News and Analysis regarding scarce coins, coin markets, and the coin collecting community #17

A Weekly Column by Greg Reynolds

I. The filing and re-filing of this lawsuit

Over the last forty years, especially from the late 1990s to 2006 or so, the coin collecting community has suffered from the terrible problem of coin doctoring; coins are deceptively altered for the purpose of tricking experts, particularly those employed by the PCGS and the NGC, into concluding that a coin is of higher quality than it was before it was doctored. The process of doctoring a coin reduces its level of quality and, in many (though not nearly all) cases, permanently damages the coin. Coins ranging in value from less than $50 to more than $1 million have been doctored.

In many instances, doctored coins ‘turn’ at a later time, as unintended byproducts of doctoring processes result in unsightly delayed chemical reactions or the decomposing of added matter on the doctored coins. It is not unusual for a coin doctor to deliberately harm (often permanently) a coin that grades MS-64 in order to try to deceive experts into believing that it grades MS-66.

John Feigenbaum is president of David Lawrence Rare Coins (DLRC), and has been involved in the coin business for more than twenty years. In 2004 and 2005, DLRC sold one of the fifteen greatest collections of classic (pre-1934) U.S. coins ever to be publicly auctioned. Feigenbaum says, “in general I [John] applaud PCGS for taking action on this matter, and I think they should take any and all actions in the future towards parties that are trying to slip doctored coins past them.”

In my column of June 2, I analyzed the CU-PCGS lawsuit against alleged coin doctors, which was filed in late May. I encourage readers who wish to learn about this lawsuit, its importance and its implications, to read my column of June 2nd. On Aug. 10, CU-PCGS filed a “second amended complaint” along with a new motion.

II. The basics of the lawsuit

Although technically PCGS is a subsidiary of Collectors Universe (CU) and it is CU that filed this lawsuit, the PCGS predates CU and the PCGS is the core of Collectors Universe. Further, the PCGS certifies coins. So, it is clear and helpful to refer to the plaintiff as the PCGS as the lawsuit concerns allegations that dealers deliberately submitted doctored coins to the PCGS, without disclosing intentionally added defects, for the purpose of deceiving graders at the PCGS into assigning higher grades to such coins than the coins would have merited before they were doctored. Coin doctoring, of course, reduces the grade of a coin, often to the point where the coin no longer merits a numerical grade.

The submission contract that each dealer signs to be a dealer-submitter of coins to the PCGS for grading and authentication prohibits dealer-submitters from sending in doctored coins for numerical grading. At the very least, it is argued that dealers who submit doctored coins for numerical grading have breached their respective contracts with the PCGS. Moreover, the PCGS argues in the lawsuit that such coin doctoring is in violation of several Federal and California State laws. Curiously, attorneys for the PCGS declare that conspiracies to doctor coins and submit them to the PCGS fall under RICO statutes, and are thus said by the PCGS to constitute racketeering.

Importantly, attorneys for the PCGS argue that coin doctoring is not just a civil offense, a racket and a breach of contract. Attorneys for the PCGS maintain that coin doctoring is a crime under Title “18 U.S.C §331,” which is cited in the lawsuit as follows, “Whoever fraudulently alters, defaces, mutilates, impairs, diminishes, falsifies, scales or lightens any of the coins minted at the mints of the United States … [or] … Whoever fraudulently possesses, passes, utters, publishes, or sells, or attempts to pass, utter, publish or sell … any such coin, knowing the same to be altered, defaced, mutilated, impaired, diminished, falsified, scaled or lightened … Shall be fined under this title or imprisoned not more than five years or both.” (more…)

THIS ARTICLE SOLELY REPRESENTS THE OPINION OF LAURA SPERBER

At the Baltimore Show I heard many rumors about the PCGS lawsuit. One was great-but also was especially disturbing.

That rumor was that PCGS and some of the “named” defendants in the suit were discussing a possible settlement. That news is terrific! Or is it? I should point out what I heard is ONLY rumor and I have not spoken to anyone from PCGS about it. Legend FULLY supports PCGS in this lawsuit and its efforts to stop coin doctors.

PCGS is absolutely deserving of being refunded with penalty for all the damages these disgusting people have caused to them. A note to promising to cease probably will be included in any settlement. So I started to think, if there should be a settlement where does that leave the rest of us? The others who have been damaged by coin doctors actions with no restitution?

I believe it leaves us right back where we started. The coin doctors will just continue on their merry way. Sure, one small group is down, but the others all got away-with out so much as even a slap on the wrist (assuming there is a settlement). Of course since I had my meeting with my favorite party club of dealers-The PNG, they have issued only one statement and seem to be intent of claiming to try and define what makes up the standard for a coin being doctored (my bet is they will NEVER end the debate). Of course that will have to wait until their next meeting, then the board has to discuss, yada, yada.

EVERYONE MUST TURN ON THE PRESSURE NOW

Collectors, its going to be up to you to make changes apparently. Talk to your dealers. If they do not become vocal about this, before you walk out the door for good, ask what they could possibly be afraid of? How can any dealer not see coin doctoring as a serious crime? Ignoring it will not make the dirt bags who do it stop. Do they really believe this does not affect them? So far I have only seen 3-4 dealers actually speak up. All others seem to be hiding on corners.

Anyone who cares needs to speak up NOW. Keep writing letters to the PNG. Write letters to Coin World. Discuss the subject on the gossip boards. Write the grading services too.
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Professional Coin Grading Service (PCGS) today sent out a Press Release  announcing  a major lawsuit has been filed in United States District Court, Central District of California, against six individuals claiming they engaged in a pattern of racketeering activity, breach of contract, conspiracy, unfair competition and fraud for allegedly submitting “doctored” coins to PCGS for grading on multiple occasions for a period of years.

The Defendants named in the suit include: Al Rossman of Nevada, Rick Wesslink of California,  Robert Lehmann of Maryland, in addition to three members of the Professional Numismatists Guild ; Eric Steinberg of Florida, Silvano DiGenova of California, and Greg Krill of California

PCGS stated that as many as 10 other defendants could be added to the Complaint.

The suit claims the dealers violated federal laws, including the Lanham Act involving interstate commerce and RICO racketeering statutes, and also alleges “unlawful, unfair and fraudulent business practices” for submitting coins that were deceptively altered in an attempt to increase their value.

Click Here to view a Copy of the Complaint

The Complaint states: “Defendants knew that these coins had been ‘doctored,’ by themselves and/or other persons engaged by them for that purpose. Their methods included lasering the surfaces of extremely rare proof gold coins to remove surface imperfections, building up commonly-worn or weakly-struck portions of coins, and other physical and chemical processes. Defendants represented to PCGS that these coins had natural surfaces, intending to deceive PCGS’s graders so that the ‘doctored’ coins would be certified by PCGS and then sold in the rare coin marketplace.”

A couple of examples given in the complaint include the following coins:

• 1885 $5 gold piece, originally submitted to PCGS on Dec 16, 2009 by Steinberg on behalf of Defendant Rossman. Foreign substance added to coin’s surface to cover marks.

• 1879 $4 Stella gold piece, Originally submitted by Heritage on May 8, 2008. Resubmitted on August 28, 2008 by DiGenova after having been laser treated to remove lines. PCGS refused to grade the coin.

The suit claims the “Defendants have caused, and are continuing to cause, substantial and irreparable damage and injury to Collectors Universe and to the public and Defendants have benefited from such unlawful conduct and will continue to carry out such unlawful conduct and to be unjustly enriched thereby unless enjoined by this Court.” (more…)