After Trillions Mysteriously Go ‘Missing,’ DoD Getting Audited for First Time in History

After their own reports showed trillions of dollars "missing" from ledgers, DoD is now getting its first audit in its entire history.

Pentagon To Undergo First Ever Audit After Decades Of Sloppy Accounting And Missing Trillions

After decades of waste, overpayments, trillions of missing or improperly accounted for dollars, and most recently losing track of 44,000 US soldiers, the Pentagon is about to undergo its first audit in history conducted by 2,400 auditors from independent public accounting firms to conduct reviews across the Army, Navy, Air Force and more - followed by annual audits going forward. 

Secretary of Defense Jim Mattis speaks with DoD Comptroller David L. Norquist, June 15, 2017

The announcement follows a May commitment by Pentagon comptroller David Norquist, who previously served as the CFO at the Department of Homeland Security when the agency performed its audit. "Starting an audit is a matter of driving change inside a bureaucracy that may resist it," Norquist told members of the Armed Services Committee at the time when pressed over whether or not he could get the job done at the DHS. 

According to the DoD release: 

The audit is massive. It will examine every aspect of the department from personnel to real property to weapons to supplies to bases. Some 2,400 auditors will fan out across the department to conduct it, Pentagon officials said.

 

"It is important that the Congress and the American people have confidence in DoD"s management of every taxpayer dollar," Norquist said. -defense.gov

The Pentagon is no stranger to criticism over serious waste and purposefully sloppy accounting.  A DoD Inspector General"s report from 2016 - which appears to be unavailable on the DoD website (but fortunately WAS archived)- found that in 2015 alone a staggering $6.5 trillion in funds was unaccounted for out of the Army"s budget, with $2.8 trillion in "wrongful adjustments" occurring in just one quarter.

In 2015, the Pentagon denied trying to shelve a study detailing $125 billion in waste created by a bloated employee counts for noncombat related work such as human resources, finance, health care management and property management. The report concluded that $125 billion could be saved by making those operations more efficient. 

On September 10th, 2001, Secretary of Defense Donald Rumsfeld announced that "According to some estimates we cannot track $2.3 trillion in transactions," after a Pentagon whistleblower set off a probe. A day later, the September 11th attacks happened and the accounting scandal was quickly forgotten.

And twenty years before that, DoD analyst Franklin C. Spinney exposed what he called "accounting games," saying "Those numbers are pie in the sky. The books are cooked routinely year after year." In a 2002 testimony before the House Committee on Government Reform, Spinney laid out the DoD"s accounting quagmire of un-auditable books and budget projections which don"t match reality. 

Franklin Spinney, 2002

Finally, those of us old enough to remember the 80"s, let"s not forget the bombshell report on overpayments the Pentagon made for simple items, such as $37 screws, $7,622 coffee makers, and $640 toilet seats which Sen. William Roth Jr (R-DE) was able to whittle down to $200. 

The announcement of the audit comes amid a looming government shutdown battle which was given a two-week extension last week until December 22. If this occurs, military personnel would report to work as usual, but the DoD would not pay them until the shutdown ends. 

 "I cannot emphasize too much how destructive a shutdown is," Norquist said. "We"ve talked before about the importance of maintenance on weapons systems and others, but if it"s not an excepted activity, there"ll be work stoppage on many of those maintenance functions."

With both parties standing to lose more than gain from a shutdown, that is unlikely to happen. Meanwhile, with decades of lost confidence in the Pentagon"s accounting practices, we eagerly await the results of this "massive" audit to see exactly how much dirt - and where - previous administrations have swept under the rug.

Bill To Audit The FED Passes House Committee, Could Become Law

Washington, D.C. — For decades, the Federal Reserve of the United States Government has been ignoring Freedom of Information requests (FOIA), even finding and using loopholes to get around such requests from citizens, in regards as to how the world’s most powerful financial institution conducts its business. Nearly everything about the Federal Reserve remains a carefully and closely guarded secret. Yet, despite repeated requests from officials aware of its unscrupulous nature, the FED refuses to open its doors, let alone its financial books, to those stakeholders who dutifully claim the rights to know more: the U.S. citizenry.

For years, proponents of transparency have made repeated attempts to force the FED to operate with at least the same level of transparency with which the Congress operates to no avail. However, that could soon change.

The latest bill to hold the FED accountable was approved by the Republican-controlled Committee on Oversight and Government Reform on Tuesday. This bill began under former Congressman Ron Paul’s term and is being pushed through by his son.

As Market Watch reports, analysts said the measure has a better chance to become law now that Republicans control both houses of Congress and the White House. Paul’s son, Rand, the Republican senator from Kentucky, has introduced a similar measure in the Senate.

Proponents of auditing the FED say the central bank wields too much power, operates in near total secrecy, and is accountable to no one. Only an “outside auditor” employed by the FED is allowed to audit the FED’s books, not the government itself.

READ MORE:  It"s Happening — Fmr Federal Reserve Head Just Admitted Ron Paul was Right About the Economy

Supporters of the FED’s practice of keeping its business dealings secret say they believe the FED’s activity should not be politicized and forcing the FED to be audited, in much the same way an average citizen is audited by the Internal Revenue Service (IRS), the financial institution’s autonomy would be in jeopardy.

“This bill would open the floodgates to political interference in monetary-policy making,” said Del. Eleanor Holmes Norton, a Democrat from the District of Columbia.

Reuters writes, “Currently, the Fed publishes detailed audits of its finances but it keeps the inner workings of its monetary policy deliberations secret, publishing transcripts of policy meetings only with a five-year lag.”

Criticisms of such blind support for the FED are numerous. Ron Paul calls the Fed “the chief culprit” in the financial crisis of 2008. He says the FED’s willful printing of more currency creates a “boom” and “bust” scenario which has eroded the value of the U.S. dollar to record lows amounting to a loss of 96 percent of its value. Paul is not alone. Others who’ve tried to get any information from the FED have been frustrated by the lack of transparency the new bill seeks to enforce.

Getting around FOIA requests is easy for the FED. It denies such requests by stating it’s either not privy to the information or that a private entity has the information and therefore, FOIA does not apply. Here’s an example. While attempting to answer the question as to what extent minorities were responsible for defaulting on federally insured mortgages (during the latest recession) journalist Steve Sailer issued a FOIA request to the FED for the data. Here’s the response he said he received, which may also serve as rationale for the need to audit the FED. “The information you seek does not currently exist in the form you request,” wrote the FED’s Board of Governors in response to his FOIA request.

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Going further, the explanation continued, “Even assuming the information could be derived and produced in the format you seek, the resulting table, like the underlying data set would be a record of the Federal Reserve Bank of San Francisco, not the Board. Accordingly, we cannot provide you with any such information.”

In other words, the FED acknowledged its data is housed under the Federal Reserve Bank of San Francisco (Private Bank) and is therefore not subjected to FOIA requests. Sailer’s  discovery brings up one of the most contentious criticisms the FED faces by those who seek to force the central bank out of the shadows of privacy and into the light of transparency. All of the FED’s branches are privately owned. “The 12 regional Reserve Banks—Located around the country, the 12 Federal Reserve Banks are chartered as private corporations. Employees are not civil service,” writes the Federal Reserve Bank of San Francisco. So all the FED has to do to keep its activities secret is to transfer its data to one of its branches and FOIA no longer applies, as Sailer discovered.

The need to audit the FED is agreed to in somewhat of a bipartisan fashion, yet some Democrats and Republicans largely resist any calls for the audit. As a result, getting Congress to pass a bill requiring the FED to be audited by its own government has been no easy task. Similar bills calling for the FED to be audited were introduced in 2009 and in 2015. In both cases the bills passed in the House and failed in the Senate, and would likely have been vetoed by then president Barack H. Obama. President Donald Trump has voiced support for auditing the FED, however, that was prior to being elected. Whether or not he intends to keep that promise remains a mystery.

"Audit The ECB"? - German Officials Call For Greater Oversight Of Central Bank

With the omnipotence of the world"s central banks suddenly all too evidently exposed as nothing more than "Oz"-like smoke-and-mirrors, it is not just US politicians that are losing faith and calling for more oversight of the most-powerful unelected officials in the world. Handelsblatt reports today that Germany"s federal auditor says The ECB lacks accountability in banking sector oversight and government will work to close that oversight gap.

Handelsblatt reports, citing a parliamentary report it obtained, that the European Court of Auditors is unable to perform an "extensive review" of the bank supervisory functions at ECB. Furthermore, the German Federal Court of Auditors says in a report submitted to the German parliament’s budget committee
Germany should explore all options for closing the oversight gap.

In its report, the federal auditor says bank oversight is an important public function that does not fall under the rubric of central bank independence, noting that national banking regulators like Germany’s used to be fully audited before the ECB took over the responsibility in 2015.

“The federal government should explore all options for closing this oversight gap,” the report said.

The ECB has argued that the European Court of Auditors only has the authority to review the central bank’s efficiency in terms of personnel and budgeting, not its decisions as Europe’s top banking supervisor. The European Court of Auditors has complained in the past that the ECB has used this argument to justify its refusal to turn over some documents for review.

That, according to the German agency, has left a gap in oversight that didn’t exist before 2015, since national regulators in the euro zone tended to be separate from their country’s central banks.

In a statement, the ECB said that it works closely with the European Court of Auditors and has made “a considerable number of documents and explanations available.”

While we fully understand the concerns at the lack of transparency and oversight of Europe"s most powerful entity, it is comewhat ironic that it is the Germans complaining when they just used the "well, it"s not us messing with the currency, the ECB is independent" argument to eschew Trump"s currency war tweets.

We are sure Dragh is not too worried for now, but if this escalates, this is what we would expect him to look like...

Federal Officials Are Searching Caterpillar's Corporate Headquarters; Stock Plunges

According to the Journal Star, Federal officials have executed search warrants at three Caterpillar, Inc. facilities in the Tri-County Area — including the corporate headquarters — Thursday morning. Company officials confirmed the presence in a statement without specifying which agency was performing the search or what the search was in regard to. A spokeswoman declined by email to provide further details.

Dow Jones adds that agents from the IRS, FDIC and Commerce Department are involved in the searches. They are probably not looking for CAT profits.

"Caterpillar is cooperating," the brief statement said.

The spokeswoman for the U.S. Attorney for the Central District of Illinois confirmed that facilities in three communities were the subject of the activity — Peoria, East Peoria and Morton. At the Downtown Caterpillar global headquarters building, at least some company employees were directed to the building"s cafeteria and were told to remain there and not leave, according to one employee at the facility.

At least some of the agents entering the headquarters building wore jackets bearing an Internal Revenue Service logo, others appeared to be from the Federal Deposit Insurance Corporation. Others simply denoted that they were federal agents. A placard in the window of one of the federal vehicles noted it was used by police from the U.S. Department of Commerce Bureau of Industry and Security Office of Export Enforcement.

CAT stock, which traditionally soars on bad news and reports of losses, is inexplicably sliding on the news.

Maybe investigators are trying to figure this out?

As a reminder, this is not the first time CAT has gotten in trouble with regulators: back in 2014 CAT and PWC got in trouble before Congress for evading taxes using offshore locations when this infamous line came up: "What the heck, we’ll all be retired when this audit comes up on audit." In retrospect, perhaps not all will be retired.

US Mint Releases New Fort Knox "Audit Documentation": First Critical Observations

Submitted by Koos Jansen of BullionStar

US Mint Releases New Fort Knox “Audit Documentation”: First Critical Observations

In response to a FOIA request the US Mint has finally released reports drafted from 1993 through 2008 related to the physical audits of the US official gold reserves. However, the documents released are incomplete and reveal the audit procedures have not been executed proficiently. Moreover, because the Mint could not honor its promises in full the costs ($3,144.96 US dollars) of the FOIA request have been refunded.

Thanks to my readers that donated to the crowdfunding campaign I’ve been able to force the US Mint through a Freedom Of Information Act (FOIA) request to hand over documents related to the physical audits of the US official gold reserves stored at the Mint; also referred to as Deep Storage gold. Although the PDF-package digitally sent to me is redacted, incomplete, includes pages copied twice and materials I didn’t ask for, it’s the closest thing that I’ve ever seen to physical audit documentation of gold at Fort Knox and the other Mint depositories drafted in between 1993 and 2008.

What is worrying is that the reports now in my possession reveal the audit procedures have not competently been executed. Combine that with the fact the documents are incomplete and redacted, and the result is suspicion of fraud. In this blog post we’ll have a first critical look at the reports and the problems to be found within.

This post is a sequel to A First Glance At US Official Gold Reserves Audits, Second Thoughts On US Official Gold Reserves Audits, US Government Lost 7 Fort Knox Gold Audit Reports, The Power Of The Gold Community: Crowdfunding For FOIA Request Fort Knox Audit Documents Completes Within 24 Hours, Dear US Mint, We Gave You The FOIA Funds, Now Give Us The Fort Knox Audit Documents! Also related are Where Did The Gold In Fort Knox Come From? and Former US Mint Director Clueless On Gold In Fort Knox.

US Government Tight-Lipped About Fort Knox Audits

For starters, allow me to expand on what I think happened at the Mint’s headquarter on the 8^th floor at 801 9^th Street NW Washington DC, before these documents were sent to me.

It should be clear that the US Treasury (owner of the gold), US Mint (main custodian), Federal Reserve Bank Of New York (second custodian), and the Office Inspector General of the US Treasury (head auditor), are reluctant to disclose information about the audits of the gold at the four largest depositories that store over 8,000 fine metric tonnes. Consider that the most seasoned gold analysts aren’t even aware this gold is audited.

About a year ago we read in the introduction of an interview with world-renowned gold commentators Jim Rickards, “unlike many today, Jim Rickards believes the gold is indeed in Fort Knox but has not been audited to avoid drawing attention to it and to downplay its role”. More recently, on 11 February 2017 the Financial Times wrote, “much of the world’s excavated gold is thought to be in Fort Knox, but nobody can be sure, since the US government will not allow the auditors in”.  No, auditing Fort Knox is not a topic only the mainstream media are confused about. Gold advocates are in the dark as well.

Exhibit 0. Source. Overview of the four main depositories that store the US official gold reserves: Denver, Fort Knox, West point and the Federal Reserve Bank Of New York. Where the working stock is exactly located is not known (likely Washington DC, Philadelphia and West Point; perhaps also Denver and San Francisco). The Deep Storage gold is the metal in 42 sealed compartments spread over Denver, Fort Knox and West Point.

What nobody knows is that according the US government 100 per cent of the Deep Storage gold has been audited in between 1974 and 2008 (page 4). This period can be divided in two chapters: the first runs from 1974 until 1986 when the Committee for Continuing Audit of the U.S. Government-owned Gold verified the majority of the Deep Storage metal. The second chapter covers 1993 until 2008 when the residual was examined under the supervision of the Office Inspector General of the US Treasury. In my previous posts on this subject we focused on the first chapter, what is written below skims the surface of the second. As promised, eventually I will publish a full in-depth analysis of all chapters (there are additional chapters in the fifties, from 1986-1993, in 2009, 2010 and 2011).

Over the years my inquiries at the US government though regular channels have produced little intelligence about the physical audits of the Deep Storage gold. Some departments cooperated at first, but eventually they stopped replying emails or just hang up the phone while I was talking. The second layer of defense was raised when I started submitting FOIAs. Instead of honoring my requests they tried to delay and dodge most appeals. Clearly, the US government prefers not to answer my questions than to flaunt with the audit results.

However, in 2016 I embraced the motivation to push through and find out how many gold bars were counted, weighed and assayed in between 1993 and 2008, when allegedly the last series of physical audits was conducted. Not surprisingly, zero US government departments could provide me the information I was looking for, but through certain FOIAs I obtained leads to submit new FOIAs, and so on 12 Augustus 2016 I demanded, inter alia, the “memoranda submitted by the US Mint Director’s representative regarding audits of the Mint Schedule of Custodial Gold and Silver Reserves to the Chief Financial Officer drafted from 1993 through 2008”. The Mint replied this request would costs me $3,144.96 dollars because it would take 40 hours to search the respective documents, 8 hours for review, and additional costs would be incurred to duplicate 1,200 pages. I thought this was hogwash – 1,200 pages seemed out of proportion for such memoranda, how hard can it be to find a few pages and how did they know it were going to be 1,200 pages if they had to search 40 hours for it – but decided to start a crowdfunding campaign to collect the money.

Within 24 hours the campaign was completed and late August 2016 I sent the Mint a check, in the hopes to receive the documents a.s.a.p.. After the Mint pretended the check was missing for a few weeks, they communicated on 28 September 2016 the funds had arrived and they were working to get the requested documents out to me (exhibit 1).

Exhibit 1. Screenshot email form the US Mint (Jones, Lateau). My FOIA request was originally dated from 1 August 2016, but was revised on 12 August 2016. Jan Nieuwenhuijs is my real name.

Months past but nothing happened. I sent several emails and called the Mint three times, but time and time again I was maintained with false excuses. Then, finally, on 23 December 2016 the Mint delivered the documents I paid for. Sort of. Instead of 1,200 pages I received 223 redacted pages that contained 68 pages of reports I didn’t ask for and 21 pages that were copied twice. Effectively, I got 134 pages related to my FOIA request.

When I confronted the Mint I paid $3,144.96 dollars for a meager 134 pages they agreed the costs had been estimated to high and a refund was reasonable. Actually, they told me they never cashed the check. So, quickly I told my bank to cancel the check and ordered my crowdfunding platform to refund all my donors.

As of now all donors to my crowdfunding campaign should have received their money back (if not, please write me an email, see below for my address). From the bottom of my heart I would like to thank everyone for the loan that made this operation possible¹!

For me a slight doubt remained if the Mint had tried to fend me off by asking a disproportionate amount of money for a few pages that I assume are alphabetically archived, or that they handled my case in all honesty. A skeptical mind would think the former. To find out I read the internal emails of the Mint employees that handled my FOIA. Those are not directly publicly available, but I was told a trick by more experienced FOIA scholars that reached out to me after I published my previous blog posts on this subject, to ask the Mint for internal emails through, what else, a Freedom Of Information Act request (exhibit 2).

Exhibit 2. FOIA asking to obtain email correspondence written or received by Mint employees that was related to my case.

And it worked! On 10 January 2017 I received all (I hope) emails from the Mint I was looking for. Including one wherein Audit Liaison at the United States Mint Tom Noziglia makes an estimate for the costs of my FOIA request of 12 August 2016. Read below (exhibit 3).

Exhibit 3. Email by Noziglia to Saunders-Mitchell, Grimsby and Fletcher.

At first sight it seems Noziglia and his office stick to prudent protocols. But possibly this email is a veil, meant to deceive me if I would ever read it. Actually, yes, I think it’s a cloak and I’ll share my theory.

Let’s study Noziglia’s LinkedIn page:

Exhibit 4. Screen shot LinkedIn page Tom Noziglia. Note, we can read he’s a schooled psychologist that was unemployed from 1985 until 2012 after which he started as auditor at the US Mint. I count 5 typos on this page, which suggests Noziglia is not the most meticulous auditor.

We can read from Noziglia, “as Audit Liaison at the US Mint, I [Noziglia] am responsible for the coordination of all external audit initiatives … I have extensive experience in precious metal inventory, … I … coordinate the execution of the annual OIG [Office Inspector General] Joint Seal Inspection of the Custodial Gold at the US Mint”. This page tells us Noziglia is one of the auditors of the US official gold reserves. So, the email above (exhibit 3) was written by the auditor who was involved in the procedures of which I requested the documentation. Noziglia must have known my inquiry could be simply honored by sending just a few pages of documentation, as he was a co-author of the documents in question.

Firstly, with the benefit of hindsight we know Noziglia was lying in his email because by now I have the documents that count only 134 pages, and he was the coordinator of the annual inspections of custodial gold at the Mint. He must have known there were no “1,200 pages in 80 boxes” and so his $2640.00 dollar estimate is a hoax. I think Noziglia wrote the email expecting I would NOT pay the ludicrous amount of dollars, but possibly DID submit a new FOIA to view the Mint’s internal emails. Chances are slim someone could pay $3,144.96 dollars right? But I’m not the first who submits an additional FOIA to obtain internal emails. Hundreds of people went before me, this is a well-known trick for FOIA pundits, and many public servants in the US must be aware of this hazard. Hence I reckon public servants consciously write emails to colleagues, as if these will be publicly released some day. I’ve come to understand submitting and answering FOIAs is nothing but a cat and mouse game.

Second, the Mint never cashed the check. If they really thought they would have to search 40 hours, why not cash the check immediately and get busy? I guess they knew very well there was no searching required.

Third, in case Noziglia had never seen a “memoranda submitted by the US Mint Director’s representative regarding audits of the Mint Schedule of Custodial Gold and Silver Reserves to the Chief Financial Officer”, which is not likely but let’s give him the benefit of the doubt, he could have viewed the most recent version at his office that wasn’t sent to the National Archives (NARA) yet. By doing so he would have learned very effectively these annual memoranda count only a few pages.

Fourth, Noziglia states in his email (exhibit 3) he’s not sure if he will find the documents at all. But this is impossible because he’s a dedicated Mint auditor so he must know what documents the Mint sends to NARA every year. In addition, there was no need for Noziglia to “order off site” boxes, because he simply could have commanded NARA staff to deliver specific documents – this is common practice.

Fifth, in the CC of Noziglia’s email is Kenyatta Fletcher, who is the Chief of the Accounting Division of the Mint. If, which is a big if, Noziglia didn’t know what I was looking for, Fletcher would’ve known these documents wouldn’t count 1,200 pages. But still I was charged a laughable $3,144.96 dollars.

Sixth, Noziglia’s estimate is $2.640.00 dollars, but I have no emails that clarify why $504.96 dollars were added for a total of $3,144.96 dollars I was charged. This indicates, Mint staff communicated in person or through phone calls to finalize my request, and so could have done likewise to handle it in general. Concluding, Noziglia’s email doesn’t paint the full picture of the internel communication.

Seventh, please read what Noziglia’s colleague Grimsby replied to him after 4 minutes.

Exhibit 5. Email by Grimsby to Noziglia.

“Great email”? Why would Grimsby praise Noziglia for his email? If Grimsby would have written,“I agree”, I can understand. But, “great email”? Perhaps Grimsby meant to write, “great calculation that makes no sense, but is likely deceive an ignorant FOIA requester if he would ever read it!”? It sure looks like it.

My guess is that Noziglia, Grimsby and Saunders-Mitchell met in the hallway in the afternoon of 15 August 2016 and agreed for Noziglia to write a phony email that arrives at an amount of dollars aimed to scare me off. In the email below you can read Noziglia suggested to Grimsby to discuss in person in the afternoon of 15 August 2016 the estimate for the costs.

Exhibit 5.2. Email by Noziglia to Grimsby 15 August 2016.

So far we’re confirmed, again, that the US gold is held in secrecy. No surprises there. Moving on to the content of the documents.

Audit Documents Released Are Incomplete    

When one walks into a US Mint repository the main barrier will be the door to the vault room. In the case of Fort Knox this a 20-tonne door of which no one person is entrusted with the combination. Once inside the vault room the gold is stored in segregated compartments that are sealed since at least the fifties.

The official narrative is that by 2008 the load of all 42 compartments had been physically audited. Every compartment had been opened, the gold inside counted, weighed and assayed, after which the gold was stacked in an adjacent compartment in the vault room (in several documents it’s described this is the way the gold is physically audited). Subsequently the target compartment door was closed and placed under Official Joint Seal, if during the verification no discrepancies had been found with the Mint’s bullion ledger. In most years until 2008 one or two compartments were opened for a physical bar examination, while the other compartments were merely inspected for any tampering of the Official Joint Seal (OJS). The purpose of joint seals is to avoid the necessity of verifying all assets in each annual audit.

Exhibit 6. Official Joint Seal protocol drafted in 1975.

Thus the audits of the Deep Storage gold consist of two conventions gold verifications, which are the physical audits of gold bars inside the compartments. And OJS inspections, which are checks of the seals placed on the compartment doors. The superintendent in the audit procedures is the Office Inspector General of the US Treasury, in short, the OIG.

When reading the audit documents delivered to me (the Memoranda hereafter) the distinction between gold verifications and OJS inspections is clear. Let me show you an example of Fort Knox. The first screen shots below are from a gold verification at Fort Knox in March 1998.

Exhibit 7.1. Gold verification at Fort Knox March 1998, page 1.

Exhibit 7.2. Gold verification at Fort Knox March 1998, page 2.

Exhibit 7.3. Gold verification at Fort Knox March 1998, page 3.

Exhibit 8.1. OJS inspection at Fort Knox June 1998, page 1.

Exhibit 8.2. OJS inspection at Fort Knox June 1998, page 2.

Exhibit 8.3. OJS inspection at Fort Knox June 1998, page 3.

Exhibit 8.4. OJS inspection at Fort Knox June 1998, page 4.

Click here and here to download all Memoranda sent to me by the US Mint.

After I had organized the documents and imported all data in spreadsheets I noted the 134 pages exclude 27 OJS inspection reports and at least 3 gold verification reports. I’ve asked the Mint to deliver the missing Memoranda, although I’m not expecting them to ever comply.

The fact 30 Memoranda are missing is of course highly problematic. Bear in mind, I offered the Mint $3,144.96 dollars to produce these documents.

Exhibit 9. Overview gold verification and OJS inspection reports Deep Storage gold. Note, throughout time the Memoranda format changed, so in some years one Memorandum included both gold verification and OJS inspection paragraphs.

In case you’re wondering how I know what gold verifications reports I’m missing, this is because references are made to these physical audits in succeeding gold verification reports. Fort OJS inspection reports, those should be done every year.

Below is an example of an Official Joint Seal. I obtained nearly all OJS copies from a separated FOIA request at the OIG.

Exhibit 10. OJS Fort Knox compartment 29.

Submitted a whole bunch of FOIA request at US government departments regarding Fort Knox today. #gold

— BullionStar (@KoosJansen) July 30, 2016

Fort Knox Compartment 31 Was Opened In 1996 For Dubious Reasons

There are a couple of disturbing lines written in the Fort Knox OJS inspection report of 1996. Although for an OJS inspection seals should only be examined for tampering, on 12 August 1996 at the Fort Knox OJS inspection two representatives of the General Accounting Office (GAO) showed up in the vault room and decided to select “a single joint sealed compartment for opening and inspection”.

Exhibit 10. Fort Knox OJS inspection report 1996.

Unfortunately the report doesn’t say what was in the vault compartment; how many bars and fine troy ounces (FTO) it contained. Based purely on this document it would impossible to decipher what the GAO exactly did. However, by combining the info in the 1996 OJS inspection report with documentation obtained through a FOIA requests at the OIG, we do know what happened.

Have another look at exhibit 10. We can read Fort Knox compartment 29 was sealed in 1998. But the content, 19,800 gold bars weighing 6,470,624.049 FTOs before assays samples were taken, was sourced from compartment 31 that was sealed on 12 August 1996. Was compartment 31 the one opened by the GAO in 1996? Yes, without a doubt.

By examining all OJS copies – such as demonstrated in exhibit 10 – it shows there was no other vault segment freshly sealed on 12 August 1996 other than compartment 31. Moreover, the 1996 OJS inspection report mentions only one joint sealed compartment was breached. Therefore we know the GAO representatives opened Fort Knox compartment 31 comprising 19,800 gold bars weighing 6,470,624.049 FTOs on 12 August 1996.

Furthermore, in the 1995 OJS inspection report we read there was one compartment – the number is redacted – that contained 19,800 gold bars weighing 6,470,624.049 FTOs. And in 1995, 1996 and 1997 there were no gold verifications at Fort Knox as far as I know, other than the GAO incident. Have a look below at a screenshot from the 1995 Fort Knox OJS inspection report.

Exhibit 11. Fort Knox OJS report 1995.

What happened is that on 12 August 1996 compartment 31 was opened by the GAO to “check a few bars”, but then two years later in 1998 the same gold was verified by the OIG; all the gold inside taken out of compartment 31, counted, weighed and assayed, to be stored across the hall in compartment 29. This is suspicious. I quote, “the purpose of joint seals is to avoid the necessity of verifying all assets in each annual audit”.

I do not possess the official rules for US Mint OJS inspection and gold verification for the year 1996 (“MD 8H-1”), but based on the rules that prevailed in 1975, what the GAO did on 12 August 1996 was not done. Read with me.

Exhibit 12. Source.

My interpretation of the quote above is that if a compartment was opened all assets within should have been verified by the auditors, not just a few bars. If these rules still applied in 1996, what happened in Fort Knox compartment 31 was fraud. Unfortunately, but perhaps no coincidence, the GAO is exempt from FOIAs. On their website we read, “the Government Accountability Office (GAO) is not subject to the Freedom of Information Act”. (In July 7, 2004, the US GAO’s legal name was changed from the General Accounting Office to the Government Accountability Office.) I’ve submitted a FOIA at the Mint to obtain MD 8H-3 but it bounced. Currently I’m trying the OIG to provide these rules.

How come the GAO could open a compartment? The OIG stated under oath in 2011, “since 1993, when we assumed responsibility for the audit, my office has continued to directly observe the inventory and test the gold” (page 4). If the OIG is responsible how come the GAO could break a seal?

Let’s contemplate this: if the “random checks” the GAO performed in 1996 in compartment 31 formed an adequate gold verification, why did the OIG re-audit the exact same gold in 1998? And what was the intention of the GAO in 1996? The GAO couldn’t fully audit compartment 31, because they were present at Fort Knox only for one day (12 August), and no single person or flock of auditors can verify 19,800 large gold bars in one day. The fact these 19,800 gold bars were re-audited in 1998 underlines what the GAO did in 1996 was inappropriate at best.

One theory is that the gold in compartment 31 was prepared in 1996 to be physically audited down the road. Remember what the Fort Knox gold verification report of 1998 stated (exhibit 7.2)? In 1998 the OIG, “selected predetermined individual bars to be drilled for assay”. Possibly, the OIG selected the exact bars in 1998 that were put in in 1996. If this is true the names and autographs of the perpetrators of this crime are on the seal of compartment 29 (exhibit 10).

My succeeding post on this subject will expose that many other Deep Storage compartments at the Mint have been opened for dubious reasons as well. Which could be the reason the Mint didn’t provide us ALL the OJS inspection reports from Denver and West Point from 1993 through 2003 (exhibit 9).

Weighing Sample Size Remarkably Low

We need to discuss the sample size of the gold verifications. In 1998 at Fort Knox 19,800 gold bars were inspected but only 105 of them were weighed and assayed (exhibit 7.2). That’s not much in my humble opinion. In any case, I expected a higher sample size.

In the 1953 audit at Fort Knox (download report here) in total 88,000 bars weighing 48,506,985 FTOs were counted for verification. About 10 % of those were weighed.

During the Continuing Audits from 1974 through 1986 it seems 2 % of the gold counted was weighed. A huge decline from 1953.

Exhibit 13. Audit report Fort Knox 1981.

Although gold bars tested to be out of tolerance during a Fort Knox audit in 1977 at a sample size of 2 %, by 1998 the sample size had been further debased to 0.53 %. I’m not a professional auditor (if you are one please contact me), but common sense suggests that when irregularities are found the sample size should be increased, not decreased.

To make matters worse, in 1999 at West Point the sample size was 0.52 %, and again, a melt appeared to be out of tolerance.

Exhibit 14. Gold verification report West Point 1999.

Was the sample size increased after 1999? Not really. At Fort Knox in July 2000 the samples size was 0.65 % (93 bars weighed of 14,262 bars counted). But wait until I show you what numbnuts were entrusted handling the scale for the audits of the world’s greatest gold hoard. 

Scale Didn’t Work, Repeatedly

Let’s study the 2004 physical audit at West Point. Please read:

Exhibit 15.1. Gold verification report West Point 2004.

Exhibit 15.2. Gold verification report West Point 2004.

When all parties tried to reconcile the weight of samples on 22 and 23 July 2004, they found out, “the scale was reading at ounces rather than fine troy ounces”, because, “a setting on the scale had not been properly changed”. Allegedly this is what caused alternative readings in the books of the Director of the Mint’s Representative and the OIG’s Representative. And presumably because nobody could figure out how to use the scale correctly they decided to postpone re-weighing the samples until 24 August 2004. This failure of how to use a scale is a colossal disaster for the credibility of the Deep Storage audit procedures.

In 2004 a mere 71 bars were weighed and assayed, but it appeared that none of the auditors present knew how to rightly use the scale. The Memoranda mentions they found out the scale wasn’t properly functioning when weighing the assay samples, but what about the weighing of the actual bars? What about the weighing of every Deep Storage gold bar under the supervision of the OIG from 1993 until 2008? We have no guarantee this has ever been executed competently.

To repeat, the official explanation for this blunder reads, “the scale was reading at ounces rather than fine troy ounces”, because, “a setting on the scale had not been properly changed”.

First, in my mind there can be no imaginable circumstances in which setting of the scale should have been changed. The scale should read troy ounces to as many decimals all day long. That’s it. Why change the settings?

Second, they say, “the scale was reading at ounces rather than fine troy ounces”, but scales don’t read fine troy ounces so this statement is fake. A scale reads troy ounces, or digital ones can be set to reading grams; it cannot smell what is the purity of the gold and thus display fine troy ounces. That’s what the assay test is for.

In 2008 at West Point a similar disaster happened. Read with me:

Exhibit 16.1. Gold verification report West Point 2008.

Exhibit 16.2. Gold verification report West Point 2008.

The auditors couldn’t clearly read the decimal point. After assay samples were drilled to be taken out, the auditors weighed the same amount of gold granules to replace the samples, in order for the Deep Storage FTOs to remain flat in 2008. But the assay lab, White Sands Missile Range, which is a division of the US Army, found out from the paper work that the weight of the assay samples didn’t match the weight of the granules. And so West Point compartment 10-H had to be re-opened on 22 September 2008 to put an exact 10.346 ounces of gold in, instead of 1.0346 ounces.

What a catastrophe! Be aware that before weighing the granules the auditors weighed 86 gold bars and the assay samples. How do we know they properly weighed the assay samples and the totals of the 86 bars? The short answer is, we don’t.

Thereby, anybody with a sense for gold can see the difference between 10 ounces and 1 ounce of yellow metal.

Conclusion

From the examples above it should be clear that the Deep Storage gold has not been audited by professionals, but the precious metals have been verified by imbeciles. Clearly the scale was repeatedly handled by amateurs, which throws a wrench at the integrity of the entire US official gold reserves auditing project. I’m not at all surprised the US Mint has tried everything to keep the records of the auditors out from the pubic domain. Fortunately most of it will be out in the open eventually. The citizenry of the world deserves to know everything there is about the Deep Storage gold.

Let’s finish with one more comment from the West Point 2006 audit report.

Exhibit 17.1. Gold verification report West Point 2006.

The auditors couldn’t figure how to use the drill to take assay samples (how about pointing the tip to a bar and press the button). They also were oblivious how to calculate fine troy ounces. We must wonder if these people would be capable of tying their own shoelaces. In any case, the fact the US government chose to assign very inexperienced people widely opens the possibility that the audits are a complete hoax.

Senator Rand Paul Just Reintroduced Corruption-Killing Legislation to ‘Audit the Fed’

When mentioning the Federal Reserve, most Americans have no idea that it even exists. Those that do know of its existence think it simply sets interest rates and helps the economy — but they are wrong. And, thanks to the efforts of Ron Paul over the last few decades, that ignorance about what the Fed does is diminishing. Now, his son Sen. Rand Paul (R-KY), is going to carry on his father’s legacy.

Paul is now calling for an audit of the federal reserve. But the Federal Reserve Act of 1913 wasn’t introduced as a bill by Congress. Instead, the bill was drafted in secret on Jekyll Island, Georgia, in 1910. Often the retreat for billionaires, Jekyll Island was the playground for the nation’s richest 1 percent.

According to one source, those in attendance were, “Senator Nelson Aldrich, his personal secretary Arthur Shelton, former Harvard University professor of economics Dr. A. Piatt Andrew, J.P. Morgan & Co. partner Henry P. Davison, National City Bank president Frank A. Vanderlip and Kuhn, Loeb, and Co. partner Paul M. Warburg.”

These elite men had five objectives, all bad ideas reminiscent of a drug cartel, or an oil cartel like OPEC, but focused more on monetary control. The following five objectives were used to establish the Federal Reserve.

1. Stop growing competition from banks


2. Obtain franchise to create money


3. Get control of all banks’ reserves


4. Shift losses to taxpayers


5. Convince Congress of its purpose

There are no elected officials in charge of running the Fed. Also, the Fed is privately owned but no one knows by whom because the Fed is not accountable to anyone, not even the government of the United States.

Paul wishes to end all of that and expose the Fed for what it really does, and how it really manages the country’s money supply. So far, he hasn’t had any luck, even though both he and his father have been calling for accountability for years.

According to ZeroHedge, Senator Rand Paul, together with Rep. Thomas Massie on Wednesday “called for the re-introduced legislation to ‘Audit the Fed’, after a similar effort stalled in the last Congress.”

Paul feels he may have a better chance of seeing an audit of The Fed, now that Republicans control not only a majority in both the House and the Senate, but also control the presidency as well. It’s a long-shot to think that the establishment will go against their corporate employers and political masters, but Rand has fired the warning shot across the bow of the Fed’s big ship. Rand reportedly said, “The U.S. House has responded to the American people by passing Audit the Fed multiple times, and President-elect Trump has stated his support for an audit. Let’s send him the bill this Congress.”

As The Free Thought Project has reported on several occasions, the world’s power and influence are in the hands of just five wealthy families and their descendants, many of whom were responsible for creating The Fed. For more information about The Fed, click here to read our archives. In the meanwhile, keep your fingers crossed that this Congress will have enough guts to audit the world’s most secret money club, that truly affects every American’s financial budget, whether they are aware of it or not.

Rand Paul Introduces Bill to Audit the Fed, Says it Has Trump Support

Literally nothing is going to happen here. Let"s not pretend Congress will actually pass a Rand Paul bill that simply requests for the Federal Reserve to be audited. After all, they"re the central bank for the world now, rigging markets and fixing rates almost on demand. There are a lot of people with a lot of questions for the Fed -- an entity who presides over an unlimited balance sheet and the power to both print fiat currency at will and to increase the amount of interest it charges the U.S. government.

Any person or entity under the auspices of the SEC or FINRA is forced to undergo routine audits, just to make sure everything is kosher. Why isn"t the same standard used for the Fed?

Rand Paul wants to change that and he says it has the support of President elect Trump.
 

On Tuesday, U.S. Senator Rand Paul reintroduced his Federal Reserve Transparency Act, widely known as the “Audit the Fed” bill, to prevent the Federal Reserve from concealing vital information on its operations from Congress. Eight cosponsors joined Senator Paul on the legislation.
 
Representative Thomas Massie (KY-4) has introduced companion legislation, H.R. 24, in the U.S. House.
 
“No institution holds more power over the future of the American economy and the value of our savings than the Federal Reserve,” said Sen. Paul, “yet Fed Chair Yellen refuses to be fully accountable to the people’s representatives.”
 
“The U.S. House has responded to the American people by passing Audit the Fed multiple times, and President-elect Trump has stated his support for an audit. Let’s send him the bill this Congress.”
 
“The American public deserves more insight into the practices of the Federal Reserve,” said Rep. Massie. “Behind closed doors, the Fed crafts monetary policy that will continue to devalue our currency, slow economic growth, and make life harder for the poor and middle class. It is time to force the Federal Reserve to operate by the same standards of transparency and accountability to the taxpayers that we should demand of all government agencies.”
 
On January 12, 2016, a bipartisan Senate majority voted 53-44 in support of Audit the Fed.
 
S. 16 would require the nonpartisan, independent Government Accountability Office (GAO) to conduct a thorough audit of the Federal Reserve’s Board of Governors and reserve banks within one year of the bill’s passage and to report back to Congress within 90 days of completing the audit.
 
Audit the Fed would amend section 714b of Title 31 of the U.S. Code to allow the GAO to fully audit:
 
transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization;
 
deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;
 
transactions made under the direction of the Federal Open Market Committee; or
 
a part of a discussion or communication among or between members of the Board and officers and employees of the Federal Reserve System related to clauses (1)–(3) of this subsection.

Isn"t anyone interested in learning how this happened and how they intend to unwind it?