creating the watermark, they would have spelled the words correctly.”
“You’re looking at one of the darker sides of our country’s history,” Ken said quietly. “The bearer bonds are authentic, issued by the Federal Reserve Bank of New York, on the date specified. The bank officials created the bonds with the mistakes in them, thinking the foreigners wouldn’t notice, and they didn’t. Decades later, when the bonds were presented, the bank officials simply claimed the bonds were forgeries, and refused to return the gold.”
“And because of the mistakes in the text of the bond, no one can prove the bonds are real,” Jake said.
“Precisely,” Ken replied. “In addition, the signatures on the bonds are fictitious, no one by those names ever worked for the Federal Reserve.”
“So you’re telling me the Federal Reserve Bank intentionally swindled these people out of ten tons of gold?”
“Nope,” Ken replied. “I’m saying the bank swindled them out of twenty-two thousand tons of gold.”
“What?” Jake said. “You can’t be serious.”
“I am serious. At today’s prices, I make that 844.8 billion dollars.”
“And nobody was charged and prosecuted?”
“No real proof,” Ken said. “The Secret Service audited the bank’s records, which indicated 218 tons of gold had been received from Asian families, all of which had been redeemed by the families after the war. The bank claimed that no gold bearer bonds have ever been issued by a Federal Reserve System bank.”
“But here they are — ten of them. You said they’re authentic.”
“I know they are — but I can’t prove it. The Secret Service has been following various gold bearer bonds for decades. Everyone who examines the bonds comes to the same conclusion you did−that the bonds are fake.”
“I don’t understand,” Jake said. “We have ten bearer bonds that are real, but were made to look like fakes. Are there fake bonds that look real?”
“Of course there are.”
“So how do you tell them apart?”
“Sometimes, you can’t. We divide counterfeit financial specimens into three tiers. The quality of tier 1 specimens is so good that you can’t tell them from the real thing. With tier 2, an expert can tell the difference, and tier 3, with a few simple tests, the cashier at your local grocery store can tell the difference.”
“This sounds like we’re talking about currency instead of bonds,” Jake said.
“Counterfeiting isn’t just about currency. It involves every form of financial instrument, from a five dollar bill to stocks and bonds, mortgages and derivatives. If it involves money, it’s being counterfeited.”
Jake picked up one of the gold bearer bonds. “The bank told you no Federal Reserve Bank has ever issued a gold bearer bond?”
“That’s what they said. It’s actually a clever defense. Under federal law, only the US Treasury Department can issue bonds such as these. The Federal Reserve System has no legal authority to issue bonds. They buy US Treasury Bonds, which are debt instruments. That’s how the federal government borrows money — we print and issue the bonds, and the Federal Reserve buys them. We get the money, and the bank gets the debt instrument, which is added to the National Debt.”
“Then why would anyone attempt to counterfeit something that doesn’t exist?”
“They wouldn’t,” Ken replied. “That’s one of the things that lead me to believe the gold bearer bonds are real.”