Expert Offers Six Vital Steps To Avoid Gold Coin Fraud, Scams and Hustlers When Buying or Selling

After thirty years of faithfully serving the public as a buyer and seller of precious metals and numismatic (collector) coins, Swiss America Trading Corp. is very concerned by the influx of gold dealers making false claims, deceptive promises and non-deliveries of goods to customers.

“When it comes to buying or selling precious metals, ‘caveat emptor’ (let the buyer beware) is the best rule of thumb in today’s marketplace fraught with fraud, scams and hustlers,” says Swiss America Chairman Craig R. Smith, who has been an active coin trader for nearly half a century.

Mr. Smith is a pioneer in providing customer transparency, full disclosure and a buy-back policy since founding Swiss America in 1982 from his Phoenix, Arizona home. Since then, as the public has slowly rediscovered the wisdom of asset diversification; the firm has grown a hundredfold, built a corporate headquarters, operated debt-free and maintained a stellar industry reputation nationally.

According to Mr. Smith, there are scores of ways unethical gold dealers are scamming the public today, including over-pricing coins, over-promising performance, over-selling the product and long or even non-delivery of the product after payment is made.

Smith believes the rise of the Internet has been both a blessing and a curse for inexperienced coin shoppers. Searching for a reputable gold dealer can be very confusing as consumers wade through a mixture of hard-to-understand information, disinformation and half truths from an industry that, until recently, has had a general lack of accountability.

To help protect consumers from gold fraud and scams, seven years ago Mr. Smith helped found NCA, the Numismatic Consumer Alliance (, a New Jersey-based not-for-profit organization that has helped consumers recover $5 Million since it began in 2005.

According to the NCA Website, “Many of these buyers are senior citizens with no knowledge of coins who also lacked the Internet savvy to check out what they were buying and who they were buying it from.”

NCA co-founder John Albanese writes, “The industry has failed to prove its ability to competently self-regulate and police transactions between itself and the public. The company intends to bring attention to, and thereby illuminate certain types of fraudulent and illegal conduct.”

Sadly, Smith expects the trend of rising consumer fraud and scams to grow in the months and years ahead as predatory marketers continue their own “gold rush” into this field where investors are coming to seek security in an uncertain economy.

This is why Smith coined the phrase “learn before you earn” as the first step for consumers to avoid being hustled and rushed into buying gold coins from the wrong firm.

Two decades ago Mr. Smith first published six basic, practical steps to help consumers avoid gold fraud and scams.

1. Buy and sell U.S. gold coins from a recognized national dealer or broker who has experienced the ups and downs in the market and has at least a 10-year track record. Find out if a dealer is a member in good standing with the Better Business Bureau, American Numismatic Association (ANA), Industry Council for Tangible Assets (ICTA), Certified Acceptance Corp (CAC), Numismatic Guaranty Corp (NGC) and Professional Coin Grading Services (PCGS).

2. Make sure the gold dealer offers a two-way market. Confirm the dealer will not only sell the coins but also provide, in writing, their buy-back policy. Closely examine their buy-back policy. Make sure the buy-back price does not vary on a basis of quantity. Also inquire about the time factor for repayment. Reputable companies will always settle a trade within 72 hours.

3. Buy only PCGS or NGC certified “sight-seen” (vs. unseen) U.S. numismatic gold or silver coins with a fair inspection period after delivery. This ensures buyers the option of exchanging a coin if they don’t like its appearance. Make sure your coin has been inspected for copper spots and other imperfections by at least two numismatists.

4. Look for full, truthful disclosure. Be sure the dealer has presented both the upside and downside risks associated with the coins being purchased. Short-term versus long-term positioning should be explained to in clear, understandable language. Beware of dealers who suggest putting more than 30% of one’s assets into precious metals.

5. Be sure the gold or silver coins can be bought and delivered at the prices quoted. In other words, don’t just buy the quote, buy the coin. Anyone can promise to sell coins 10%, 20%, or even 75% less than another dealer IF they don’t have the coins to deliver. Make sure the dealer can actually deliver the coin quoted at the price quoted.

6. Buy from a gold dealer in whom you have complete trust. Check references carefully. Most importantly, ask many questions before buying or selling, and get satisfactory answers. Demand facts, historical performance charts and portfolio tracking tools, and ignore the hype. Always keep in mind that a profit is not made buying a gold coin, but only when the time comes to sell it.

Anyone following these six steps will be well on his or her way to having a positive experience in buying and selling precious metals. For more information visit, which has additional tips on avoiding gold scams from the Commodities and Futures Trading Commission as well as educational videos and other resources on the subject available free to the public.


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5 Sleazy Gold Coin Scams

Here are five of the most damaging gold coin scams and what you can do to protect yourself.

NEW YORK ( TheStreet) — With gold prices rising thanks to the economic and market chaos, the shiny yellow metal’s profit potential is drawing some unscrupulous gold scam artists out of the woodwork. Here are five of the most common and most damaging gold scams out there right now — plus 3 safe ways to invest in gold.

Gold Scam No. 1: Grading Games

The Coin Con: In gold coins, MS-70 is the top of the heap — a “mint state” coin that has never been handled. But what’s an easier way to increase the value of a coin than to lie about the condition? For instance, a 2002-W $50 Gold Eagle is worth $1,650 at a grade of MS-60 — a very clean condition, but not perfect. MS-70 for the same coin tallies a tag of $2,850. Unsuspecting coin buyers may not be able to tell the difference, thereby overpaying by hundreds of dollars.

Solution: Check the grades of coins with an independent source before buying. A reputable dealer will stand by his product and welcome a third-party appraisal. Just make sure that third party is of your choosing and not a rubber stamp on the dealer’s payroll.

No. 2: Pretty Packages

The Coin Con: Be very cautious about grading certificates and “slabs” or other ornamental holders that prevent you from examining the actual coin itself. Some disreputable dealers like to put inferior products on fancy plaques or behind layers of plastic to prevent you from inspecting the piece. You could fall prey to the aforementioned grading scam this way, or worse, buy a coin that is a gold-copper alloy but looks pure in its protective casing. Solution: Never buy collectors’ items or gold coins in pretty packages. If you’re decorating a room, it can be excused, but no serious investor/collector cares whether his gold coins are displayed in a pleasing matter. Quality and value matter more.

No. 3: Skewed Salomon Index

The Coin Con: If you want to buy gold as a hedge against inflation or to garner a decent return, that’s admirable. But beware of the Salomon Brothers Index quoted by dishonest dealers as proof that you will get rich quick. This annual index, formerly compiled by the New York investment bank Salomon Brothers, can show appreciation of 12% to 25% a year by a trick of math — but the reality is that the Salomon index was based on a list of 20 very rare coins. Gold eagles you get at the local coin shop are far more common and less likely to appreciate at the same rate. Solution: Be realistic with your expectations and don’t get pressured into buying due to some get-rich-quick scheme. As the saying goes, “If it sounds too good to be true, it probably is.”

No. 4: Make-Believe Bullion

The Coin Con: Though it may seem hard to believe, some brazen dealers traffic not in counterfeit gold coins, but in coins that never existed in the first place. They prey off gold investors’ practical fear of holding a large amount of physical gold in their homes. What if a robber takes it all? Where can someone find the place to store a bulky coin collection? These “helpful” dealers offer to keep the coins in escrow to avoid such problems. Only, a far greater problem is that the gold coins never existed in the first place. And to top it off, these charlatans will actually charge you a storage fee for the gold they don’t possess! Solution: If you’re getting into gold coins, you simply must take possession of them. There are risks and rewards to all manner of investments, and if you want to play physical gold, you have to understand that proper storage is part of that investment.

No. 5: Executive Order 6102

The Coin Con: Believe it or not, the most brazen gold con of all time was undertaken by Uncle Sam. Executive Order 6102 was signed on April 5, 1933, by President Franklin Roosevelt, “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates” by U.S. citizens. The result was a massive seizure of gold from safety deposit boxes. Some U.S. citizens who owned large amounts of gold had it transferred to countries such as Switzerland, but others were forced to take the $20.67 per ounce the government offered in exchange for the precious metal. So much for future appreciation. Solution: Call me a conspiracy nut, but there’s no guarantee against a second Depression breaking out or U.S. sovereign debt avoiding a downgrade like the one Greece recently endured. So it’s in your best interest not to put your gold in a bank deposit. Again, if you truly want to hedge your risks and buy gold coins, you have to plan for everything.

Protect Yourself!

So how can you invest in gold and be sure you’re not getting ripped off? Well, doing your due diligence and relying on trade groups helps. The Industry Council for Tangible Assets and The Professional Numismatists Guild are two leading gold coin trade groups. Check with them for a list of members. You’ll always have to do your due diligence, depending on your specific purchases, but it’s easy to weed out a large swath of unsavory dealers by consulting these registries. Remember, there are never guarantees, and it’s always buyer beware, whomever you choose as your gold dealer. Now, here are three safe investment options that take the guesswork out of gold… and gold scams. Top 5 Stocks for the 4th

Safe Ways to Invest in Gold

No. 1: Gold Bullion ETFs: If you prefer liquidity and fear possessing physical gold, ETF trusts that trade like stocks are good options. The Shares COMEX Gold Trust ETF ( IAU) and the SPDR Gold Trust ETF ( GLD) are two to consider. You will technically be investing in the “trust” and not the gold itself, so you could eat some of your profits in fees and expenses. But for many investors, that’s a small price to pay for easy liquidity and tight SEC oversight instead of examining coins on their own.

No. 2: Gold Miner Stocks: Another relatively easy, but indirect way to invest in gold is through metal-related companies. This involves buying individual mining stocks such as AngloGold ( AU)or Kinross Gold ( KGC). Obviously this is not a pure play on gold so there is some wiggle room between bullion prices and stock prices. AngloGold is up 11%-plus year to date, for instance, while gold prices are up 15%-plus. But these stocks also pay dividends that shouldn’t be overlooked and offer strict SEC oversight of your investment as opposed to the pawn shop free-for-all some gold buyers endure.

No. 3: Gold Mutual Funds: InvestorPlace recently published a list of five top-performing gold mutual funds . These funds invest in a mix of gold bullion and mining stocks, providing diversification as well as the ability to play the upside of gold. Again, this is not a pure play on gold, but the liquidity, safety and oversight of mutual fund investments can protect investors new to the gold game.


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Coin Fraud Watchdogs: Paul Montgomery and Lyn Stevens


Editor’s Note: Paul Montgomery, past president of the Professional Numismatists Guild, and Lyn Stevens, a Texas-based attorney, made the news because of their role in the PCA/PCI coin fraud case in which over one million dollars was awarded to plaintiffs. Coin Update reporter Michael Bugeja interviewed Montgomery and Stevens about their crusade to combat coin fraud. Montgomery, one of the country’s leading numismatists, served as past president for Bowers and Merena Gallery, now Stack’s of New York. He is a lifetime member of the American Numismatic Association and was honored in 2008 with the association’s President’s Award for his contributions to the industry. Stevens has over 35 years’ experience and practices in Texas and Oklahoma. He is a Life Fellow of the Texas Bar Foundation and holds Board Certification in Personal Injury from the Texas Bar Association. He operates the website Coin Fraud Lawyers.

paulmontgomery Paul Montgomery

COIN UPDATE: Paul, you have said that you and Lyn Stevens are on a crusade to stop coin fraud. What sparked that crusade and why is it important for the hobby?

MONTGOMERY: When I was 11 years old I bought my first really rare coin from a local coin shop in Nassau Bay, Texas. It was a 1916-D Mercury dime that I bought as a VG for $90. It took three months profits from my paper route to pay for it! It was the cornerstone of my collection and I was very proud to show it. I still often talk about that coin today because I remember how excited I was to bring it home, punch out the “rare” tab in my Whitman coin board and display the coin. Many years passed and in 2004 my parents gave me my collection when they moved from their home. Of course, I went straight to that coin. By that time I was a veteran dealer and recognized the coin’s obverse as an AG instead of a VG. That was disappointing enough but when I turned the coin over to see the reverse (back), my heart stopped. I immediately recognized the coin as a counterfeit with a pasted on mint mark. Wow, someone sold an added mint mark to an 11 year old. I will never forget how disappointed I was that day.

This kind of marketplace fraud still happens every day and it makes my heart sick. The first real fraudulent deal I saw as a professional was back in 1984, my first year in the business. A recently widowed woman came into the shop where I was working and showed me her husband’s collection in order to sell it. Her husband had bought the coins from a nefarious dealer on the East Coast whom I was familiar with. She explained that she and her husband had purchased the coins to pay for their retirement years. Long story short is there was no remedy for her. She sold her collection for a little over $60,000 dollars in auction after having paid over $600,000. She had to go back to work in her 70’s to make ends meet for the rest of her life. It makes me angry to think about it. The industry was certainly different then. I refer to it as the “wild, wild west.” This was before PCGS and NGC, and most dealers did their own grading. Fraudulent transactions are clearly as old as the hobby, I just wasn’t around yet. Since that time with the widow in 1984 I have done everything I can to champion the victims; whether it is appraisals, referring collectors to lawyers or various attorneys general, and have offered to testify on many occasions on behalf of victims.

Lyn Stevens came into the picture back in 2008 when we worked on our first case together. He is a brilliant legal mind who also shared a heart for these victims. He and I have teamed up and are chipping away at the pile. We have to do better. The marketplace has to be safe in order to convince newcomers to the hobby. As coin and metals prices have grown to higher and higher levels over the last 10 to 15 years we’ve seen a lot of new and less experienced players are coming into the marketplace, many of which prey on the unsuspecting new collector. I’m going to continue to go after the bad guys every chance I get. In fairness to the majority of the dealers out there, Michael, I must say that my experience has been that 95% of the guys are doing their best to give people a fair shake. It’s the other guys Lyn and I are after. You mess with our hobby, you better watch out for us!

COIN UPDATE: We often hear caveat emptor when it comes to buying self-slabbed or over-hyped coins. Some dealers I know actually believe anyone foolish enough to lay down good money in coins without knowing the basics of the business essentially gets what they deserve. It seems you don’t believe in that line of thinking. What about caveat emptor?

MONTGOMERY: Well Michael, I guess I agree with you for the most part here but it’s not an easy thing for consumers. There are ways to check for credibility among sellers but they are not perfect, not by a long shot. We need a new system of authority to certify and govern dealer practices. I could write about that forever and I assure you this is on my agenda for the coming years. In my opinion, a true certification for dealers is necessary to grow the hobby. Before the American Medical Association, anyone who studied a medical book could call himself a doctor. Before the state bar associations, anyone who read the law could call himself a lawyer. We have not done enough to protect our consumers as a trade and it needs to be done. While it’s true that buyers should shoulder some of the burden and do need to be more careful when they buy, the predators out there are very good. They shouldn’t be allowed to call themselves professional numismatists.

COIN UPDATE: What else can you tell us about coin fraud that we have not covered here?

MONTGOMERY: It’s important to know that there are remedies for fraud victims. Most write their issues off as bad investments and forget about them. There is help out there. Along with the services Lyn and I provide, the Professional Numismatists Guild has an arbitration process available when member-dealers are involved in a dispute with a consumer. Also the Numismatic Consumer Alliance that is run by industry legend John Albanese, a consumer advocate with undeniable credibility.

lynstevensLyn Stevens

COIN UPDATE: Lyn, from a legal standpoint, what role if any does the defense of caveat emptor have in cases of coin fraud?

STEVENS: The Latin term “caveat emptor” means “buyer beware” and is, at its heart, the purist form of capitalism and while its strict application may prove beneficial to the businessman, its application has been severely curtailed for many decades. The more reasonable approach in businesses today focuses more on “fair market value” principles in consumer businesses. This means a consumer should expect to pay a fair market price for a good or service and not fear being bamboozled by cunning and deceptive dealers. To protect consumers, almost all states have some form of consumer protection statutes and most States Attorneys General have consumer protection divisions to prevent false and deceptive practices. To cut to the point, caveat emptor is no longer favored by the courts because it tended to only hurt the consumer and provide no recourse against a deceptive dealer.

COIN UPDATE: What are the legal ramifications, if any, for self-slabbers who sell silver melt as rare coins, grading a cleaned EF Morgan, say, as MS66?

STEVENS: Such fraud has always been actionable in a suit against the self-slabber. In addition, most states have what is commonly called “Deceptive Trade Practices Acts,” which will not only provide a consumer protection against fraudulent representations such as you mentioned, but also punish the self-slabber for intentionally misrepresenting the grade and value of the coin. If the self-slabber uses the US Mail and repeatedly misrepresents the value in a scheme against consumers, then they find themselves liable to treble damages under the Federal RICO act.

COIN UPDATE: Lyn, are there any legal consequences for an auctioneer or auction company offering these self-slabbed coins with descriptions that cite Red Book or PCGS prices?

STEVENS: Auctioneers may believe that they are protected because they are simply repeating the coin grade or value given by the seller. However, since the commission and fees earned by the auctioneer are based in part on the coin’s selling price, they need to be aware of any problems such descriptions and representations pose. If the auction house has knowledge that the coins are materially misrepresented in grade, then they can be liable for selling the coins. The focus is whether there was a material misrepresentation or just an honest difference of opinion; and, what that difference means. Some coins have very little difference in the fair market value between a MS65 and MS66, while others have a significance difference in value. So, each situation is unique.

COIN UPDATE: We know at least one Internet auction company that is changing its terms of service because of this PCI/PCA case, assigning liability to auctioneers for any statements about value. What specific advice can you provide for these companies, assuming its terms of service would exempt them from liability?

STEVENS: These “terms of service” are contracts that attempt to limit the buyer’s remedies to seeking to recover only against the sellers. Such attempts to limit a consumer’s rights are subject to each State’s laws, so a buyer needs to realize that such limitations may be valid. Having said that, most states will not allow a consumer to waive a right to sue for deceptive consumer practices or for fraudulent transactions. Again, the focus is on the action or inaction of the auctioneer. Some questions that should be asked would include: 1) did the auctioneer know of the misrepresentation; 2) has the auctioneer taken any steps to insure that the products it auctions are legitimate; 3) is there a history of misgraded coins on the auctioneer’s site; 4) has the auctioneer ignored past problems of fraudulent transactions by this seller on its site; and, 5) what steps has the auctioneer taken to insure that fraud that has occurred has been corrected.

In short, the Internet auction company may attempt to insulate itself from duped buyers, but many states will not allow such contracts and may require the auctioneers to stand behind the representations made by sellers of the coins.

COIN UPDATE: If a coin buyer, dealer, auctioneer or auction company suspects coin fraud, what should they do?

STEVENS: No one should risk becoming involved with deceptive sellers and should walk away from the deal. To curb such practices, there are several things that a buyer, dealer or auctioneer can do: 1) if the seller is a PNG or ANA dealer, the buyer should report the dealer to those organizations; 2) the buyer should check to see if the seller is a member of the Better Business Bureau, and file a complaint with the BBB; 3) the buyer should report the dealer to the State Attorney General in the state where the dealer does business. Most State Attorneys General keep track of precious metal and coin dealers and will regulatory action, including revocation of their license for repeated violations and/or prosecute the dealer if the fraud is substantial (such actions has occurred in some states, including Texas); and, if the buyer has been duped, they should consult an attorney and seek legal advice as to what actions they can take to recover damages. At one time, the Federal Trade Commission prosecuted coin fraud, but now seems to be leaving enforcement to the States and private litigation.

COIN UPDATE: Lyn, is there anything else you would like to add concerning legal liability or processes involved in coin fraud?

STEVENS: The sale of graded bullion poses the most significant area of coin fraud, especially upon the elderly. This generation has amassed a life time of savings and grew up in an era of openness and trust. They are also the generation that fear economic instability and gravitate toward the assumed safety of precious metals. So, they are easy prey for unscrupulous dealers. And, they along with most consumers have no idea of the true populations of bullion coins or their own ability to have a coin graded (even an MS70) at an insubstantial price.

Further, as Paul Montgomery stated, without certification or licensing of dealers through organizations like the ANA or PNG, state or federal intervention is inevitable. If a collector wants to insure that they are paying good value, the only safeguard in the hobby is to seek assistance from–or only buy from–a PNG dealer. For more information concerning coin fraud, visit If any of your readers are interested in further discussions, they can reach me at or call me at 409-835-5200.


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Edmond coin expert crusades against fraud

Edmond coin expert Paul Montgomery, president of Heartland Precious Metals, recently gave expert testimony in a case in Texas on purchasing coins that were either overvalued, damaged or counterfeit.

Photo - <p>Paul Montgomery</p>

Paul Montgomery

EDMOND — Edmond coin expert Paul Montgomery enjoys fighting for victims of fraud who have been deceived into misleading investments related to rare metals.

“I’ve always been kind of a crusader against the bad guys … I’ve gotten a reputation over the years as the guy who helps people get their money back,” the numismatics professional said.

In November, Montgomery testified in federal court in Texas as an expert in a lawsuit against a New York-based coin dealer accused of misleading an elderly woman from Corpus Christi into buying coins that were either overvalued, damaged or counterfeit. Tuesday, the federal judge who heard the testimony last year ordered the dealer to pay nearly $1.9 million in damages.

The lawsuit came after Bonnie Pereida died in October 2011 and her fiance, Albert Malvino, was appointed executor of her estate and had the coins appraised for tax purposes, court documents stated.

Between January and May 2011, Pereida made 31 purchases of rare coins from the dealer PCA Collectibles Inc. Court documents show she got 135 coins for more than $700,000. The investment was meant for the couple’s retirement, Malvino testified.

Montgomery was one of the appraisers who assessed the coins. He determined the coins’ retail value was about $150,000.

“This case was so egregious,” Montgomery said. He said at one point he was called to the bench with the attorneys to teach the judge how to grade old, rare coins. He also wrote a report outlining his findings. He said he’s been involved with hundreds of investment cases over 31 years.

“Now, 99 out of 100 of these will settle, and typically they settle right about the same time I turn in my report because they know they’ve been caught dead to rights.

“People make bad decisions on investments all the time and, instead of fighting for their rights, they are embarrassed and they write it off as just a bad investment,” he said. “Don’t do that. There are remedies … don’t let somebody just nail you.”

Montgomery is the president and founder of Heartland Precious Metals in Edmond.

Conflict of interest?

The majority owner of PCA Collectibles, Anthony J. Delluniversita, who was found liable for misleading the victim, bought PCI Coin Grading Inc. in November 2010. The judge found that because Delluniversita graded the coins through his company, the coins were not “independently graded.”

Delluniversita “used the appearance of PCI as a separate corporation to deceive Pereida into believing that she was purchasing independently graded coins through PCA,” court documents stated.

The judge stated no one at PCA Collectibles knew he owned the coin-grading company. Delluniversita sold the coin-grading company in December 2011, court records show.

Anthony P. Delluniversita, the defendant’s son, is a New York attorney and assisted in the case. He said there are no laws saying it’s a conflict of interest if coin sales company owners also own grading companies.

“There’s no evidence, not one piece of evidence, through three years of litigating this matter, in which the actual consumer, the deceased, Bonnie Pereida, makes any form of a complaint about this,” Anthony P. Delluniversita said. He also called Pereida a “savvy investor,” citing her background as vice president of the Corpus Christi branch of Merrill Lynch.

The judge found, though, that she “was not an astute coin collector and was clearly deceived.” The defense attorney said they plan to appeal.

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$1.9 million Fraud Judgment Raises Compelling Hobby Issues

PCA Case

PCA Collectibles, a New York company associated with the former PCI Coin Grading company, was found liable for nearly $1.9 million in damages based on the impression that coins sold to the plaintiffs were graded independently according to industry standards but actually were fake (one coin), damaged or worth only a fraction of Red Book prices.

The Red Book, or The Official Red Book: A Guide Book Of United States Coins, was sent by one of the defendants, Anthony J. Delluniversita, to the late Corpus Christi stockbroker Bonnie Peredida, who used it to evaluate the prices she paid against the value for the coins she bought and their grades as listed in the annual book.

The case hinged on several issues, including an important one for hobbyists involving Anthony Delluniversita, primary owner of PCA Collectibles. (His son Paul reportedly owned 40% of that company.) Anthony Delluniversita, who had bought PCI, was its sole grader, while coins sold through PCA gave the impression that grades were assigned by an independent entity, PCI.

One issue that may be debated by this ruling concerns so-called self-slabbers, who are sole graders, and whether their highly inflated grades in company holders contribute to similar overpayment by buyers. On Internet sites, sellers sometimes cite Red Book or PCGS prices for these coins. If auction portals carry those descriptions, they may want to revisit their terms of service concerning statements of value made by consignors and/or auctioneers and listed through their digital systems. We brought that to our readers’ attention in previous coverage of this case.

The case also involved Pereida’s fiancé, Albert P. Malvino, Ph.D., executor of her estate, who had testified that the couple bought the coins for their retirement and believed they had struck a good deal with PCA, again based on those Red Book values.

Pereida reportedly made 31 separate purchases of 135 coins and paid a total of $727,569 to PCA for them. However, two entities and one expert numismatist valued the collection much lower. Heritage Auctions Appraisal Services listed it at $190,865 at the time the coins were examined. Paul Montgomery, past president of the Professional Numismatists Guild–retained by Dr. Malvino–put a reasonable retail value of the coins at $150,964, about 20 percent of what Pereida paid. Montgomery also requested Professional Coin Grading Service to do an independent appraisal of the grades. The judge ruled that PCGS’s findings were consistent with those of Montgomery.

In particular, Heritage, Montgomery, and PCGS identified one coin as a counterfeit, a 1914-D Indian $2.50 graded by PCI as MS64. According to a news release, they also identified twenty-five other coins that could not be graded because they were either cleaned or damaged. These included a 1907 Saint-Gaudens Roman Numerals High Relief Double Eagle graded by PCI as MS65 and sold for $19,500. Heritage estimated the auction value at $6,000, Montgomery valued the coin at retail as $4,500, and both Heritage and Montgomery agreed with PCGS that the coin had been cleaned.

Example: a 1907 Saint-Gaudens Roman Numerals High Relief Double Eagle

Example: a 1907 Saint-Gaudens Roman Numerals High Relief Double Eagle

An 1892-CC Liberty Double Eagle, sold by PCA to Pereida for $12,500 and graded by PCI as MS62, was valued by Heritage at $2,600 and only AU. It was valued by Montgomery at $1,700 because it was damaged and also given no grade by PCGS because of a noticeable scratch on the coin.

In its final ruling, the court ordered that the estate can recover $1,892,324 from Anthony Delluniversita, majority owner of PCA and the owner of PCI coin grading company at the time the coins were graded and sold to Pereida. Of that total, $1,610,802 is for damages, $280,190 for attorney’s fees and another $1,332 for costs of the lawsuit.

You can also read Judge Ramos’s Findings of Fact and Conclusions of Law (PDF) in which she summarizes and then expands on the case.

In a news release Montgomery stated: “I’ve been involved in hundreds of these kinds of cases, and this is the first one that resulted in a federal court victory. Usually, the sellers resolve the buyers’ complaints to avoid a trial in court by eventually making a refund of all or at least a portion of what the customers paid. It takes time, but there are remedies against nefarious dealers, and I’m delighted for Dr. Malvino about the judge’s decision in this case.”

The ruling affirms what Coin Update News has been repeating in numerous columns, including this recent one, in which we reported: “We often hear that grading is ‘subjective.’ Of course it is subjective to a degree (a point here and there) but not grossly so, as with some self-slabbers calling extra-fine cleaned coins MS66.”

The court noted that assessments by “PCGS and Montgomery were within two grade levels of each other for a majority of the coins and nearly 90% of the assessments were within three grade levels of each other.”

Judge Ramos also noted that “PCI failed to adhere to any of the industry-recognized grading standards discussed by Montgomery, and it systematically over-graded the coins sold to Pereida.” She then cited a court case that stated: “while subjectivity in the grading process may justify some variation in grading, this subjectivity factor cannot account for the huge difference in the grade and value of the coins.”

In addition to reevaluating the term “subjective” when it involves industry standards, this case also affirms the necessity for serious hobbyists and investors to know the basics of grading. Coin Update News covers grading extensively in Coingrader Capsule. Another convenient resource is PCGS Photograde Online. Several books also discuss grading and should be a requirement in every hobbyist’s library.


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