Judge Awards Coin Fraud Victim’s Estate Nearly $1.9 Million under Federal Racketeer Laws
A Federal Court Judge in Texas has issued her final ruling that a coin fraud victim’s estate should receive nearly $1.9 million from a Long Island coin dealer and his grading company under the Racketeer Influenced and Corrupt Organization Act (RICO). The estate was assisted in its three-year recovery efforts by former Professional Numismatists Guild (PNG) President Paul Montgomery, President of Paul Montgomery and Associates in Oklahoma City, Oklahoma.
Judge Nelva Gonzales Ramos of the United States District Court of Southern Texas, Corpus Christi Division, issued her final judgment on July 21, 2015.
Last November, Judge Ramos held a bench trial in the case. On May 20, 2015 she issued a 30-page Findings of Fact and Conclusions of Law in which she ruled that PCA Collectibles, Inc. of North Lindenhurst, New York, and PCI Coin Grading Company misled Corpus Christi stockbroker Bonnie Pereida “into buying coins that were counterfeit, damaged or worth only a fraction of what they were represented to be.”
Judge Ramos also stated in May that “[the] Court concludes that there is clear and convincing evidence of the fraud perpetuated by PCI and PCA against Pereida.”
In her final judgment, the judge now has 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.
“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.”
According to court documents, from January through May of 2011, Pereida made 31 separate purchases of rare coins from PCA. She bought 135 coins and paid a total of $727,569 to PCA for them. The coins were graded by PCI, and the sole owner of PCI at the time was defendant Delluniversita who also was the dominant shareholder of PCA Collectibles.
Pereida’s fiancé Albert P. Malvino, Ph.D., testified, “We bought these (coins) for our retirement … and we thought, we’re getting a good deal.”
When Pereida died in October 2011, Dr. Malvino was appointed executor of her estate and had the coins appraised.
Heritage Auctions through its Heritage Appraisal Services estimated the auction value at $190,865 at the time the coins were examined, less than 27 percent of the amount paid by Pereida. Montgomery then was retained by Dr. Malvino to assess the grade and value of the coins, and he concluded the reasonable retail value of the coins at the time they were purchased by Pereida was $150,964, about 20 percent of what Pereida paid.
Montgomery also requested Professional Coin Grading Service (PCGS) to do an independent appraisal of the grades, and, according to the Judge’s ruling, “PCGS’s findings were consistent with those of Montgomery.”
Heritage, Montgomery and PCGS identified one coin as a counterfeit: a 1914-D Indian $2.50 graded by PCI as MS64.
They also identified 25 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.
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, valued by Montgomery at $1,700 because it was damaged and given also given no grade by PCGS because of an noticeable scratch on the coin.
During the trial in November 2014, Montgomery showed the judge coins graded by PCI as Mint State, that were in his opinion, only About Uncirculated.
“She quickly understood the concept of grades and its relationship to coin values. I told her, Your Honor, now you’re a coin grader,” recalled Montgomery.
“When you’re buying or selling coins, there’s an important lesson for the public to remember. If you don’t know rare coins, you’d better know your rare coin dealer. Members of the Professional Numismatists Guild must adhere to a strict Code of Ethics in the buying and selling of numismatic merchandise. The dealer who sold coins to Ms. Pereida was not a PNG member,” said Montgomery, who served as PNG President from 2009-2011.
The case is Albert Malvino v. PCA Collectibles, Inc., Civil Action No. 2:12-CV-401, in the U.S. District Court of Southern District of Texas Corpus Christi Division.