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Coin Rarities & Related Topics: Defining Coin Doctoring and Dipping, Additions to the PCGS Lawsuit Against Alleged Coin Doctors
Posted By Greg Reynolds On September 8, 2010 @ 7:05 am In Coin Grading & Authentication,Coins and the Law,Column: Coin Rarities,Commentary and Opinion,Counterfeits & Fraud,Dealer News,General Collecting,PCGS | 2 Comments
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.
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.”
There is not space here to discuss why natural toning is highly favored by sophisticated collectors and why ‘coin doctoring’ is extremely harmful. Please read my three part series on the collecting of naturally toned coins, in which dipping and coin doctoring are discussed: Part 1, Part 2, and Part 3.
In my analysis on June 2, I repeated the PCGS definition of coin doctoring and also another widely accepted, though less formal, definition. Here, I will move in the direction of composing my own definition, which is aimed to be very much consistent with the PCGS definition and others that are widely accepted. Such definitions are not arbitrary are not the products merely of opinions or wishful thinking. Accepted definitions stem from values that evolved over the history of coin collecting, and are consistent with Federal and State Laws (such as those cited in the PCGS lawsuit).
John Albanese states that the nature of “the wrongdoing is obvious to reasonable, ordinary people. Coin doctoring is fraud.”
Though I understand how beginning and intermediate level collectors and onlookers may become confused by definitions of coin doctoring, the reality is that expert dealers, and also advanced collectors who have the motivation and time to become involved in the coin collecting community, mostly have consistent concepts in their respective minds regarding that which constitutes coin doctoring. There is more objectivity and far less opinion involved than non-experts and other onlookers realize.
For most doctored coins (except relatively minor cases of artificial toning), the nature and extent of the doctoring can be conclusively demonstrated. There is just not much opinion involved, in most cases. Moreover, technologies that are being developed and implemented by the PCGS will provide scientific evidence of additional cases of coin doctoring. Similar technologies could be refined and employed by others who wish to identify doctored coins.
While a team of experts can certainly identify doctored coins with nothing more than their minds and magnification, these technologies have the potential to scientifically document, for a wider audience, instances of coin doctoring. The ‘Sniffer’ technologies, which PCGS is refining, include the ability to conclusively identify the chemical components of foreign substances that are added to coins to cover imperfections and also include the ability to show the consequences, in terms of chemistry, of deliberate modifications in the metal of a coin.
Generally, in any field of human endeavor, a rule that separates legitimate practices from wrongdoing cannot be effectively applied in all instances. There will be cases where it is difficult or impossible to ascertain whether wrongdoing has occurred. In the realm of coin doctoring, there are borderline cases. A very large majority of instances of coin doctoring (except cases of artificial toning), however, can be proven beyond a reasonable doubt.
Consider some of the instances cited in the lawsuit: The adding of a fabricated head to a relatively flat head Standing Liberty Quarter is clearly coin doctoring. The slicing and rebuilding of the bands on the reverse (back) of a Mercury Dime is clearly coin doctoring. The use of a laser to obliterate hairlines (narrow, shallow scratches) by somewhat melting and smoothing the metal surrounding the hairlines is obviously coin doctoring. The adding of a “foreign substance,” perhaps auto putty or a paste created in a laboratory, to cover contact marks is doctoring. More than 95%, and maybe even 99+%, of rare coin experts (who are familiar with accepted grading practices) would be in agreement (if they all honestly revealed their respective thoughts) that cases such as these constitute coin doctoring.
Generally, coin doctoring is not about repairing coins that have been damaged or about removing miscellaneous stuff that adhered to coins in an ocean before these were found in shipwreck. Likewise, if a coin must be modified to be identified; it is probably not being doctored. A coin that is polished solely for use in jewelry is not being doctored either, though I would strongly recommend against anyone polishing coins. A practice that is harmful to a coin, or even destroys it, is not necessarily coin doctoring.
Coin doctoring involves harming a coin for the purpose of deceiving experts (or in such a way that experts would be likely to be deceived), along with everyone else who is interested, into falsely believing that the coin is of higher quality than it was before it was harmed. The harm does not have to be permanent; it just has to be deceptive or potentially deceptive to leading coin experts.
In the realm of rare coins, dipping refers to the practice of immersing a coin in an acidic solution for the purpose of tearing layers off the coin to brighten the coin, remove toning and/or remove other matter that has adhered to the coin. While most (though not all) sophisticated collectors would agree that dipping a coin is harmful, it is not deceptive to experts or even to intermediate level collectors.
If a valuable silver coin is dipped and then submitted to the PCGS, the graders will, in most cases, immediately realize that it had been dipped. More than two thirds of all uncirculated 19th century silver coins have been dipped at one time or another. Obviously, all such coins are not regarded as having been doctored. Besides, some knowledgeable collectors and many expert dealers honestly maintain that the benefits of dipping typically outweigh the harm done. Hardly anyone would say that about coin doctoring. No respected coin expert has ever said that the benefits of lasering, of adding auto putty, of polishing, or of adding metal to a rare coin outweigh the harm done.
I am bothered that some misguided individuals conclude that I am advocating dipping, because I point out that dipping is not doctoring. I am NOT recommending dipping coins.
Dr. Steven Duckor, a famous and very accomplished collector, agrees that “dipping is not in any way ‘coin doctoring,’ though [Duckor] personally would never [deliberately] buy a dipped coin nor would [he] dip a coin”! For “forty years,” Dr. Duckor has sought “original, toned coins, the more natural the better!”
I believe that more than 90% of the coins that have been dipped should not have been dipped. In my view, though, there are coins that should be dipped. Sometimes, toning is so thick and unfortunately formed that it covers characteristics of a coin, which really should be seen. Moreover, sometimes foreign matter (not toning) adheres to coins in such a way that dipping is the least harmful method of removing such matter. I acknowledge, however, that dipping is a widely accepted practice.
“The majority of the numismatic community thinks [that] dipping can be OK,” David Hall relates, “though of course overdipping is a negative.” Note the words “can be” rather than “is”!
The second amended complaint, which is the revised lawsuit, includes evidence that has been gathered since the first amended complaint was filed. Here, the word ‘complaint’ refers to a lawsuit.
G. Krill and R. Wesselink are defendants in the lawsuit. The PCGS claims that the PCGS has evidence that Krill and Wesselink continued to conspire to have Wesselink doctor coins sent to him by Krill for the purpose of Krill, or someone affiliated with Krill, eventually submitting such doctored coins to the PCGS for numerical grading.
The plaintiff (CU-PCGS) argues that a package of coins, which Krill planned to ship to Wesselink, was sent, evidently by accident, to the NGC, the leading competitor to the PCGS. The PCGS and the NGC are the two leading grading services. Officials at the NGC alerted officials at the PCGS when this package was received. The NGC then sent the contents of this box to the PCGS.
The suit lists four specific coins that the PCGS alleges that Krill intended to send to Wesselink, with instructions allegedly from Krill, for Wesselink to ‘doctor.’
Donn Pearlman, a public relations consult for CU-PCGS, provided images of these coins. The depicted handwritten notes are said by CU-PCGS to be from Krill to Wesselink.
Did the writer of these instructions employ the term “clean up” as a euphemism? After all, the term ‘clean’ has a specific meaning in the coin collecting community. Though it is now recognized as a harmful practice, it was common for coins to be ‘cleaned’ by way of wiping motions. A cleaning usually left hairlines, and, unbeknownst to the cleaner, a cleaning reduced the grade of the coin. So, it is unlikely that the handwritten notes actually refer to cleaning. What then was meant by “clean up”?
On an 1861 Half Eagle ($5 gold coin), the handwritten instructions call for “a very light clean-up to make new”! A cleaning would certainly not “make” a coin look “new”! So, what do these instructions really mean? The PCGS argues that Wesselink was asked to “make” a coin that is not “uncirculated” look as though it is so.
One of the coins in the package is in a PCGS holder. It is an 1851 one dollar gold piece that has been assigned a grade of MS-63 by the PCGS. It also has a sticker of approval from the CAC. Though I cannot really draw a conclusion from an image, it appears that it might be a very desirable coin. The handwritten instruction specifies a “light clean-up”!
As this coin is encapsulated, it would have to be removed from its PCGS holder to be modified. It is logical to theorize that the intent would be to re-submit the coin to the PCGS or the NGC for the purpose of receiving a grade that is higher than MS-63. I cannot think of another reason for a coin expert (outside of PCGS) to remove it from its PCGS holder, especially since it has a sticker of approval from the CAC. There are collectors who remove coins from PCGS holders because they wish to hold them, but the activities of such collectors are probably not relevant to this case. Therefore, if a “light clean-up” is aimed at changing a MS-63 grade coin such that experts may grade it as MS-64 or higher, what could a “light clean-up” mean? Is it fair to conclude that Krill is asking Wesselink to doctor these coins for the purpose of deceiving PCGS or NGC graders into believing that they merit higher grades than they ever really merited? I do not know.
In addition to listing coins that were allegedly sent by Krill in the package just cited, the amended lawsuit contains a slightly different list of examples of coins that were allegedly doctored and/or submitted by the defendants. (See section 14, pages 9-10 of the first amended complaint and section 16, pages 10-12, of the second.)
CU President and PCGS founder David Hall has indicated that a settlement in the very near future is unlikely and he seems to look forward to information that will be unearthed in the discovery process. I (this writer) believe that an early settlement would be a mistake. John Albanese remarks that “the keys will be in the discovery” proceeding. It is really necessary to unearth more information relating to coin doctoring. If the defendants do or will maintain that they have not done what they are accused of having done, then most of the coin collecting community would be interested in their explanations regarding the allegedly doctored coins cited by the PCGS.
Albanese believes that “in the short term, it will be tough” to address the coin doctoring problem. “Over the long term,” John says, this lawsuit will be “a huge positive. It will increase confidence.” Albanese already finds that he sees “less than half as many doctored coins” during the course of business then he did before the PCGS filed this lawsuit in late May.
It is important for collectors to realize and accept the seriousness of the coin doctoring problem. I have seen thousands of doctored coins in PCGS or NGC holders. John Albanese reports that “more than five percent” of the PCGS certified coins that have been submitted to the CAC have been doctored.
As I already mentioned, many doctored coins worsen over time. Also, most collectors learn from experience. Numerous collectors who do not know that they currently own doctored will eventually find out. Collectors and potential buyers of coins will have more confidence in coin markets and in the coin collecting community if the coin doctoring problem is contained.
©2010 Greg Reynolds
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