This section contains references to fraudulent investments which
are sold based on a perceived rarity of the item. Such false
goods will include the collection for investment purposes of wine,
spirits, drinks, liquors ( rare whisky ), coins, art and stamps.
Collectible Coins and Currency
COIN DEALER AGREES TO TURN OVER SEVERAL MILLION DOLLARS IN ASSETS
- 03/92
T.G. Morgan, Inc. and its president, Michael W. Blodgett, have
agreed to turn over several million dollars in assets to settle Federal
Trade Commission charges that they falsely represented rare coins
they sold to consumers to be good investments and an effective means
of preserving wealth in a liquid form.
The settlement also prohibits the defendants from falsely representing
any material fact about coins or any other investments they sell,
and requires them to make certain disclosures to future customers.
Further, under the consent judgment, many of the coins recovered
from the defendants will be returned to T.G. Morgan's customers.
The remainder of the assets will be liquidated and used to set up
a fund for providing customer refunds.
Specifically, the consent judgment prohibits T.G. Morgan and Michael
Blodgett from falsely representing:
-- that purchasing their coins is an effective means of preserving
wealth or holding wealth in a form that can be easily liquidated;
-- the safety of investing in their coins;
-- the relationship between the prices the defendants ask, quote or charge
for their coins and the coins' market value or the prices the defendants
paid;
-- the current or past market values of their coins or any other investment
they sell;
-- the past or likely future financial gain that will result from purchasing
an investment from the defendants, or the nature or quality of any service
the defendants provide in connection with such investments; or
-- any fact material to a consumer's decision to purchase their coins
or any other investments they offer.
In addition, the settlement requires the defendants to disclose
to future customers that the investment value of rare coins depends
in large part on the prices consumers pay, and that it is strongly
recommended that buyers consult an independent coin expert to determine
a coin's current market value and liquidity when buying a coin as
an investment.
The amount of redress distributed to T.G. Morgan customers as a
result of the settlement depends on how much of the judgment is actually
collected.
MINNESOTA DEFENDANT IN FTC COIN-FRAUD CASE SENTENCED TO SIX YEARS,
ORDERED TO PAY $500,000 - 10/22/93
Michael W. Blodgett, of Wayzata, Minnesota, a defendant in
a Federal Trade Commission lawsuit naming him and his firm, T.G.
Morgan, Inc., and charging that they ran a deceptive rare-coin investment
scheme, was sentenced to six and a half years in prison and three
years of supervised release, and ordered to pay $500,000 in restitution
to victims.
The sentencing comes on the heels of a federal district court jury
finding last June that Blodgett is guilty of 18 counts of mail fraud,
interstate transportation of stolen property, and wire fraud in connection
with the scheme, which bilked about 250 investors out of $25 million.
The FTC alleged that the defendants falsely represented at investment
seminars and elsewhere that the coins they sold to consumers were
good investments and an effective means of preserving wealth in a
liquid form. The FTC alleged that the defendants thus induced consumers
to purchase coins at prices often more than double or triple their
resale or liquidation value.
In March 1992, Blodgett and T.G. Morgan agreed to settle
the FTC charges under a consent judgment that required them to turn
over several million dollars in assets to be used to pay redress
to the company's customers. The consent judgment also prohibits the
defendants from falsely representing any material fact about any
investment they sell in the future, and requires them to make certain
disclosures to future customers.
In November 1992, a federal grand jury returned a 27-count criminal
indictment against Blodgett in connection with the scheme. The indictment
was sought by the Department of Justice, following the execution
of search warrants by U.S. Postal Inspectors. After a four-week trial
and one day of deliberation, a district court jury found Blodgett
guilty on 18 counts.
GEORGIA COLLECTIBLES MARKETER SETTLES FTC CHARGES - 01/95
"Coins" issued by the "Hutt River Province" in
Australia and allegedly promoted by Chattanooga Coin Co.
as official coins issued by the authority of a government are privately
minted commemorative tokens with no legally-established monetary
value, the Federal Trade Commission charged.
The Hutt River Province actually is a private farming property
within Australia, and not a government authorized to issue coins,
the FTC said. Yet, Chattanooga used these types of claims to induce
consumers interested in collectibles to purchase the tokens at prices
more than triple their metal value.
The agreement is accompanied by broad prohibitions on future misrepresentations
about the nature or value of Hutt River Province products or any
other collectible, and is part of a settlement of Federal Trade Commission
charges against Dahlonega Mint, Inc., which does business
as Chattanooga Coin Co., and Dahlonega's president, Lewis Revels.
Dahlonega is a mail-order business that sells coins, sports cards
and other collectibles to consumers, and is based in Rossville, Georgia.
The proposed settlement stems from FTC charges filed in federal district
court in April 1994.
The FTC alleged that the defendants advertised the commemorative
tokens at issue in their publication, called "The Coin & Sports
Card Wholesaler." The ads allegedly described the tokens as
having been issued or authorized by the Hutt River Province, representing
to consumers that they were worth at least their face value.
The FTC complaint detailing the charges states that, although the
owner of the Hutt River Province announced in 1970 that he had seceded
from Australia, the province remains a private property within that
country. Thus, the privately-minted coins have no legally-established
monetary value, the FTC charged.
The defendants have signed a consent judgment to settle these charges,
and it requires the court's approval to become binding. Under the
settlement, Dahlonega and Revels would be prohibited from representing
that any item issued by Hutt River Province:
-- is issued by the authority of a government of a sovereign state;|
-- is authorized by a sovereign state for use as money;
-- has a legally-established monetary value; or
-- has a value based solely on the face value of the item.
The settlement also would prohibit the defendants from misrepresenting
in the future the origin, scarcity or other material aspects regarding
any collectible, including coins and tokens as well as sports cards,
stamps and other collectibles.
TWO NATIONWIDE SELLERS OF RARE COINS MISREPRESENTED THEIR VALUE
AND INVESTMENT POTENTIAL - 09/86
The Federal Trade Commission yesterday charged two related companies
and two individuals who have sold thousands of rare coins nationwide
with misrepresenting the grade and investment value of the coins.
The Commission asked a federal court to grant a temporary restraining
order, preliminary and permanent injunctions, consumer redress, and
an asset freeze against Rare Coin Galleries of America Inc.,
Rare Coin Galleries of Florida Inc., and their principal officers.
The companies' sales brochures and other promotional materials
included claims such as the following: "You can be confident
that any coin acquired through RCGA will be exactly as represented;" and "You
receive our Rare Coin Galleries of America Guarantee of Authenticity
in Grading, in which your coins are certified to be genuine and accurately
graded."
They also claimed to include only those coins in the highest investment
grades. According to the complaint filed in court, these claims were
false.
The complaint alleges that the defendants significantly overgraded
their coins. According to the FTC staff, the coins were sold for
between $100 and $3,000 each.
In documents filed with the court, the FTC charged that many of
the coins were worth substantially less than the price the customers
paid for them.
The sellers marketed the coins, through advertisements in general
circulation newspapers and magazines, and through direct mail and
telephone sales, mainly to investors rather than to knowledgeable
collectors of rare coins.
The value of a coin depends not only on its rarity but also on
its condition or grade, the FTC staff stated.
"Mint state 65" (MS 65) is generally the highest available
grade for an uncirculated coin and is used to describe a coin in
near-perfect condition. The companies described most coins they sold
as MS 65 amd falsely claimed that the coins they sold were accurately
graded when in fact their coins were of a grade significantly inferior
to what they were represented to be.
Many consumers follow the value of their rare coin investments in
industry pricing publications. The complaint charged that the companies
falsely claimed their coins were worth prices quoted in those publications
when, in fact, they were worth substantially less.
In addition, the complaint alleged that the companies falsely claimed
that consumers could reasonably expect to make a substantial profit
on their investment in three to five years. However, according to
the complaint, because defendants sold their coins at prices far
higher than the fair market value for such coins, consumers could
not reasonably expect to recoup more than a fraction of the purchase
price upon resale.
The temporary restraining order prohibits the defendants from selling
any coins unless they have been graded accurately and in accordance
with generally accepted industry standards; prohibits them from misrepresenting
the value of any coins; and prohibits them from any other misrepresentations
in their sales of rare coins or other investments.
Rare Coin Galleries of America Inc. had headquarters in
Boston, and Rare Coin Galleries of Florida Inc. was based
in Fort Lauderdale.
The complaint also names Edward Kalp and Richard Kayne,
sole stockholders and principal officers of both companies; Kalp
and Kayne are residents of Marblehead, Mass.
PROGRAM TO COMPENSATE CONSUMERS IN GEORGIA-BASED COIN INVESTMENT
SCHEME 08-93
The Federal Trade Commission today announced a refund program to
compensate consumers who purchased rare coins whose investment quality
and grades were allegedly overstated by two Atlanta-based firms.
Under the disbursement plan, consumers will receive a pro rata portion
of their original investments.
The refunds stem from a December 1987 FTC complaint charging Rare
Coins of Georgia (RCG), its president, Sheldon Schultz, Independent
Grading Associates, Inc. (IGA), and its president, Robert
Cornely, with misrepresenting the value and grades of rare
coins they sold to telemarketers nationwide.
According to the FTC complaint, RCG, IGA, and American Coin Grading
Services (ACGS), an unincorporated entity operated by at least one
of the defendants, issued certificates that overstated the quality
of rare coins, and supplied those coins and certificates to telemarketers.
Using the certificates to promote the coins, telemarketers then resold
the coins to consumers as high-quality investments, the FTC alleged.
A consent judgment to settle the charges, previously approved by
the court, prohibits the defendants from making any future misrepresentations
in the sale of rare coins or other investments and required them
to pay $150,000 for consumer redress.
FTC CHARGES MARKETER OF RARE COINS WITH MISREPRESENTING INVESTMENT
POTENTIAL - 04/92
In a complaint naming Federal Coin Repository and Ichak
Listenger, the FTC has asked the court to prohibit the alleged
deceptive practices and order the Glen Cove, New York company to
provide consumer redress.
Federal Coin and Listenger represented that a purchase of rare coins
from them is an excellent, low-risk investment; that their coins
have consistently appreciated in value; and that the appreciation
rate for their coins is comparable to the rate for the rare coins
reported in Salomon Brothers investment surveys. The representations
have been made in written promotional materials, newspaper ads, and
direct-mail solicitations to consumers.
The FTC alleges that these representations are false and misleading
because: the defendants mark up their coins at prices two to five
times their actual value, making the coins neither an excellent nor
a low-risk investment; and that the appreciation rate reported in
Salomon Brothers surveys is not comparable to the appreciation rate
for the lower-grade Morgan silver dollars that the defendants sell.
In fact, the defendants' coins have consistently declined in value
since at least 1987.
The FTC further alleges that the defendants have represented that
they are affiliated with the federal government when, in fact, they
are not, according to the complaint.
NEW YORK RARE COIN MARKETER TO PAY $95,000 FOR CONSUMER REDRESS
TO SETTLE FALSE CLAIMS CHARGES - 08/93
Federal Coin Repository, a New York-based marketer of rare coins,
and its owner, Ichak Listinger, have agreed to pay $95,000 in consumer
redress to settle Federal Trade Commission charges.
The consent judgment also would prohibit the defendants from falsely
representing, among other things:
-- that their coins, or any other investment they advertise, sell
or promote are excellent, low-risk investments, or that they have
appreciated consistently in value;
-- that Salomon Brothers surveys or any other investment guides
reflect or predict the investment potential of the coins they advertise,
sell or promote;
-- that Federal Coin Repository is affiliated with a federal, state
or local government entity. The proposed consent judgment also would
require Federal Coin Repository to display the following disclosure
near its name in all promotional materials: "FEDERAL COIN REPOSITORY,
INC. IS A PRIVATE CORPORATION AND IS NOT AFFILIATED WITH THE FEDERAL
GOVERNMENT."
RARE-COIN SELLERS MISREPRESENTED PROFIT POTENTIAL AND RISK -
08/93
The Federal Trade Commission has charged a California-based rare-coin
marketer and its principals with deceptively telemarketing rare coins
as investments to consumers by misrepresenting the value and risk
of such investments, as well as the markups on the coins they sell.
As a result, the FTC charged that consumers were misled into buying
overpriced coins and risked losing a substantial part of their investment
money. In addition, the FTC alleged that, by holding themselves out
as providing expert information and advice on rare-coin investments,
the defendants falsely implied that their coins are offered at prices
similar to those that could be obtained by informed investors elsewhere.
The FTC asked the federal district court to permanently bar the
defendants from engaging in the alleged deceptive practices. In the
meantime, at the FTC's request, the court has appointed a receiver
to handle the defendants' financial affairs, frozen the defendants'
assets to preserve funds for consumer redress, and temporarily ordered
them to halt the alleged practices.
The FTC's complaint names Goddard Rarities, Inc. (Santa
Barbara, California), its affiliate, Goddard Rarities of Los
Angeles, Inc. (Encino, California), as well as Dennis S.
Goddard and Iraj Sayah-Karaji, who are officers and directors
of one or more of these firms.
The FTC complaint, which details the charges, cites several statements
made in the defendants' telemarketing calls and promotional materials,
through which they allegedly represented to prospective investors
that:
--they are a large full-service brokerage firm providing expert
investment advice on the purchase and sale of rare coins;
--they sell coins that are excellent, low-risk investments; and
--they offer competitive prices and low markups.
According to the FTC complaint, the latter two representations
are false and misleading.
The FTC charged that, by holding themselves out as providing expert
information and advice on rare-coin investments, the defendants have
implied that the coins they sell to consumers are offered at prices
similar to those at which an informed investor could obtain the same
or similar coins elsewhere.
In fact, according to the FTC, the defendants sell coins for as
much as two to six times their market value and at markups that are
much higher than the prices the consumer would pay through a market
purchase.
Thus, the FTC charged that the coins are neither a low-risk nor
an excellent investment, adding that it is "virtually inevitable
that many consumers will lose a substantial part of their investment
capital."
CALIFORNIA RARE-COIN MARKETERS SETTLE FTC CHARGES - 10/94
Dennis S. Goddard and his Santa Barbara, California-based firm Goddard
Rarities, Inc., agreed in a settlement to post a $100,000 bond for
the protection of their customers, before they market any coin or
other investment opportunity in the future.
Goddard Rarities of Los Angeles, Inc. and Iraj Sayah-Karaji have
agreed to a settlement with the Federal Trade Commission that would
prohibit them from making a host of false and deceptive representations
in connection with the future marketing of any coin or investment,
and in any future telemarketing effort.
The settlement also requires Sayah-Karaji and one other individual,
who is not a defendant in the case, to release their claims to various
real estate and other assets so that the assets can be liquidated
for consumer redress or disgorgement to the U.S. Treasury.
The settlement specifically would prohibit them from making
false claims:
-- that the item is an excellent or low-risk investment;
-- that it is being sold at a reasonable, competitive, low, or specified
markup price, or a price that is close or equal to the item's liquidation
value or market price;
-- that its price is based on an analysis of the market for similar items;
-- regarding the likelihood that consumers will profit from the investment;
or
-- about the past appreciation, earnings potential or current customer
earnings for the item.
The settlement also would require these defendants, when selling
coins to consumers, to include a clear, prominent and specifically-worded
disclosure in sales brochures and on invoices warning consumers about
the risks of investing in coins. Further, these defendants have agreed
under the settlement to comply with all state registration, filing
and bond requirements before engaging in any telemarketing business
in the future.
CALIFORNIA COIN DEALER CHARGED IN DECEPTIVE TELEMARKETING SCHEME -
12/91
Golden Oak Numismatics, a rare-coin marketer based in Marina
Del Ray, California, has been charged by the Federal Trade Commission
with making numerous false and misleading representations to consumers
to induce them to invest in coins with markups of several hundred
percent.
According to the FTC complaint, Golden Oak and Ronald H. Michel have
made numerous deceptive claims -- through direct-mail solicitations
and telemarketing -- about the investment value of the coins they
sell. The defendants allegedly have told consumers, for example,
that their coins are excellent, low-risk investments, that Golden
Oak offers competitive prices, and that the company charges low markups
over its cost to acquire the coins.
In fact, the FTC alleged, the defendants sell many coins for as
much as four to five times their market value. In addition, the defendants
falsely represented that their coins are sold at prices close to
their resale value, the FTC alleged.
In sum, according to the FTC complaint, the defendants' practices
make it "virtually inevitable that many consumers will lose
a substantial part of their investment capital."
CALIFORNIA RARE COIN MARKETER AND ITS PRESIDENT AGREE TO HALT
FALSE CLAIMS - 01/93
California rare-coin telemarketer Golden Oak Numismatics, Inc. and
its president, Ronald H. Michel, have agreed to settle Federal Trade
Commission charges that they made numerous false and misleading representations
to consumers to induce them to invest in rare coins.
The settlement contains several prohibitions against, among other
things, false claims regarding the risk, price, mark-up, or likely
earnings associated with investing in the defendants' rare coins.
It also enables the FTC to monitor any future telemarketing or investment
promotion Michel under- takes, and requires written disclosures to
consumers in connection with future coin sales.
Golden Oak is based in Marina Del Ray, and Michel resides in Pacific
Palisades, California.
Now the defendants have agreed to a permanent injunction that would
prohibit them, in connection with the marketing or sale of coins,
investments or investment services, or with the telemarketing of
any product or service, from falsely representing:
-- that they are excellent or low-risk investments;
-- that they are promoted or sold at, or close to, the price at which
they could be liquidated through a market sale;
-- that they are sold or promoted at reasonable, competitive, low, or
specified mark-ups over the defendants' cost to acquire them;
-- the likelihood of profit or income;
-- past or likely future earnings or returns on the investment; and
-- any other fact material to a consumer's decision to purchase such
products or services.
In addition, if approved by the court, the settlement would require
Golden Oak and Michel to place in all promotional brochures and order
acknowledgement documents for coin sales the following boxed disclosure:
"The investment value of a rare coin depends in large part
on how the price you pay compares with the coin's current resale
value. If the markup over resale value is sufficiently large, you
risk losing money even if the coin later goes up significantly in
value. You can get information that may help you to determine a coin's
resale value from other coin dealers and coin experts not affiliated
with the person selling you the coin."
The defendants further would be required to obtain a signed statement
from all customers indicating that the customers have received and
understand this disclosure.
The settlement includes a $5 million judgment against Golden Oak
and a $1 million judgment against Michel. Recovery on these judgments
is uncertain.
FTC BEGINS DISBURSEMENT OF NEARLY $900,000 TO COMPENSATE COIN
INVESTMENT SCAM VICTIMS - 12/92
The Federal Trade Commission announced today that a court- appointed
receiver will begin sending prorated refund checks this week to approximately
1,200 consumers who had been customers of Schoolhouse Coins,
Inc., a nationwide telemarketer of coins for investment. This
will be the first of two mailings that will total approximately $880,000
in consumer redress.
The refunds stem from an August 1987 FTC complaint charging Schoolhouse
Coins, Inc., its successor, Numis Group Inc., and several others
with making false claims to consumers about the value and investment
potential of the coins they sold.
The FTC alleged that, beginning in at least 1985 and continuing
until charges were filed, the defendants represented that the coins
they sold were a low-risk investment when in fact they sold them
at prices 10 - 20 times in excess of their true value. According
to FTC staff estimates, the defendants' sales totaled as much as
$14 million, with many individual consumers investing between $10,000
and $20,000 each.
Shortly after the complaint was filed, the court granted the FTC's
request for a preliminary injunction to prohibit the defendants from
making further false and misleading claims. In addition, the court
appointed a receiver to take control of and manage the defendants'
assets. Final judgments approved by the court prohibit the defendants
from making any false claims about the potential profitability of
coins or other investments, or the risks associated with an investment
in them.
In separate charges filed by the Department of Justice, two former
officers of Schoolhouse, Inc., John Pace and Wayne Pedersen,
pled guilty to charges of mail fraud. Pace is currently serving an
8-year prison term and Pedersen is a fugitive from justice.
The court-appointed receiver has advised the court that the total
claim for consumer loss is $12.5 million. The initial redress checks,
to be mailed this week, total $700,000. The second disbursement --
to be issued this spring -- will total approximately $180,000 and
is linked to the recent sale of coins from the defendants' assets.
CALIFORNIA COIN DEALER AGREES TO SETTLE - 06/92
Hannes Tulving, Jr., president of Hannes Tulving Rare
Coin Investments, Inc., a California retail marketer of numismatic
coins, has agreed to settle Federal Trade Commission charges that
he created and maintained an artificial coin market to induce the
purchase of coins at inflated prices.
Under the proposed settlement filed in federal court, Tulving would
be prohibited from misrepresenting, among other things, the degree
of risk or any other fact material to a consumer's decision to purchase
any investment offering. The order also imposes a monetary judgment,
which will be partially satisfied by the payment of $260,000 over
a five-year period.
In August 1990, the FTC filed a complaint against Tulving and his
company, Hannes Tulving Rare Coin Investments, Inc., of Newport Beach,
alleging that they misrepresented the degree of risk and appreciation
of their coins, falsely represented that the figures published in
their coin price guide reflected the actual wholesale market price
of their coins and that their customers' portfolio updates reflected
the current value of the customers' coins; and that they failed to
maintain a reserve of funds to enable them to honor their buy-back
guarantee. The case against the corporate defendant, Hannes Tulving
Rare Coin Investments, Inc., is still pending.
Under the terms of the proposed consent order settling the charges
against Hannes Tulving, Jr., he would be prohibited from, among other
things, falsely representing that his coins are an excellent, low-risk
investment or that they have consistently appreciated in value; that
portfolio updates given to customers reflect the current value of
their coins; and that the prices he charged for his coins were at
or near the prevailing market price.
He also would be prohibited from falsely representing the profitability
of any investment offering, the services he offers in connection
with such an offering, or the earnings of any of his customers.
Further, the proposed order would prohibit Tulving from falsely
representing that he has a reserve of funds sufficient to honor any
buy-back guarantee for a substantial number of customers, if he offers
such a guarantee; misrepresenting any other fact material to consumers'
decisions to purchase any investment from him; and from representing
that the FTC endorses or approves his activities. Misrepresenting
the terms of the settlement also would be prohibited.
The proposed settlement would further require Tulving to place
a written notice on all coin-related promotional material to alert
consumers to the risk of investing in rare coins. If he offers a
buy-back option, he also would be required to disclose clearly and
conspicuously the following notice on all promotional material:
"BUY-BACK OF COINS: We cannot guarantee that, when you desire
to liquidate your coins, we will be able to repurchase them from
you. Moreover, if we are unable to repurchase your coins and you
are forced to sell them to another dealer at the current wholesale
price, you will probably receive much less for the coins than what
you paid for them."
Defendant Tulving has agreed to the imposition of a $10 million
judgment. In light of his recent filing for bankruptcy and the absence
of security, however, the Commission cannot be assured that it will
collect the full judgment. The $10 million judgment against him would
be non-dischargeable in bankruptcy -- that is, he still would owe
it. Under the settlement, Tulving would pay $50,000 within 14 days
of the entry of the court order, $210,000 over five years, and the
remainder at the end of the five years.
The Commission vote to file the consent order was 4-1, with Commissioner
Deborah K. Owen dissenting. Owen stated, "I find no financial
justification for reducing the defendant's required monthly payments
from $5,000 to $2,500 after two years. More- over, I disagree with
imposing, on paper, a monetary judgment that may be 'empty' in practice.
Such an empty judgment is a departure from recent practice, and could
give the impression that the Commission's monetary judgments are
illusory."
FTC CHARGES FLORIDA RARE-COINS MARKETER WITH FALSE MARKETING
CLAIMS - 02/92
U.S. Rarities, Inc., a Miami, Florida-based rare-coin telemarketer,
has been charged by the Federal Trade Commission with making false
claims that the coins it sold were excellent investments likely to
produce substantial profits for consumers within a short time.
The FTC alleged that U.S. Rarities routinely sold coins for anywhere
from three times to more than 10 times their actual dealer-to-dealer
market values.
According to the FTC complaint, which also names U.S. Rarities'
president James A. Fullwood and vice president, Robert
Ramos, since 1989 the defendants have induced consumers to purchase
their rare coins at inflated prices by falsely representing their
competitive pricing and their potential for high- profit return within
a short period of time.
The FTC charged that the defendants falsely represented to consumers
that they sold coins graded by an independent grading service that
applies standards as strict as, or more strict, than the prevailing
market standards.
Further, the complaint alleges, U.S. Rarities represented that
its coins have regularly traded at or below resale market prices.
In fact, because the independent grading service's standards were
lower than the market standards, the defendants' coins traded at
only a fraction of the prices for coins of the same grades, the FTC
alleged. According to the FTC complaint, the defendants' practices
made it "virtually inevitable" that many consumers would
lose a substantial share of their investments.
RARE COIN TELEMARKETER AGREES TO SETTLE - 05/92
U.S. Rarities, Inc., a Miami, Florida-based rare-coin telemarketer,
and its co-owners, James A. Fullwood and Robert C. Ramos,
have agreed to settle Federal Trade Commission charges that they
falsely portrayed the coins they marketed as excellent investments
likely to generate substantial profits in a short period of time.
Under a proposed settlement agreement, the defendants would be
prohibited from, among other things, misrepresenting any fact material
to a consumer's decision to purchase any coin, investment, or telemarketed
product and would be required to post a $25,000 performance bond
before they engage in any coin, investment or telemarketing sales.
According to the FTC's complaint, since 1989, the defendants have
induced consumers to buy their rare coins at inflated prices by deceptively
representing their competitive pricing and their potential for high-profit
return within a short period of time.
The FTC also charged that the defendants falsely represented to
consumers that the coins they sold regularly trade in the market
close to the prices listed in a numismatic publication recognized
as the industry wholesale pricing guide.
The FTC complaint said that the telemarketer's practices made it "virtually
inevitable" that many consumers would lose a substantial share
of their investments.
The proposed consent decree to settle the charges would prohibit
the defendants from misrepresenting, among other things, that any
coin, investment or telemarketed product or service they offer is
an excellent or low-risk investment and that it is being offered
at or close to the price at which such products or services could
easily be liquidated through a market sale. The proposed consent
decree also would prohibit misrepresentations regarding the likelihood
an investor will realize profits or income on any such product or
service.
The $25,000 performance bond, for the benefit of consumers, is
required for any future coin investment or telemarketing business
that the defendants initiate. The bond requirement would increase
to $50,000 if any two defendants jointly engaged in such activity,
and to $75,000 if all three became jointly involved.
The defendants also would be required to place the following disclaimer
on all brochures pertaining to coins and on the front page of all
sales orders:
"THE INVESTMENT VALUE OF A RARE COIN DEPENDS IN LARGE PART
ON THE PRICE YOU PAY. IT IS STRONGLY RECOMMENDED THAT BEFORE YOU
PURCHASE A RARE COIN AS AN INVESTMENT, YOU SEEK TO DETERMINE ITS
CURRENT MARKET VALUE AND LIQUIDITY BY CONSULTING A COIN EXPERT WHO
IS NOT AFFILIATED WITH THE PERSON SELLING YOU THE COIN."
Before concluding the sale of any coins to consumers, the defendants
would be required to get a signature from the customer, indicating
that the customer has read and understood the required disclosure.
The individual defendants have filed for bankruptcy. Under the
proposed settlement, the Commission would waive payment from the
two individuals whose resources are insufficient to provide a distribution
to the FTC justifying the attendant transaction costs. The defendants
have stipulated to a judgment for $1,750,000, however, so that the
bankruptcy plans can be modified in the future if either individual
defendant has concealed assets.
The proposed consent decree also requires the defendants to turn
over any remaining U.S. Rarities assets to the Commission to be liquidated
and paid to the U.S. Treasury.
BEVERLY HILLS COIN DEALERS ORDERED TO PAY $1.7 MILLION -
11/91
The Federal Trade Commission has won a judgment in federal court
against Reese Scott Brutzman of Santa Monica, California,
the last individual defendant in the Commission's enforcement action
against the Woodmar Corporation, Inc.
The U.S. District Court for the Central District of California
entered the judgment permanently enjoining Brutzman and three corporate
defendants from making misrepresentations in the promotion and sale
of coins, bullion for investment, or any other investment offering.
The judgment also orders these defendants to pay $1.7 million in
redress. The judgment stems from an August 1988 FTC complaint charging
that the defendants deceived consumers in the advertising and marketing
of rare coins they sold for investment purposes.
The FTC's complaint named Woodmar Corp., of Los Angeles, doing
business as Republic Rare Coins; Shelmar Corp. of Beverly
Hills, doing business as Beverly Hills Coin Gallery (BHCG); Plano
Corp. of Los Angeles; and three individuals: William McGarry, Christopher
Permann and Reese Scott Brutzman.
In an earlier settlement filed in May 1991, McGarry and Permann
agreed to settle charges that they misrepresented the value and investment
potential of the coins they sold. Under the stipulated judgment,
McGarry and Permann were permanently prohibited from misrepresenting
the grade, value, and investment potential of their coins. That settlement
was also filed in federal court in the Central District of California
in Los Angeles.
The final judgment involving Brutzman and the three corporate defendants
prohibits them from misrepresenting, among other things:
- the grade or market value of any coin they sell;
- the degree of risk involved in the purchase of their coins, bullion,
or any other investment offering;
- that purchasers of their coins, bullion, or other investment offering
could reasonably expect to resell their investment at a substantial increase
in profit within two to five years; and
- the ease with which their coins, bullion, or other investment offerings
can be repurchased or liquidated.
In addition, the judgment requires the defendants to disclose,
in all sales literature concerning coins, a statement on the risk
of investing in coins, and to have consumers acknowledge, in writing,
that they received the statement.
The court also ordered these defendants to pay $1,773,836 as consumer
redress.
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