POLL: What constitutes fraud?

MrEureka

Everyone has their own ideas about what's acceptable. Some of us, myself included, seem to think that aggressive pricing can in some circumstances be fraudulent. So let's look at a specific scenario and try to quantify what we consider to be fraud.

First, assume that we're talking about a coin that we can all agree is worth roughly $10,000 at a major auction, give or take 15%.

If a professional numismatist offers the coin to a completely inexperienced coin investor and represents it as a "good value" and "good opportunity", what's the most he can quote without committing fraud?

RYK

I posed the question to my wife, who happens to an attorney, and I fully expected her to be outraged by someone (especially a non-coin person) getting ripped off overpaying for a coin.

I was shocked by her response. Caveat emptor. Isn't it the same as going to an interior decorator and overpaying for a price of furniture when you can get virtually the same piece at Target for a small fraction of the price?

Live and learn.

mrearlygold

Question to answer the question.

When certain common coins which just happen to be toned and are bid at 100 bucks are sold for 3 times that, is it fraud?

What about 5 times bid?


10 times bid?

60+ Grand for an Oregon commem?

Tom

TommyType

I didn't vote....Selecting a specific $$ seems really silly to me.

For instance, a dealer might sell it for EXACTLY the $10,000, and still be guilty of fraud. A statement like, "This thing will be worth 3 times that in a year!!", might make the otherwise perfectly acceptable transaction fraudulent.

On the other hand, someone could sell it for $25k, and be perfectly innocent. "This coin has sentimental value to me, but for $25k I'll let it go. I'd suggest you do some research before accepting, however, since I'll admit that's a very high price to ask."

If you bought it then, I wouldn't hold it against the seller at all!

It's the words that make fraud, not just the price.

MrEureka

60+ Grand for an Oregon commem?

Good point. Can you imagine the potential ANA and PNG complaints if a telemarketer sold that coin for 69K to a newbie investor?

mrearlygold

<< <i>60+ Grand for an Oregon commem?

Good point. Can you imagine the potential ANA and PNG complaints if a telemarketer sold that coin for 69K to a newbie investor? >>





Bingo!

keets

this is an area where the ANA or some regulating board/agency would be invaluable, some kind of safety net for the "completely inexperienced coin investor" to fall back on when the hood is lifted off his head down the road. the agency wouldn't be doing anything for any collector---caveat emptor---but it would at least effectively regulate the ethics of it's members.

i think the trouble is that many if not most "completely inexperienced coin investors" are under the impression that such an agency must be in place. think about it, most areas of commerce are licensed in some way, coin dealers just need a vendors permit to set up.

al h.

MrEureka

TommyType - Assume that all of the material facts have been presented.

morgannut2

It entirely depends on the "replacibility" of the coin. Is it a pop 5 ultra rarity in original condition, or a common date $20 Saint that anyone can buy (and sell easily) at any coin shop? The rarer the example, the greater the dealer risk , the greater the mark-up!! The interior decorator gives value added for their taste and expertise. Dealers do NOT. PCGS does, which is why they go for more money with the opinion/holder.

mrearlygold

The rarer the example,the greater the mark-up!!



I paraphrased your statement.

We DO lose money on rare coins sometimes. More often than you would believe.


Tom

TommyType

Nah....Too many variables to assume the scenario is complete. It sounds more like someone is buying a pack of gum than a $10,000 coin.

I'll just reitterate that I think the background and the "pitch" are important in determining if the dealer was fraudulent, or the buyer was stupid.

BAJJERFAN

<<"I was shocked by her response. Caveat emptor. Isn't it the same as going to an interior decorator and overpaying for a price of furniture when you can get virtually the same piece at Target for a small fraction of the price?">>

Not the same thing as Target will oftimes sell a TV for less than a small TV shop operator can buy it for. Car repair shops mark up prices on parts they buy from NAPA to put in your car. An interior decorator offers the furniture as part of a package and generally doesn't have the purchasing clout of a Target chain. Interior decorators can't afford to carry as many low profit "me too" or sucker-type loss leader products as Target can. In the case of coins the salesperson is usually convincing the ignorant customer to purchase something that he knows is not a good buy.

MrEureka

It entirely depends on the "replacibility" of the coin.

The coin must be reasonably available or we could not all have agreed that the coin would bring $8500-11500 at auction.

morgannut2

If I wasn't clear, if a dealer buys a fairly rare piece, there is commonly much more liquidity and marketability risk. Hence they may often lose substancilly on just that one coin, perhaps wiping out the profit on 20 other common dates sold at a small markup. So if a dealer in my area---- say Silver Spring Maryland, offered me an engraved 1st one hundred 1921-D Morgan for $20,000 that was bought for $10,000 I would not in the least feel offended or taken advantage of. If my Mom visited same hypothetical shop to buy a 1923D PCGS MS-63 Saint and was charged $2,500, not only would I be offended, I'd seek her money back. Fortunately there are no coin shops like this around here, but apparently there are some nationally with pure "white collar overpricing" marketing operations giving all dealers a bad name. And lot 2429 Bowers Dec. 04, 1886O MS-62DMPL cost me $8,000 and I defy anyone to find another in that grade very easily and it's in your example price area. If a dealer sold me that coin at a 50% markup--fine I'd certainly think about it/make an offer, if they tried it with an 1886-P I wouldn't do business with them again! That's the distinction I see anyway.

FatMan

The term "fraud" gets tossed around this forum like a hot potato. Fraud requires intent. Intent is a covert mental activity meaning only the person committing the act knows whether the act is fraudulent or not. You cannot see intent. It is up to the courts to determine if the accused actions are consistent with intent. The dollar amount is one of many contributing factors.

No offense MrEureka, but I'm thinking it is pretty silly to talk assessing fraud by how much harm measured in finite dollars. This exercise is asking if someone intends to harm a party through deception it is ok if it is only $999 but if it is $1000 it is fraud. However, you're a pretty bright guy so I assume that is the point you are trying to make here.

What we really should be talking about here is what is good for our hobby. What is a fair markup that will keep our hobby healthy, thereby answering what a buyer should expect if they need to liquidate shortly after the purchase.

morgannut2

The defense of the laissez faire attitude of some coin and used car dealers severly hurts their reputations. To the degree that new collectors are driven from the hobby by boiler room coin sales tactics, the resale value of my collector coins and investment coins may be harmed. Indeed I'm about sick of it myself.

K6AZ

Welcome to another poll by Andy Lustig, complete with a stuffed ballot box by his cronies.

RYK

If a knowledgeable buyer wishes to pay $60,000 for an Oregon, that is not fraud.

If an inexperienced buyer, gets sucked in with a teaser deal on SAEs and then gets pressured to pay 150% top-shelf retail for additional coins, it may or may not be fraud, but it sure as heck stinks and may be cause for action against the seller.

ElectricEye

I believe the line between overhyped and misrepresentation is all in the delivery. A seller can ask any price for an item but when it is represented as something it is not, the line has been crossed.

MORGANHUNTER2

fraud: n; 1a: DECEIT, TRICKERY;specif: intentional perversion of truth in order to induce another to part with something of valueor to surrender a legal right to b: an act of deceiving or misrepresenting.

Case in point- I will sell you an 1878-s dmpl ms 66 Morgan for $6,000.00 because it is a rare dog gone near one of a kind. you the unknowing virgin coin collector say WOW this is such a deal. deal is made. Virgn takes coin to PCGS to have holdered as a ms66dmpl- pcgs comes back to you and states the coin is a au58 cleaned harshly, and may not be authentic without further research. Opps- got a problem here- coin is now valued at best (IMO) $20.00

Virgin goes looking for me- my shop- is now empty and I'm in Mexico sucking up the sun- this is fraud.

this is hypothetical from me just present a scenario.

magikbilly

Coin Vault - 6 AM this morning - rolls of 20 1921-P Morgans, VF+ to XF - dipped, heavily scratched/cleaned problem coins. Said to be "conservatively at least XF but more BU" - a mystery price guide "shows" them to be worth $49.95 each - these rolls were priced at $400 each. Coins I would not buy for $8.50 ea with a gun to my head. Intent is clear to me, facts misrepresented (perhaps carefully, but I doubt it - thses are of course NOT scarce or rare) and grade and value obviously misrepresented. Would this be fraudulent in the context of this conversation? If so, has anyone gone after them? If not, why?


Billy

MORGANHUNTER2

I think that answer is simple- unless you can prove(TPG) that the folks at SAHTV and CoinVault intentionally deceived you into buying coins that they say are xf/bu and they came back as whizzies- then yes it is fraud with intent. But they have a disclaimer stating that this is their opinion only because the coins are not graded by a independent grader or something to that effect.

magikbilly

So any "dealer" with such a disclaimer is free to operate the same way? Then caveat emptor it is I suppose

Education! READ BEFORE YOU BLEED! Not that anyone in here would buy those 21's, that was an example of course (real though it was).


Billy

MORGANHUNTER2

magik
You would be truly suu prised at the legal wording some disclaimers have- this I found when I did order something from them- but it was TPG'd by NGC- I found it amazing at the gall of these guys- I sent a letter to them about a month ago- still no response.

ColonialCoinUnion

<< <i>Welcome to another poll by Andy Lustig, complete with a stuffed ballot box by his cronies. >>



K6AZ, with all due respect, what the he11 are you talking about?

I voted in the poll in the 'no price too high' category because I don't see a link between fraud and high prices.

Barry

Fraud has nothing to do with price. It has to do with misrepresentation.
If the seller is telling you about investment potential or appreciation potential, that may be fraud, regardless of price. Or, if he tells you it's MS65 and it's AU or it's whizzed/damaged, that's fraud, regardless of price.

SilverDollarMan

None of the above. U own it, u price it. They buy it, they decline it.

magikbilly

If you were referring to my post about the Morgans - I was talking about misinformation and intent - not price.

Billy

K6AZ

<< <i>

<< <i>Welcome to another poll by Andy Lustig, complete with a stuffed ballot box by his cronies. >>



K6AZ, with all due respect, what the he11 are you talking about?

I voted in the poll in the 'no price too high' category because I don't see a link between fraud and high prices. >>



You must have missed the other hit thread on me.

BAJJERFAN

AS a seller don't the SAH-TV folks have some duty to know what they are sell and what the approx value is or shud be? Its like I'm sellin these rolls of worn out Morgans and I don't know chit about them so I'm not responsible if you get screwed. Sheesh they know just enough to price em at $400 a roll though.

K6AZ

And one thing Andy is not mentioning in this thread. This was started due to a discussion in another thread, where several companies are advertising in non coin publications offering gold and/or silver eagles "at cost". Once someone places an order, they are subjected to high pressure telemarketing trying to sell common slabbed gold at 150-300% of what the majors (companies like Heritage) sell it for out of their inventory. Keeping in mind these "prospects" were collected from advertisments in non coin publications, do you all still think this is ethical? I sure don't.

Merry Christmas from dealers who seek out unknowledgable people to stick it to.

MrEureka

do you all still think this is ethical? I sure don't.

Eric - Are all unethical business tactics fraudulent?

tradedollarnut

Are all unethical business tactics fraudulent?

And that would seem to be the $64,000 question!

coinkat

MrEureka:

I think this is really not a fair poll becasue it really depends on the specific coin. Certain coins, even under 10K, may be a finest known example. For example what is a fair price for an 1896-O Micro o in AU55. The coin is an extreme rarity in that grade and there could be an estimate of $4,000 and it could easily fetch 10K or more... because it is that rare. I am not willing to say that would be fraud.

Now if it were a far more "common" coin and it sold for some outrageous amount, I would wonder. Fraud is a tough term to use here. BTW, I did not vote and for the record, I think that you have made a substantial effort to help all collectors with many of your posts. I appreciate the contributions that you have made.

MrEureka

CoinKat - Remember, I said "First, assume that we're talking about a coin that we can all agree is worth roughly $10,000 at a major auction, give or take 15%." So we're not talking about coins that are highly subjective in value.

Edited to say "...and thanks for the kind words!"

Russ

<< <i>60+ Grand for an Oregon commem?

Good point. >>



Not really a good point at all. It's an apples to oranges comparison. The Oregon was sold at competitive auction with both the winner and the underbidder being very sophisticated numismatists. Not even in the same realm as a boiler room telemarketing operation targeting neophytes.

Russ, NCNE

MrEureka

Russ - How much would a telemarketer have to charge a neophyte for that Oregon before it would in your eyes constitute fraud?

mrearlygold

<< <i>

<< <i>60+ Grand for an Oregon commem?

Good point. >>



Not really a good point at all. It's an apples to oranges comparison. The Oregon was sold at competitive auction with both the winner and the underbidder being very sophisticated numismatists. Not even in the same realm as a boiler room telemarketing operation targeting neophytes.

Russ, NCNE >>





Maybe, maybe not. Any idea where the coin resides at present? Know for sure? If so, how do you "know"?

Too tough? Ok, let's reduce that idea to the simplistic for the ideologically challenged. I sold a number of rainbow dollars, common dates in 4 and 5, to customers of mine who have no clue about dollars, or for that matter toned coins ( most people don't despite their claims to the contrary). I paid UP to triple bid for some of them and sold at a 20% markup. The customers were merely following my lead as they are all customers of mine who have bought and sold coins with me in most cases for nearly 2 decades. These sales occured in 2003.

I bought some of them back in mid-2004. Some of them were auctioned off.

How do you reckon they did?

That should be easy enough you reckon?

Tom

ziggy29

I can't put a specific dollar amount or percentage on it. It all depends on how, and to whom, it is marketed.

Julian

Fraud is not quantifiable.

Fraud is lying to the buyer, misrepresentation is fraud.

There can be fraud by both ignorance and intent. If by ignorance, then a refund satisfies that.

If by intent, then harsher penalties are warranted.

Russ

<< <i><<

<< 60+ Grand for an Oregon commem?

Good point. >>

Not really a good point at all. It's an apples to oranges comparison. The Oregon was sold at competitive auction with both the winner and the underbidder being very sophisticated numismatists. Not even in the same realm as a boiler room telemarketing operation targeting neophytes.

Russ, NCNE >>

Maybe, maybe not. Any idea where the coin resides at present? Know for sure? If so, how do you "know"? >>



As far as I know the buyer, David Schweitz, still owns the coin since he bought it for his own set. Of course, that's not relevant anyway as what he did with it after buying it doesn't negate the fact that your attempt to compare the selling price of a coin at auction to a boiler room scam falls flat on it's merits.



<< <i>Too tough? Ok, let's reduce that idea to the simplistic for the ideologically challenged. >>



Ideologically challenged? You drinking early today? What exactly does ideology have to do with the fundamental premise that pressuring the uninformed in to overpaying for an "investment" is wrong? That concept is really nothing more than common human decency. Are you suffering from a shortage of same?



<< <i>I sold a number of rainbow dollars, common dates in 4 and 5, to customers of mine who have no clue about dollars, or for that matter toned coins ( most people don't despite their claims to the contrary). I paid UP to triple bid for some of them and sold at a 20% markup. The customers were merely following my lead as they are all customers of mine who have bought and sold coins with me in most cases for nearly 2 decades. These sales occured in 2003.

I bought some of them back in mid-2004. Some of them were auctioned off.

How do you reckon they did?

That should be easy enough you reckon? >>



Can somebody translate the above for me? I don't speak gibberish.

Russ, NCNE

au58

A dealer can commit ethical fraud but never be subject to a charge of fraud in a court of law.
Terms such as "rare", "scarce", "choice", and "nice" are all relative terms and subject to abuse.
Use of these terms may or may not be fraudulent.
Selling a coin at an inflated price to an uninformed buyer may or may not be fraudulent.

coynclecter

Fraud and price are not related. Fraud is a misrepresentation. If I sold a coin to you for 100,000 and told you it was a common cleaned junk Morgan. That's not fraud.
If I sold the same coin, same price and said it was a high grade rarity then that is fraud.

Ethics for coin dealers is a book that can be found at the library next to "Italian war heros" about the same size too. The problem is that we expect our "dealers" to be working for us, that's an implied agency. Instead they are working for themselves, a fact we need to remember. Many try to build a client base so they treat the client fair. but there is no law that says that your "dealer" is supposed to look out for your interest. In the end Its buyer beware.

If the seller provides a written statement as to the value or grade and its wrong then there is a case for fraud but most crooks know this so don't expect them to. That's why when you see a big disclaimer about grading being subjective etc, its time to run like hell. They KNOW they are misleading you and want a weasle clause.

mr1931S

"When certain common coins which just happen to be toned and are bid at 100 bucks are sold for 3 times that, is it fraud? What about 5 times bid?10 times bid? 60+ Grand for an Oregon commem?"

I don't think the courts care about "bid" when deciding whether or not fraud has occurred.

MrEureka

The problem is that we expect our "dealers" to be working for us, that's an implied agency. Instead they are working for themselves, a fact we need to remember.

If someone takes a call from a telemarketer, or walks up to a dealer's showcase out of the blue for the first time, and expects the dealer to be "working for them", they're probably on drugs, if not from another planet. On the other hand, if a collector has established a working relationship with a dealer in which it is understood between the parties that the collector is RELYING on the dealer, even if it only took only a few minutes to establish that relationship, the collector has every right to expect the dealer to "work for him".

MORGANHUNTER2

Andy- this is a great thread to sit back and see all the legal Beagles fight the controversial fraud issue. IMO- what andy had presented in the beginning and those that did respond earlier- has 2 separate and distinct meanings- and as I have seen Mr. Lustig present in the past is more than entertainment it is insightful and well thought out.

Hey I provided the formal dictionary version of fraud - and MY interpretation of what Mr. Lustig was stating in his poll- but the dollar amounts were to high for me to vote- there should have been one more section- anything over reasonable value that in the buyers best interest with out having prior knowledge or the where to all would constitute fraud, ie= dealers is looking to make a big score.

mrearlygold

<< <i>"When certain common coins which just happen to be toned and are bid at 100 bucks are sold for 3 times that, is it fraud? What about 5 times bid?10 times bid? 60+ Grand for an Oregon commem?"

I don't think the courts care about "bid" when deciding whether or not fraud has occurred. >>






Wrong. They certainly do.

There's a provision called unconscionable profits which have quite a bit to do with bid or fair market value.


Tom

Newmismatist

Here's a definition for Fraud to help "answer" Andy's Question "What constitutes fraud?"

Fraud is defined as a deception deliberately practiced to secure unfair or unlawful gain.

First correct answer gets an official US Coin Forum online law degree

MrEureka

I voted in the poll in the 'no price too high' category because I don't see a link between fraud and high prices.

CCU - Is the fact that the coin was represented as being a "good value" and "good opportunity" relevant? I think so, especially because the person making the representation is a professional dealing with a completely inexperienced buyer. After all, the buyer is obviously relying on the seller's representations.

morgannut2

For the umteenth time, fraud is a function of the representations made to the buyer, and there has to be intent in some way to obtain unfair gain based on deception of significant magnitude. It has less to do with price, and more to
do with fully (honestly) informed buyers and sellers forming agreements/contracts.

monsterman

>>>>fraud: n; 1a: DECEIT, TRICKERY;specif: intentional perversion of truth in order to induce another to part with something of valueor to surrender a legal right to b: an act of deceiving or misrepresenting.

that just about sums it up....now being a very experienced juris doctor myself.... it is fraud to sell a coin in a holder using another holder`s price sheet where there is clear and obvious divergence

experienced collectors know that a ms 66 1891 p morgan dollar in a pcgs holder is one really rare coin and the price sheet shows it...and if some slabber puts a slider 1891 p coin in a ???? holder and calls it a ms 66 ...that is no crime ...as that is his opinion and the market will have to respond to the slabbers grading skills...or lack there of...and will do so in time...but it is not a crime...its a lack of talent....however.....when sellers state " it sheets at 10,000 when they know darn well what they are selling isnt worth 10,000 and in fact is worth less than 100....now thats a crime...not only is it a felony.....but once sent through the post office its a federal offense......and when i get those cases ....i do the right thing and max up the perp


now here is where i step on toes....there are hundreds doing it on ebay right now...you all know who you are.....plaintiffs are filing everyday....3 months ago i got one and sent it to arbitration ....and was informed it was settled in 2 hours...a 430,000 refund.....i didnt want to arbitrate it...i wanted to try it ..but thats another story.... i knew what hapened and i was in a spanking mood..but

the rest of the thieves out there wont be so lucky next time i can assure you


now on to ebay....we here at the justice department know darn well that if for example....a watch manufacturer had a thieve in their employment...we know he could steal watches everyday...but after he sold them to all his friends, neighbors and relatives who else could he sell them to.....so the stealing curtailed.....then came ebay....no accusations here but a little logic and you might conclude as to who has become the largest " fence" in the world....and the stealing now resumes...this is a HUGE problem and ebay needs to be pro active in addressing the problem


case in point

20 years ago when the thieves were stealing your suburban seats...the insurance companies would ( if it was over 2 years old ) buy used seats " on the economy" at 1/2 price.....after a year or so they finally figured it out....replace all stolen seats with new ones...guess what....since the insurance companies removed the market for stolen seats...all the stealing stopped ...instantly........as all they were doing was creating a market....now that there is an ebay...a whole new market has returned.....and ebay knows it

in conclusion someone said "Caveat emptor"....that depends...when you are quoted 6,000 for a 90,000 coin.... you bet invoke Caveat emptor....but when they sell you a 6,000 coin for 90,000 as per the price sheets...its a fraud.....and i will slam my gavel so hard you will still be hearing it when you are paroled

now as far as 60,000 for a oregon....smartest thing i ever saw a man do...provided he is a dealer...with all that publicity.....i`ll bet he gets all the shots .... and 60,000 sounds cheap to me..... i`ll bet he picks and chooses what he wants...but they all come to him first as he is the big dummy paying all the money....laughing all the way to the bank......he probably made 60,000 his first month....absolutely brilliant!!!

monsterman