Schemes, Scams, Frauds.
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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 CurrencyCOIN 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; 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;| 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; 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; 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; 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; 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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