Interesting Numismatic Ethics article in the Numismatist

CIVITAS

It's not often that I come across an article in the numismatist that I can stand to read all the way through. I found this hypothetical rather interesting. Since the TPGs are becoming more commonplace on the "Darkside" I thought some here would would like to offer their opinions. I also think the TPGs would be more likely to make an authentication mistake on Darkside material. Also, our own Mr. Eureka was a panelist for this debate.

From the Numismatist (with a small twist for the darkside. The original coin was a 1914-D Lincoln cent with an added mintmark.):


Suppose a seasoned collector purchases a [Reuss-Obergreiz 1892A 2 Mark] from a prominent dealer. Although the coin has been certified by a major third-party grading service as EF-45, the collector thinks it's undergraded, so he cracks it out of the holder and resubmits it to the same grading service. The company returns it 45 days later in a "bodybag" noting that [it is a known counterfeit]. He contacts the grading srevice and asks it to "make good," noting the grade the coin received in its first evaluation. The grading service refuses, explaining that it can't be sure it's the same coin it previously graded. The collector then asks the dealer for a refund. Even though the coin no longer is in its original holder, and assuming the dealer know's it's the same coin, does he have to refund the buyer's money?

Discuss. No name calling either.

TwoKopeiki

It's a tough one - here are my thoughts, though:

If the coin, purchased from a dealer, was in a reputable TPG holder, then I would not hold the dealer responsible for any kind of a refund. If the coin was raw, however, you are relying on the dealer to provide a certain level of authentication. In that case, I would expect the dealer to refund the purchase price. In your scenario, it sounds to me that the customer was hoping for a better (not worse) grade when he/she re-submitted the coin for grading. The customer should have sent the coin in in it's original holder.

Just my 2 kopecks

coinpictures

Absolutely not, IMO. The collector made the decision to crack the coin out of the slab. Why should the dealer be held responsible? If the coin came back a grade or two higher would the collector gone back and paid the dealer more?

This very situation happened here locally a few months back. In the same group of coins that contained the proof seated dollar I purchased were several early bust dollars. PCGS graded one XF45 and the other AU53. A speculator bought them both, felt they were undergraded, cracked them out and resubmitted them to PCGS. BOTH coins came back bodybagged, despite having been slabbed by PCGS weeks before.

Should my local dealer have been held responsible? I think not.

worldcoinguy

<< <i>If the coin, purchased from a dealer, was in a reputable TPG holder, then I would not hold the dealer responsible for any kind of a refund. If the coin was raw, however, you are relying on the dealer to provide a certain level of authentication. In that case, I would expect the dealer to refund the purchase price. >>



Interesting thread. I agree with Roman on this one. When the collector broke it out of the holder, he assumed the liability. He took a risk and it backfired. The dealer was operating in good faith and I do not see the dealer at fault.

As for the TPG, he is running a business also. He cannot make the assumption that the coin is the same one that was previously in the holder. If the coin was still in the TPG holder, it would not be an issue.

Hussulo

I agree with all above especially coin pictures statement “The collector made the decision to crack the coin out of the slab. Why should the dealer be held responsible? If the coin came back a grade or two higher would the collector gone back and paid the dealer more?"

MrEureka

The collector made the decision to crack the coin out of the slab. Why should the dealer be held responsible?

Does it matter which TPG originally slabbed the coin?

Regulated

I think that it is the dealer's responsibilty to stand behind the authenticity of every coin he sells, whether it is in or out of a third party holder.

coinpictures

No, I think the principle is the same, regardless of whether the coin is then submitted to the same TPG or a different one.

Now if the collector makes an arrangement/guarantee with the dealer PRIOR to cracking out the coin, that's a different matter, but I don't think dealers can be held responsible for the expertise (or lack thereof) of the TPGs... at least not without the dealer having some recourse with the TPG.

By cracking out coins from one TPG and sending into another company, you get into a potential "he said/she said" scenario. Whose expertise takes precedence? Is it the TPG that says the coin is authentic or the one that says it is counterfeit?

Regardless, I don't think any TPG should ever be held responsible for any determination made about a coin *after* it is cracked out from a slab... too much potential for hanky panky between crackout and resubmission.

Should there be a mechanism whereby NGC can evaluate PCGS coins while still encapsulated? Sure, but I don't know what the logistics would be, since it's really not in any of the TPG's best interests.

Who does a collector or dealer collect from if ANACS says that Coin X certified by PCGS is counterfeit and PCGS disagrees with ANACS' assessment? PCGS could rightfully say "You didn't examine the coin outside of the slab and there's no way you can see detail XXX or determine surface characteristics while in the slab..."

Too complicated to come up with a system that would work. There would almost have to be a independent nonpartisan board of experts approved by the affected TPGs to determine such scenarios...

spoon

Shouldn't the dealer assume a higher standard than plausible deniability? Is he automatically granted benign ignorance simply because the mistake already eluded the TPG?

What level of error are we talking about here? Sometimes "howlers" (to quote LM) make it into plastic. So long as the error does not concern an obscure variety on a coin out of his specialty, the dealer should assume some responsibility. Otherwise the potential for preying on the ignorant arises.

Scenario: Dealer buys slabbed coin understanding it to be what the label says; realizes it is not, doesn't want to incur a loss; passes it on to a buyer without noting the label error. That is immoral. But it is difficult to impossible to prove that the dealer made the realization. Without the realization it would remain simple ignorance or inattentiveness, but even that will wind up costing someone eventually.

coinpictures

<< <i>I think that it is the dealer's responsibilty to stand behind the authenticity of every coin he sells, whether it is in or out of a third party holder. >>



Just authenticity? What about these other possibilities:

Coin is bodybagged as cleaned

Coin is bodybagged as tooled or altered surfaces

Coin comes back at lower grade

Is the dealer obligated to refund the collector on all of these as well?

Too many possibilities for someone to get hosed. If a collector wishes to do this, I think they have to do so with the cooperation of the dealer in question in advance, or otherwise bear 100% of the risk for resubmission.

I think dealers should offer return privileges (within a reasonable period of time) for coins as long as they are still in the original holder, but once cracked out all bets are off.

coinpictures

<< <i>Shouldn't the dealer assume a higher standard than plausible deniability? Is he automatically granted benign ignorance simply because the mistake already eluded the TPG?

What level of error are we talking about here? Sometimes "howlers" (to quote LM) make it into plastic. So long as the error does not concern an obscure variety on a coin out of his specialty, the dealer should assume some responsibility. Otherwise the potential for preying on the ignorant arises.

Scenario: Dealer buys slabbed coin understanding it to be what the label says; realizes it is not, doesn't want to incur a loss; passes it on to a buyer without noting the label error. That is immoral. But it is difficult to impossible to prove that the dealer made the realization. Without the realization it would remain simple ignorance or inattentiveness, but even that will wind up costing someone eventually. >>



I think the biggest problem is that what do you with a coin that is now raw that once in a TPG holder? In all likelihood the dealer cannot go back to HIS source and broach the subject of a refund because the coin has been cracked out.

If the coin remains in its original holder, this simplifies possibilities immensely and many dealers I believe would honor a refund. By cracking the coin out, it creates a big mess.

Sure we like to say that plastic doesn't matter, but that simply isn't realistic from a pragmatic standpoint...

MrEureka

Would your opinion change if we were talking about a third world slab? If so, which are the "good" TPGs that give the dealer a license to sell counterfeits?

BTW, let me emphasize that this is a hypothetical we are discussing. In practice, it is extraordinarily rare for the best TPGs to slab a fake. Especially PCGS. They're an incrediblly great grading service. (Was that OK, David?)

laurentyvan

Once the coin is graded by a TPG it becomes a commodity. I would think this is what the TPG would want under ideal circumstances.

The job of the graded coin owner is to submit the coin for re-grading in its original slab, regardless of any slight extra costs the owner might incur.

If you crack it out and then re-submit or submit, it's a raw coin and you take your chances as to that days unique interpretation of your coin. Once it's naked, aren't you back to ground zero? Obvious exceptions excepted...

covers

Another possibility taking it even further - what if purchased in a TPG slab as say MS60 and sent for cross-over to 2 groups who both won't re-slab at any grade (one says improperly cleaned). Returnable?????

koincollect

<< <i>Now if the collector makes an arrangement/guarantee with the dealer PRIOR to cracking out the coin, that's a different matter, but I don't think dealers can be held responsible for the expertise (or lack thereof) of the TPGs... at least not without the dealer having some recourse with the TPG. >>



I agree with the above, but here the collector is not looking at the authenticity but just a bump in the grade and as such would not contact the dealer. I have bought many coins from European auction houses which give grades eEF or so and which turn out to be MS64-5 at the TPG service. Now the auction house won't be interested in if you crack it out and it comes back 63 and you won't too.

The auction house is selling the coin and not the holder and should be responsible IMO, but as coinpictures pointed out it would have been helpful for them if the coin were in the slab. In this case the buyer should take part responsibility and the auction house should make him good for an agreed proportion.

coinpictures

<< <i>Would your opinion change if we were talking about a third world slab? If so, which are the "good" TPGs that give the dealer a license to sell counterfeits? >>



In theory it shouldn't matter. So much for theory. Making a determination as which TPGs are "good" and which are "bad" opens a Pandora's Box. Some here do not consider ANACS or ICG as "good" when in fact they are nowhere near the ACGs or NNCs of the world. In order to be fair, I would apply the same rules to all.

The problem here isn't the authenticity. It's the crackout.

In the original scenario, if the buyer truly felt the coin was undergraded, he should have gone through presidential review with the coin still in its original holder, NOT crack it out. Once the coin is cracked out, it destroys options for all concerned:

"Ok.... now how do we get the sh*t back into the horse?"

koincollect

<< <i>Would your opinion change if we were talking about a third world slab? If so, which are the "good" TPGs that give the dealer a license to sell counterfeits? >>



..assuming the TPG stands by the guarantee. Third world slabs who do not stand by their coins should be treated as raw.

laurentyvan

Let's boil it down to bare fumes:

You send in the coin(s) for grading in a (you name it slab). It stays in the slab and is returned to you if it won't at least cross (to the new TPG) in the same grade or upgrade. You've paid whatever cost(s) for slabbing. You don't get your money back.

Is this OK with you?

coinpictures

<< <i>Let's boil it down to bare fumes:

You send in the coin(s) for grading in a (you name it slab). It stays in the slab and is returned to you if it won't at least cross (to the new TPG) in the same grade or upgrade. You've paid whatever cost(s) for slabbing. You don't get your money back.

Is this OK with you? >>



Yes. If I don't know enough about the coin and its grading to be certain the coin will cross, then I shouldn't be playing that game to begin with. Not sure that's the same scenario as with the OP though...

Here's an idea just to see how well received this would be: Go up to [insert your favorite dealer here] and say "I'd like to buy this coin from you and send it in to NGC/PCGS. If it doesn't cross, will you give me my money back?"

I'm willing to bet that the number of dealers who would agree to this is very small... at least not without some sort of restocking fee. They're effectively loaning you the coin for free. No upside for them, only downside.

MrEureka

Here's an idea just to see how well received this would be: Go up to [insert your favorite dealer here] and say "I'd like to buy this coin from you and send it in to NGC/PCGS. If it doesn't cross, will you give me my money back?"

If I've priced the coin at "PCGS money", and if I think the coin will make the grade, I'll usually agree to those terms.

MrEureka

Once the coin is graded by a TPG it becomes a commodity.

BS. It's a coin in a holder, perhaps with some sort of guaranty. If someone wants to treat it as a commodity, that's fine, but that doesn't make it a commodity.

MrEureka

Another possibility taking it even further - what if purchased in a TPG slab as say MS60 and sent for cross-over to 2 groups who both won't re-slab at any grade (one says improperly cleaned). Returnable?????

It is illegal to sell a counterfeit coin as real. It is not illegal to sell a cleaned coin. If it were, most of us would be in jail.

MrEureka

It is illegal to sell a counterfeit coin as real.

Can you imagine the following conversation:

You: "Your Honor, the law against owning and selling counterfeit coins does not apply to slabbed coins."

Judge: "What is a slabbed coin?"

You: "It's a coin in a plastic holder that is guaranteed authentic by a company in (some city)."

Judge: "But the coin is still counterfeit."

You: "That's not my problem."

Judge: "Now it is. Guilty, as charged."

satootoko

From the purely legal standpoint (at least in California), I totally agree with those who felt that the crackout without the prior agreement of the seller and the TPG insulated both of them from liability.

If the hypothetical purchaser tried suing either the dealer or the original TPG after breaking it out, he would be unable to meet the burden of proof faced by every plaintiff - proving every element of his case.

Under the hypothetical facts he would be required to prove that the raw coin is the same one that was originally in the slab, and that the TPG's second opinion was the correct one.

Without a continuously running video of the slabbed coin being cracked, packaged for shipment, being examined by the TPG for the second time, being packaged for shipment back to the buyer, and being preserved, stored, and brought to the trial, there's no realistic way to meet the burden of showing it to be the same coin. A picture of the slabbed coin alone would not be likely to have enough detail to convince the judge or jury that it depicts the exact coin in dispute.

Then there is the opinion/fact problem. The buyer has an opinion of the TPG that the coin is counterfeit, not some scientific test proving its status. The TPG was paid (on two separate occasions) to express its opinion on the authenticity, as well as the grade, of the coin. "It is Saturday as I write this" is a statement of absolute fact. If it's relevant, and it can be proved both that this was written on Thursday, and that the person relying on that statement was reasonable in doing so, fraud has occurred. "I think that is the loveliest sunset I have ever seen" is a mere opinion, that cannot be reasonably relied upon, and there is no fraud.

How does the original seller prove either that the first opinion given was not the actual opinion held when the slabbing was done, or that the second opinion was not the actual opinion held when the bodybagging occurred? Without one of those proofs, the TPG was not acting improperly.

On the other hand, by making the resubmission, the buyer was acknowledging the expertise of the TPG as an authenticator and grader. The dealer was, therefore, totally reasonable in relying on the TPG's original opinion. Only if it could be proved that the coin was in fact both a counterfeit, and the one the dealer sold, might the dealer be held liable without fault on the basis that counterfeit coins are contraband, as to which title cannot legally pass from seller to buyer, and as to which the buyer is entitled to restitution of his "purchase" price, regardless of the seller's knowledge or ignorance.

In my opinion this is not one of those cases where conduct can be both lawful, and unethical. Neither the dealer nor the TPG have acted unethically in the absence of actual knowledge that the coin was counterfeit, at or before the time of sale.

(Whether the dealer is criminally liable for selling a counterfeit coin is a separate question, that depends on proof beyond a reasonable doubt that the TPG's second opinion was correct. Depending on the jurisdiction, actual knowledge of the contraband status at the time of sale might, or might not, be an element of the crime.)

MrEureka

Roy - Who said anything about fraud ? The question was: "assuming the dealer know's it's the same coin, does he have to refund the buyer's money?"

MacCrimmon

coinkat

This is really a great threat worthy of commentary... (even from the likes of me)

I think there are lessons to be learned from this discussion...

If you play the crack out game, you live and die by the results. Specifically, if you bought a coin thinking it would upgrade and it doesn't or if the second opinion is that the coin is fake, that is something that you chose to buy, a risk that you chose to undertake.
You have to live with the consequences of the approach you chose to take in cracking the coin out for re-submission.

If there are significant risks, submit the coin in the holder so if it comes back as a coin that will not cross or upgrade due to the opinion that it is a counterfeit, at least it is still in a holder whereby there is recourse. I can honestly say I have had to deal with the counterfeit issue with certain US coins and how some TPG dealt with it. Unfortunately, it would be inappropriate to get any more specific.

The morals of the story?

Think before you crack because cracking may not always be what it is cracked up to be.

The second moral of the story is Think long and hard about what TPG company will stand behind what they grade. All TPG companies are not created equal.

1jester

My favorite brand of Cool-Aid is PCGS of course!!



PS: CoinKing, please don't ban me for this feeble attempt at humor....

mrearlygold

Regulated

Just authenticity? What about these other possibilities:

Coin is bodybagged as cleaned

Coin is bodybagged as tooled or altered surfaces

Coin comes back at lower grade

Is the dealer obligated to refund the collector on all of these as well?

Too many possibilities for someone to get hosed. If a collector wishes to do this, I think they have to do so with the cooperation of the dealer in question in advance, or otherwise bear 100% of the risk for resubmission.

I think dealers should offer return privileges (within a reasonable period of time) for coins as long as they are still in the original holder, but once cracked out all bets are off.

I think that a competent coin dealer should guarantee the authenticity and correct attribution of the coins that he sells - these issues are black and white. I do not think that a dealer should have to underwrite the subjective opinion of a third party about grading and originality unless the dealer has made specific claims or warranties as to the nature of the item's originality and grade.

Ricke

I actually thought about this one for a while, and here's my opinion:

Were I in this situation, as the buyer, I can't see holding the seller responsible for a total loss due to my actions of cracking the coin out for a possible upgrade, unless that was an agreement made by the seller contigent to the purchase. Had I not cracked the coin, the seller had a possible guarantee to fall back on for situations of a counterfeit certified in error. By pressing for a refund, I have hurt his business, and I would feel resposible for his loss. Had I not cracked the coin, I would expect him to take the counterfeit back, as if the coin were not in a faulty plastic case - just as I would expect the seller to take back a raw, uncertified fake - because it's been returned under the same conditions as I received it.

It wouldn't even cross my mind to attempt to hold the TPG resposible for the loss, because even I can understand how cracking a coin prior to resubmission voids any possible guarantee by the grading company.

All laws that have been brought up by selling counterfeit coins are not really the issue, in my opinion. Laws and ethics rarely fall together as a single unit - so my response is based on what I think is right.

I would be mad as heck about it, especially if it caused a substantial loss, but since I was the person who cracked the case, I would take the hit, and call it a loss on my part.

I would also add that this is my opinion, because I feel somewhat numismatically competant - certainly, far less knowledgeable than a lot of you who post here, but competant enough to know that fakes are not extremely rare in this hobby. Because of that, I feel a personal responsibility that holds me accountable for my purchases and actions to some extent - not absolute, but if I were the purchaser in this situation, I think I would be able to undertand that there were certain things that I could have done differently to cover my tail.