Has PCGS ever been independently audited?

JD

Has PCGS ever been independently audited? I haven’t used them but I’ve read the complaints and have often wondered whether their ‘insiders’ get preferential treatment. Is it a fixed game? For me it’s small potato’s I collect common stuff (solely out of personal interest) that many of you wouldn’t probably touch, but, for many dealers it’s big business. Grade inflation or deflation effects populations which effect supply which effects price which effect profits. After experiencing all this crap with Enron (and Worldcom – firsthand) are the grading services truly neutral or catering to their own self interests? (Kind of makes me wonder if an independant audit is even worth anything...but for the sake of arguement let's assume it is.

Now, some of you will tell me to learn how to grade so I don't have to rely on PCGS and to buy the coin not the slab, etc. etc. yeah, yeah, yeah, I read it in every other post...but the point is this...the difference between a ms67 and an ms68 or ms69 etc can mean a big price difference and when it comes to market creditability is someone going to put greater stock in your personal assessment that a coin's a ms68 vs a ms67 or PCGS's label.

Has PCGS ever allowed an independent audit to determine whether their internal polices and procedures effectively shield the submitter from the grader? Do they have a SAS70 equivalent that they are willing to release to people?

How easy would it be to call over and say, I’ve twenty-three really nice Morgans being shipped to you now can you keep an eye on them and call me when they arrive?

I can go on but I think you get my point.

pontiacinf

i find that question very interesting

LanLord

This is an interesting idea, probably a good idea, but may be difficult to obtain any real data from for this reason.

Assume that some auditing company (Arthur Anderson for instance ) just kidding - any reputable auditor, would take 10 coins and throughly document them with photos and perhaps obtain a cross reference of "expert" opinions

These coins would then be sent to PCGS under some name that wouldn't be recognized as an industry leader, the grade that these coins receive would then be recorded and more photos taken.

Then these coins are broken out and resubmitted under the name of some PCGS insider or perhaps several times with different insider names (I don't want to pick on anyone in particular, so just choose one or more yourself). We would be auditing to see if the coins submitted by an insider received higher grades (pure grade, cameo, etc).

Now here is where this may all fall apart. It's possible that a coin submitted by an insider won't necessarily get any preferential treatment just based on the name on the submittion form, but would require a "conversation in the hallway" to get preferential treatment. In our test case, we assume that all insider knows he/she is part of an audit, therefore, won't have that conversation because they don't want to be implicated in some scheme. If, however, the coins are submitted under the insiders name without their knowledge, they wouldn't know to have the conversation in the hallway because they wouldn't be aware that this submission took place.

It's one of those situations that auditing may not work on unless the people involved in any inproprieties are just plain stupid.

Just my opnion though,

nwcs

Another factor is that a coin is not totally stable. Environmental changes affect it's appearance. Handling can affect grade. If they do this, what if one of the companies fingerprinted it? It would ruin the experiment of consistency. It would invalidate the experiment. And there are other dangers, such as the effects of breaking out a slab -- maybe damaging a coin. Etc. I'd say it would be easier to do something like an audit of business practices instead of coin grading.

Neil

RLinn

LanLord, I understand your line of thinking and tend to agree with it. The question I have remaining is "Does PCGS (or any other service) have the kind of "blind" quality control procedures in place that might be similar to the audit process LanLord describes but is testing (i.e. lookin at) grading consistency instead of insider preferences?"

oreville

How about this for your comments?

I was at the offices of NGC dropping off a coin to be reviewed and in walks the then current President of the ANA to have his mutlitude of coins to be slabbed by NGC. He goes into one of the conference rooms to go over each of the coins he is submitting to NGC with one of the graders.

Blatent conflict of interest given that the ANA "endorses" NGC as their official grading service in return for $$ to the ANA?

While PCGS does indeed have some potential problems with internal control processes problems, NGC is right up there with PCGS. ICG has attempted to do something about the problem.

The way to "cure" the PCGS perception problem is for B&M and DHRC and all their employees to give up being authorized PCGS submitters/dealers since the conflict of interest is too "apparent." Then they can contractually work with a number of other active PCGS dealers to submit their coins for them ON A RANDOM BASIS.

But NGC is no better in this area and I still say shame on the ANA.