Crimes of Persuasion

Schemes, scams, frauds.

Collectible Coins and Currency

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.


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.


10/93 - 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.


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.


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.


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.


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.


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:



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.


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.

Articles on Rare Coins Scams and FTC enforcement actions.

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