Options
Another Court Case involving Grading
K6AZ
Posts: 9,295 ✭
Here is another one. While some of you cling to this idea that overgrading can not be dealt with in the legal system, here again is a group that has been convicted of mail fraud for systematically overgrading coins.
US Court of Appeals Ruling
US Court of Appeals Ruling
0
Comments
<< <i>That while subjectivity in the gradin process may justify some variation in the grading, this subjectivity factor cannot account for the huge differential in the grading and value of the coins >>
Oh the ramifications this could have --- and I'm not only talking about the Hagers or any other of the questionable TPGS!!!
This could be very chilling for the whole community.
Michael
--csw
Tiger trout, Deerfield River, c. 2001.
HRH explains exactly what grading is - world class graders agree 75% of the time. And when they don't agree, they are usually pretty darn close. Just because it's not 100% objective doesn't mean you get to legally throw the baby out with the bath water.
Contrast that situation with one in which the seller says that his car “has a rebuilt engine and a new muffler.” That’s a specific representation capable of empiric proof. If, in fact, the car does not have a rebuilt engine or a new muffler, the seller can be liable for the damages caused by his misrepresentation. That also is a fair result, provided that the buyer actually relied on what the seller said when deciding to buy. (The legal term for this is called "detrimental reliance".)
Now, there are certain fungible items in everday life that are bought and sold according to their condition or grade. Take beef, for example. Beef wholesalers sell their cuts to retailers according to a grading system set out by the USDA and known to all who are in the business. One type of beef has certain known characteristics and is priced accordingly. Another type of beef may be of a lesser quality, and therefore be of a lesser grade on the scale, and command a lesser price. Eggs are another example. grade A eggs have certain predetermined characteristics that distinguish them from other grades of eggs. If a seller of eggs says to a potentional buyer, “These twelve dozen eggs are all grade A,” and the eggs are a lesser grade, the seller is liable to the buyer. There is a whole body of law which addresses the sale and purchase of items that are valued according to a grading system, like beef and eggs.
And coins. Like beef and eggs, coins are commonly bought and sold according to their grade. Yes, clearly there is a subjective element to grading coins, but that is true with grading eggs or beef or any number of other items, and there is a definitive standard against which any particular coin can be measured to determine its grade. Indeed, the graysheet prices coins sight unseen by saying that, in a given case, a particular year and mint of mercury dime is worth so-and-so. It simply cannot be denied that the coin industry relies on coin grading to determine value, just as cattle and poultry producers rely on their own grading system.
Thus, a seller who says that a particular coin is in a particular grade has made a representation about that coin. The law calls what he said an “express warranty” that the coin is, in fact, the grade that the seller said it was. (UCC Article 2, § 2-313(1)(a) provides that “[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis for the bargain creates an express warranty that the goods shall conform to the affirmation of promise.”) If the buyer buys the coin and finds that, in fact, it’s a lesser grade, and as long as the buyer relied on the seller’s representation regarding the grade in deciding to buy the coin, then the buyer has a legitimate claim for damages. (If the buyer did not rely on the seller’s misrepresentation, then the buyer has no claim, and rightly so.)
The UCC provides a variety of remedies for a frustrated buyer (and also for sellers when the buyers refuse to buy). The underlying principle is that when a contract is breached, the non-breaching party is entitled to the “benefit of the bargain” he struck. In the case of a seller being the breaching party, the buyer can demand the money back (plus any “reasonably foreseeable” consequential damages), the buyer can “cover” (that is, go out into the market, buy the product, and then charge the purchase price to the original seller), or, perhaps most commonly, recover the difference between the item as warranted and as actually received (Article 2, § 2-714(2) of the UCC says, “[t]he measure of damages for breach of warranty is the difference . . . between the value of the goods accepted and the value they would have had if they had been as warranted . . . .”)
Thus, if a seller tells a buyer that a coin is, say, MS 65, and in fact the coin grades at MS 62, and the difference between MS 65 and MS 62 is $100, the buyer would be entitled to the lower-valued MS 62 and--note that I said "and"!--the additional $100 in order to permit the buyer to receive everything he bargained for. (Or the buyer could buy a “real” MS 65 and send the bill to the original seller, or the buyer could just demand his money back. Buyer chooses the remedy he desires.)
As sellers, you might say that grading standards are too subjective and that PCGS or some other reputable grading service might grade a coin MS 65 one day and the same coin MS 64 or MS 66 the next. this is a fair argument, but against a properly-prepared plaintiff it won't carry the day. Yes, there is an element of subjectivity in grading, and yes, PCGS's and others' results might vary, even for the same coin, but how are you going to prove it? PCGS won’t submit an affidavit on your behalf that they sometimes grade the same coin differently. The best you’ll be able to do is to take the stand in your own defense (or hire another coin dealer to act as an expert) and try to explain why a definitive coin grading system can’t really be adhered to or followed accurately, all this after the court has heard from the disappointed buyer who has presented compelling evidence of his own about how the entire coin industry relies on the grading system. I contend that that's not a situation most sellers would like to be in.
When (if) you represent that a particular coin is a particular numerical grade, you have made an express warranty that the coin is, in fact, the grade you represented it to be, and if it isn’t, you can be held liable for damages. Beware, especially if you live within New York, Connecticut, or Vermont (the three states comprising the United States Court of Appeals for the Second Circuit).
(Note well, too, that may be just the beginning. If the plaintiff proves that it was more likely than not that you had a “bad” motive in making your representation, you can be found liable for multiple damages *and* costs and the plaintiffs’ attorneys fees! Not to mention criminal liability!)
But don’t despair. As sellers there are things you can do to limit your exposure. You can disclaim warranties in your sales receipt, for example (although this is a bit tricky to do legally–the UCC has several sections on exactly how it must be done to be valid), or you can assert that the grade is merely your opinion of the coin’s grade and that the seller should not rely on anything you say about the grade. You also could say that a coin was “probably” or “likely” a particular grade. Or you could just say that it’s “premium” or “gem” or “high quality” or use other “puffing” language. Just be careful, that’s all.
Again, take it or leave it, but ignore it at your peril.
Best regards to all,
–csw
Tiger trout, Deerfield River, c. 2001.
One less of these companies is good news to me
The above post should be required reading by everyone on this Board --- dealers, collectors, graders, scammers alike.
Well done and thank-you csw,
Michael
Don't think I've ever seen a court document that doesn't have at least the case # on it-
This makes no reference to what case# or court location and address on it- which most do...
Is this common with appeals courts?
Having worked with building the type of document management systems used in the AOC (Admin. Ofc of the Courts)
I'm surprised to see one not in standard form...
(I should note that it's obviously a real case- shows up in several other places including the FTC website as mentioned in the previous thread)
I ALSO should note that I _DID_ just see the docket #
Never tolerate spin-doctoring and lies told to the people in the name of 'security' from the elected officials.
I _also_ just spotted the docket # in a MUCH more obvious place than on the left hand side indented by ) marks....
sigh---- I think I shouldn't post this late at night- obviously I don't really read things..
I was just curious- and obviously being led by my own -blindness- - the numbers were right there ;-)
Just a different format than I'm used to-
I'm glad people are getting caught for this sort of thing- wish it'd happen more often on the home shopping networks!
those people are giving coin collecting a bad name...
That and all the people putting out things like what the RR commemorative was about in the earlier thread...
that _really_ should be stopped - but as someone said, he's a public figure, and it'd cost more than it's worth to try to stop that sort of nonsense...
Never tolerate spin-doctoring and lies told to the people in the name of 'security' from the elected officials.
Thanks for the kind words, FrattLaw.
-csw
Tiger trout, Deerfield River, c. 2001.
Never tolerate spin-doctoring and lies told to the people in the name of 'security' from the elected officials.
<< <i>Incidentally, I'm KA4LFP >>
It's amazing how many hams are also coin collectors. I see you are not too far from me.
Now I see why the big advertisers in Coinworld use "premium" in their descriptions.
I'm going to print it out and send it with every coin I sell so buyers can see I care about fairness to both parties. WELL WELL done sir, (or madam)
Further, I could also respond to CSW's post with additional points, (some 'pro' some 'con'), but if open debate about the matter, (as concerns my own opinions anyway, ) is not desired by any posters to this thread, I'll respect the desires of those involved and not add anything more at this point.
There is MUCH more to this than may 'meet the eye', and few can understand the deeper points of Liberty as restricted and defined via precedent, true also that even fewer can deny the mob and truly speak of their own convictions, but if there is any interest, I would be happy to join the fray.
NumiMagician
<< <i>
<< <i>Incidentally, I'm KA4LFP >>
It's amazing how many hams are also coin collectors. I see you are not too far from me. >>
Maybe we got it from collecting QSLs?
(DXCC Honor Roll #1, 5BWAS, 5BDXCC, 5BWAZ, USA-CA All Counties, etc.)
Free Trial
<< <i>Further, I could also respond to CSW's post with additional points, (some 'pro' some 'con'), but if open debate about the matter, (as concerns my own opinions anyway, ) is not desired by any posters to this thread, I'll respect the desires of those involved and not add anything more at this point. >>
If you have something worthwhile to add to CSW's post then by all means do so!
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
Do you think a Seller would be responsible for the grades assigned by third party graders such as PCGS, NGC or Anacs?
For example, if a person sells a coin and advertises it as; “PCGS has graded this coin ms63" would this make the Seller potentially liable for the grade assigned by PCGS if the coin turns out to be an au58? Thanks csw.
ps. Frattlaw what do you think? Any ideas? Suggestions?
You would be liable if you had a conflict of interest such as being a grader of the TPG company or an owner of the TPG (which assumes possible influence over the grade assigned to the coins) and other scenarios.
Joe.
I agree, This post should be required reading by every buyer and seller.
K6AZ: Thanks for bringing this back up to the forefront for everyone to read and digest.
<< <i>Do you think a Seller would be responsible for the grades assigned by third party graders such as PCGS, NGC or Anacs? >>
NO you have recourse thru the TPG if the coin was/is misgraded. However if you doctor your images to to hide marks, grease streaks and the like then you are misrepresenting the coin and should be obligted to accept a return and refund the buyer's money in full. Same if you offer poor quality pics which do not accurately portray the item.
When you buy a car you sign a form releasing the dealer from liability for defects because they did not make the car.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
<< <i>For example, if a person sells a coin and advertises it as; “PCGS has graded this coin ms63" would this make the Seller potentially liable for the grade assigned by PCGS if the coin turns out to be an au58? >>
The distinction between an MS63 and AU58 is much different than the distinction beteen MS62 and MS65 or 66, etc, as the "grade" of a BU coin is opinion, (and a few years of us all using 11 grades of MS will not, in and of itself, ever constitute legally quantifiable MS standards... nor has any court ever held this to be so.)
When one claims a coin to be "uncirculated", (regardless of the number that follows,) they are stating as fact, that the coin has not been circulated, and therefore has no "wear".
This is either true, or not, there is no "gray area".
When one claims a coin to be a certain grade of uncirculated condition, they are giving their opinion of a net calculation which includes wholly unquantifiable factors such as "eye appeal", (or 'beauty'.)
Since whether or not a coin is 'attractive' is 100% opinion, and none can impose upon any others, their own criteria for establishing that which is 'attractive', (regardless of how many may agree with any given individual's opinion, or not,) it is impossible to legally establish so strict a standard as would be imposed by eleven levels of uncirculated condition.
Every case prosecuted thus far, including, naturally, those mentioned on the various boards by the concerned parties engaged in discussion, has involved a conspiracy to defraud. That is to say that the main purpose of the charged individual's "certifying" the coin's "grade" was to deceive another(s) into accepting a false valuation, reinforced by the grade given.
One of the most recent cases, involves the purchase and breaking out, of usually MS62 PCGS graded gold coins, for the sole and express purpose of then re-encapsulating the same coins into new holders, as MS65.
But simply grading the coins by one's own standard, and especially when/if that standard existed for two decades, (well prior to the establishment of the very grading services to which said grading service is then being compared in order to so impugn their grading acvtivities,) can never alone be seen as conspiracy to defraud!
There is one case from 1984, mentioned on a prominent website involved in current debate over this issue(s), that involved damages awarded in the amount of $80,000... Yet in that case too, there was the concurrent misrepresentation of the coin's dollar value based upon the grade on the holders.
We see such activity on "ebay" quite regularly in fact, where an "off" grading service-encapsulated coin will be offered with a link to this site's price guide, (or quotation therefrom,) directly implying, and often stating, that the coin's grade and value, are in all respects, identical to PCGS values for the same grade assigned to the same date/type of coin.
Proceeding in action against a grading service itself, based only on the fact that they use differing standards, would raise so many legal hurdles as to make success impossible, absent evidence of intent to defraud. And rightly so, for if ever it were established that the "grading" of BU coins, (itself a very new facet of a VERY old hobby,) was truly quantifiable numerically, none may then say with surety that even ONE grade's difference would be lawfully acceptable.
And in a case involving a company in business prior to the newer services, one would not ever succeed in establishing, (in essence ex post facto,) that the standards of the "newer" services could somehow be construed as regulation, and thereby force the older grading service into accepting and utilizing what are in truth, NEW standards, set by the newer companies.
I will not at this point go into the UCC, except to explain that the portion of the United States Code known as the "Uniform Commercial Code" is enforced by the Federal Trade Commission, and that agency has not the power to attempt to enforce ANY of the UCC against non-commercial entities, (such as ebay "hobby sellers".)
Therefore, if some ebay 'small-timer' sells you a "badly" graded coin, you may, depending on the details of the transaction, be quite capable of bringing suit against them to recover your damages, but you will NOT succeed in getting the FTC involved.
None who sell on ebay, as 'non-commercial' sellers, need worry about such draconian enforcement as some may fear, (though simply claiming title to such designation is not enough, so that no actual business may hide behind such 'protection' as would be afforded the "hobby seller".)
For the sake of such brevity as may be yet possible, I will end here for now.
This is either true, or not, there is no "gray area".
Unfortunately it is not quite that cut and dried. There is a gray area even when it comes to MS coins such as is it wear?, acceptable rub?, weak strike? etc.
Joe.
NumisMagician, very good post. Thanks.
PS - are you an attorney?
Our eBay auctions - TRUE auctions: start at $0.01, no reserve, 30 day unconditional return privilege & free shipping!
It would be interesting if somebody could access the court file and see what kind of evidence was presented. Govt. regulation is always a mized blessing at best and, if this is how it starts, it could indeed change numismatics and certainly grading as we know it.
You can call grading an art and not a science as long as you like, but, when folks go to prison for misrepresenting grades on coins sent through the mail, that's a whole different ball game.
As in so many other areas, if numismatics does not take the necessary steps to regulate itself (FORM A GRADING STANDARDS COMMITTEE WHICH LICENSES AND TESTS GRADERS AND PROMULGATES UNIFORM INDUSTRY STANDARDS, OR DO IT THROUGH A TRADE ASSOCIATION) the government will step in and do it for us. 'Trust me, I'm from the Government,' were never words that gave anyone a particularly good night's rest.
<< <i>Several errors exist in an attempt to compare the merits of the case linked-to by K6az, to the current 'ACG lawsuit'. >>
Well well well, look at what the cat drug in.
Nice of you to insert the ACG business into this thread, even though there was no mention of it until you showed up.
For everyone else, check out this thread on the eBay coin board to see where this guy is coming from:
eBay thread
"This decision addresses the interesting issue of whether the existence of objective [*342] and subjective grading factors immunizes a seller of coins from a criminal charge of fraudulently misrepresenting the grade and value of coins to prospective purchasers."
"Defendant corporate entities Numisgroup International Corp., Numismatic Asset Strategies, Inc., Galerie Des Numismatique, Ltd., Meridian Numismatics Inc., and the President and Chairman of each entity, Robert DuPurton (collectively, "the Numisgroup Defendants"), [**2] were convicted after a ten week jury trial of conspiracy to engage in mail fraud, various substantive counts of mail fraud, and conspiracy to engage in wire fraud." [ a ten-week jury trial would bankrupt many small businesses for the legal fees alone, win , lose or draw.]
" Numismatic Asset Strategies, Inc., Galerie Des Numismatique, Ltd., and Meridien Numismatics, Inc. are New York Corporations engaged in selling rare coins, an exceptionally specialized product unfamiliar to the general purchasing public. As part of this enterprise, the defendant corporations employ salespeople who answer telephone calls from potential customers responding to newspaper advertisements placed by the Numisgroup Defendants in such national publications as the Wall Street Journal and USA Today."
"Numismatics is the study of coins or other forms of currency. The fair market value of a coin is established by its "grade" and authenticity. A grade is a numismatic measure of a coin's overall quality, comparative wear, originality and state of preservation on a 70 point scale. Coin grading is a necessary corollary of coin collecting. A coin is placed under an overhead incandescent lamp, sometimes viewed through a magnifying eyepiece, and is typically [**4] graded by a numismatic expert. The highest grade a coin can receive is an uncirculated "mint state" ("MS") 70. A coin earning an exceedingly rare uncirculated MS-70 grade will have no surface defects, its original full mint luster, a full strike, with exceptional eye appeal. It is significant, that slight variations in the grade of a coin can cause substantial variations in value. For example, a coin graded MS-66 can command up to ten times the price of a coin graded MS-64. A "certified" coin is a coin that has been graded by a numismatic grading service. Once the coin has been graded, a certificate reflecting that grade is produced and the coin is encapsulated in a hard plastic folder that is sonically welded together. A "raw" coin is a coin that has not received a grade certified [*343] by a numismatic grading service and is not encapsulated."
"In their major argument fortified by oral argument, the Numisgroup Defendants assert that there was insufficient evidence to sustain the guilty verdicts returned by the jury because, as the Government's experts conceded, the grading of coins is largely subjective. The defense contends that there are two levels of subjectivity at work in such grading. First, the defense argues that there is subjectivity within a particular grading standard. In other words, two numismatic experts employed by the same grading service and working within the [**14] same established grading system often disagree among themselves over a coin's grade. Second, in addition to the existence of subjectivity within an individual grading service's particular standards, the defense contends [*346] that there is also subjectivity within the entire coin industry because the industry has not adopted a monolithic coin grading standard."
"The Government presented testimony from two experts for purposes of establishing that coins were graded based on largely objective criteria [**15] and that, at the time a coin is sold, it's market value could be readily determined. The Government also presented evidence that the Numisgroup Defendants intentionally and systematically overgraded the coins that they sold.
"The first Government expert, Richard Montgomery, has been involved with coins on a full-time basis for 21 years. His experience includes employment in the certification service department of the American Numismatic Association where he was an authentication trainee and received specialized training in counterfeit detection. Montgomery has personally graded in excess of 5 million coins. At the time of the trial, Montgomery was the president of the Professional Coin Grading Service ("PCGS"). PCGS is a numismatic grading service that does not put a monetary value on the coins it grades. Starting in 1986, PCGS created a product intended to facilitate the sight-unseen purchase and sale of coins. It developed a grading service employing professional graders and it permanently sealed the coins in plastic. Also, it maintained a network of dealers willing to agree with the grading standards of PCGS and to purchase coins, sight unseen, at a regularly quoted bid and ask [**16] price which each dealer established without reference to any other dealer. Montgomery testified that his main function at PCGS is to perform a "final quality check" or verify the grade assigned to a coin. Montgomery graded the coins at issue in the chart known as Government's Exhibit 1300.
"The Government's second expert witness, Anthony Swiatek, graded and appraised the value of each coin. Swiatek has owned a coin buying and selling business since 1979. At the time of the trial, Swiatek had just completed two consecutive terms as president of the American Numismatic Association. He had also authored three published books covering coin history, coin grading, and coin investment potential. In addition, Swiatek has published articles in several weekly coin publications. Like Montgomery, Swiatek attended the American Numismatic Association's counterfeit coin detection program and several coin grading classes."
"Montgomery and Swiatek conceded that the coin industry lacked a unified and homogeneous grading standard. However, each provided a careful explanation of the intricacies supporting their respective methods of grading. Montgomery described the grading structure of coins within the [**17] industry and indicated that a coin is graded based on the following four primary components: (i) luster: meaning the original brilliance of the coin; (ii) contact marks: meaning the degree of contact marks a coin has incurred when "dinged," [*347] nicked, or scratched, for example, by another coin; (iii) strike: based on how well the blank coin face came together with the dye used during minting, and how detailed and defined is the design on both sides of the coin; and (iv) eye appeal: meaning the coin's overall attractiveness particularly in regard to toning and coloration.
"After a coin is examined, it is categorized within a grade range and assigned a numeric grade. The grade range, in descending order of condition, is as follows: uncirculated, about uncirculated, extremely fine, very fine, fine, very good, good, about good, fair and poor. An uncirculated coin is a new coin, typically received directly from the Federal Reserve, which has never been spent or distributed to the public, while a circulated coin is in use or has been spent. In addition, a coin can also be defined as being struck as a "proof" coin intended for collectors.
"The numerical grade corresponds with the descriptive [**18] grade range. For example, a coin graded with the highest grade range of uncirculated is considered to be in "mint-state" ("MS") and will receive a corresponding numerical grade between 60 and 70, while a coin within the almost uncirculated ("AU") category will receive a numerical grade between 50 and 58. PCGS has a policy that it will not grade counterfeit coins, cleaned coins or coins with altered surfaces." [sounds like this judge either did his homework or is a collector.]
"The Government also demonstrated that there are several weekly periodicals that report price developments affecting various coin types. Coin World Trends includes a general commentary on the status of the coin market, as well as several pages of prices. As to newsletters, one appears to be the standard in the field. The Coin Dealer Newsletter, frequently referred to as the "Grey Sheet," is widely subscribed to by sophisticated investors and dealers. The publication offers pricing examples of various privately certified coins by type and by some individual dates and mintmarks. The Grey Sheet attempts to post benchmark prices that are representative of the market and, in addition, attempts to list the highest recorded price for each grade quoted.
"The Coin Dealer Newsletter contains [**19] a section entitled the "Certfied Coin Market Indicator" stating which grading services receive the highest percentage of the price set forth in the Coin Dealer Newsletter on the open market. Each edition of the Newsletter received in evidence ranked PCGS first among all coin grading services in that a coin graded and encapsulated by PCGS would bring on average, approximately 89-92% of the price stated in the Newsletter.
"Absent a handful of coins certified by the Accugrade grading service, the Numisgroup Defendants exclusively supplied their own grades on the coins they sold."
"In this case, the evidence adduced by the Government established that coin grading involves various factors, including some that are subjective, that are beyond the knowledge and experience of the unsophisticated purchaser. The grade of a coin is the predominant factor in a consumer's decision to purchase a coin; it is what the customer is bargaining for. One of the many sales tactics employed by the Numisgroup Defendants, the oral misrepresentation of the coin's grade, lead customers to believe that they were receiving a coin of a certain overall quality which the evidence reflects they did not receive. Dr. Charles [**28] Richardson testified that he told Dupurton that he knew nothing about coins and his purpose in purchasing coins was for investment. Dr. Richardson also testified that Dupurton told him that the grades were supplied at his company.
Q: Now, during the time that you were purchasing these coins from Numisgroup and Mr. Dupurton, did you, in any way, educate yourself about what this MS-66 or 65 meant?
A: Most of my education I received from Mr. Dupurton. . . .
Q: During the time you were purchasing coins from Mr. Dupurton and Numisgroup, did you ever ask him who supplied the grades on the coins?
A: Yes. He said they supplied it there at his company."
"Montgomery graded 702 coins that were admitted in evidence. Of the 702 coins he examined, Montgomery arrived at the same grade as the Numisgroup Defendants 67 times. Montgomery graded 397 coins lower than did the Numisgroup Defendants and deemed another 200 coins ungradable because they were either cleaned, altered, or damaged. So that a total of 597 of the 702 coins were either graded lower or could not be graded because of detrimental conditions. The remaining 38 coins were of the type that PCGS did not grade. Montgomery [**29] did not grade any of the 702 coins above the grade assigned by the Numisgroup Defendants.
"Furthermore, a survey of the grades determined by Montgomery with respect to the 397 coins that he graded lower demonstrates that Montgomery graded: 39 coins at 1 point lower than did the Numisgroup Defendants; 67 coins at 2 points lower; 45 coins at 3 points lower; 17 coins at 4 points lower; 17 coins at 5 points lower; 46 coins at 6 points lower; 59 coins at 7 points lower; 50 coins at 8 points lower; 20 coins at 9 points lower; and 37 coins were graded by Montgomery at 10 or more points lower than the grade assigned by the Numisgroup Defendants. This numerical breakdown leaves the Court wondering why, if coin grading standards are as inconsistent and inherently [*351] subjective as the Numisgroup Defendants contend, not one of the 397 grades assigned by Dupurton was higher than the corresponding grade determined by Montgomery.
"In addition, the Court finds that the evidence clearly reflects that the customers also believed that the value of the coin was commensurate with the explicitly represented grades." "Dr. Richardson purchased a total of 99 coins for $ 219,833 with an appraised value of $ 86,361; George Barre purchased 28 coins for $ 168,470 which were appraised by Swiatek at $ 16,415; Lanny Wells bought 154 coins at a cost of $ 293,570 with an appraisal value of $ 37,284; and Jane Falkenstein purchased 27 coins for $ 110,125 which received an appraisal value of $ 20,460."
"Furthermore, the massive disparity between the grade the coin customers anticipated receiving and what they actually received for their money expended clearly evinces the harm contemplated by the Numisgroup Defendants in their scheme to defraud."
"This Court is satisfied that the Government has sufficiently shown, beyond a reasonable doubt, that while subjectivity in the grading process may justify some variation in grading, this subjectivity factor cannot account for the huge differential in the grade and value of the coins. In the Court's view, a reasonable jury could have found the essential elements of mail fraud based on the intentional systematic overgrading, beyond a reasonable doubt."
"The Numisgroup Defendants argue that the inclusion of the "terms of sale and disclosure statement," taken together with [*352] the 30 day return policy, which were printed on the back of the sales invoices and specifically advised purchasers about variances in grading standards and values, undermines the proof of intent to deceive. The Numisgroup Defendants cite no authority in support of their argument." "The Court finds that the existence of this disclaimer clause in very small print on the reverse side of the invoice cannot preclude a criminal conviction, as a matter of law. As discussed above, Dupurton graded all the raw coins sold by the four Numisgroup entities. [**34] The Numisgroup Defendants misrepresented the grades of the coins during telephone sales calls with prospective purchasers and in the invoices to induce them to buy the coins. The defendants cannot, in this manner, disclaim the very thing their customers bargained for." [In other words, you can't avoid the crime by including the usual disclaimer that 'grading is an art, not a science, etc.']
"Martineau also obtained an 1893-O Morgan Silver Dollar graded MS-65 ("deep mirror proof like") which he received in a trade with Numismatic Asset Strategies, Inc. for 64 Double Eagle $ 20 Liberty coins of assorted certified grades. The 64 coins had been purchased by Martineau from the First National Reserve in Beaumont, Texas for the approximate sum of $ 269,000. Martineau testified that he told a Numisgroup salesperson named Brian Mills that he wished to sell the 64 coins and Mills stated that while he could not sell the coins for him, he suggested a trade. Martineau testified that Mills told him "the 1893-O Silver Dollar was extremely desirable, very valuable, and that he could arrange a trade for my gold pieces for this particular coin, and that it was to my financial advantage to do so, because this coin, the 1893-O Silver Dollar, was worth more than my whole collection [**41] of $ 20 gold pieces." Mills told Martineau that the 1893-O Silver Dollar was worth $ 454,000.
"Unlike the 64 Double Eagle $ 20 Liberty coins which were certified and encapsulated in plastic containers, the 1893-O Silver Dollar was not certified and was bound in lucite. Nervous that the 1893-O Silver Dollar was not certified stating the grade of MS-65 ("deep mirror proof like") as he was told on the phone, Martineau attempted to return the coin ten days after receiving it. However, Numismatic Asset Strategies, Inc. would not accept the return of the coin because Martineau's account carried an outstanding balance. Significantly, the 1893-O Silver Dollar was subsequently graded by Montgomery as AU-58 and appraised at $ 650 by Swiatek."
"The Court concludes that a reasonable jury could find the guilt of all the defendants as to all the convicted counts, beyond a reasonable doubt. After considering the Numisgroup Defendants' submissions and hearing oral argument, and for the reasons outlined above, it is hereby ORDERED, that this motion for a judgment of acquittal pursuant to Fed.R.Crim.P. 29(c) by the Numisgroup Defendants is DENIED in all respects." [Score "1" for the US," 0" for the dealers.]
<< <i>Well well well, look at what the cat drug in. >>
<< <i>Nice of you to insert the ACG business into this thread, even though there was no mention of it until you showed up. >>
<< <i>For everyone else, check out this thread on the eBay coin board to see where this guy is coming from: >>
Eric,
Are you trying to tell the readers of this thread that your intention in bringing this topic up was to not refer to the ACG law suit ???
I find that a little hard to believe given the recent and current circumstances, and that you just "pop" into the forum message boards with random info.
I think Numismagician makes a very strong and confident argument. He obviously is well educated and mannered. In my opinion your attacks against his well reasoned statements only serve to make you look more foolish.
I read thru your exchange with him on the eBay forum and in my opinion he completely shut you down. You came across like some kind of bully who must have his way or nothing.
This guy is a hypocrite. He claims that you can not say anything about other's "opinions" on grading, but he does it regularly on the eBay board, just look at his "ME" page.
And no, this thread had nothing to do with ACG. It has to do with people being criminally found liable for misrepresenting coins, and this is a much bigger issue than just ACG.
<< <i> He didn't shut anyone down. There are specific issues I can not discuss publically, or I would have torn him to pieces. >>
<< <i> I'm not missing anything. I purposely left out the ACG business because of the ramifications of this decision. However, there are some who are just bound and determined to attack and bait me on the ACG business, and where this happens, it will be dealt with. >>
I understand completely and i know there probably is more to this controversy than can be publicly stated. All i'm saying is that he made some very strong arguments, and probably because of limitations put on you by the pending court case, your arguments were not very good and you came across as a "bully".
I would suggest that since you are limited to what you can and cannot say, because of the pending court case, that maybe nothing said is better than debating an argument that can't be won because of limitations on information. If your case is as strong as you suggest, then i would assume that in the end you will be victorious, and then be able to disclose all of the legal info to back up your assertions.
IMO
<< <i>Do you think a Seller would be responsible for the grades assigned by third party graders such as PCGS, NGC or Anacs? >>
There are two questions here -- are you asking from a criminal standpoint or a civil?
As for criminal liability -- I would think that you would not be held responsible if you were selling a top 3 TPG slab(s). I could certainly make the argument that if you utilized a different service for grading and were aware that they consistently overgraded their coins you might be liable. The same analysis that the court applied in the above mentioned case could be used with any TPG. If you sold 1000+ slabbed coins from a certain TPG with values based upon those grades and when examined those coins were overgraded by 1-10 points, I think you might have some problems. Maybe not criminally though. It would also depend on the seller's experience and level of knowledge. Intent is hard to prove. The more experience you are the less likely the ignorance defense would work.
As for a civil claim, I think that's pretty obvious. If you sell overgraded junk you might just get sued for it. The deal would have to be large enough to warrant hiring attorneys and expert witnesses like R. Montgomery, but I think this is a distinct possiblity.
As for the problems with the subjectiness grading that NumisMagician raises, I just don't see it the same way. Read the full case posted by Lawman. The court handled this correctly, in my view. You have 700+ coins graded and not a single one grades higher than the expert opinion you present and the vast majority grade 2+ lower. That's an easy one for a jury or a judge to understand. There's a pattern there to defraud. Now if there was 10 coins as a sample, you might have some problems proving up your claim.
This is why I have been pushing a class action claim for these types of problems. Large numbers of plaintiffs, large number of coins to be analyzed, with the costs ultimately to be paid by the defrauding party, if you are successful.
One successful class action could honestly take a dealer or TPG right out of busniess.
Michael
<< <i>For everyone else, check out this thread on the eBay coin board to see where this guy is coming from:
eBay thread >>
That's some fascinating reading. A couple things NumisMagician said jumped right out at me:
<< <i>In truth, ACG, (and if they could silence ACG, you can bet they'd go after NTC, PCI, et al,) is a real threat to PCGS and NGC. >>
<< <i>No one is harmed by ACG >>
Russ, NCNE
"Guess the Grade of these Coins"
Now those are three coins from my auctions, these three:
Auction A
Auction B
Auction C
He picked these out of my first page of feedback. Of course, he conveniently didn't mention some of the really nice PCGS coins I have sold in the last few weeks. He also was very convenient in playing with my images, and in the case of the first 84-O, using the scan I used to show the coin in the holder rather than the digital picture.
Never tolerate spin-doctoring and lies told to the people in the name of 'security' from the elected officials.
With the kind of money being spend in the current boom on numismatic treasures, it is only a matter of time before some of the civil plaintiff's lawyers get hold of the grading issue and squeeze it for all it's worth. I see the real prospect also of attacks coming from the federal administrative agencies like the FTC, the SEC, and the Justice Dept. (who, I have heard through the grapevine of old lawyer friends working for DOJ on the East Coast, has a special task force looking carefully at massive coin dealing through the mails and over the internet).
Lots of fun coming for us lawyers; less so for dealers and graders. Stay tuned and STAY INFORMED.
I don't believe this will happen in my or anyone else's lifetime.
Joe.
<< <i>I don't believe this will happen in my or anyone else's lifetime. >>
Why do you say this? It's just a matter of time until the plaintiff's bar finds it's way over to our little corner of the world. As Lawman suggests where's there's money there's attorneys. Sort like the blood in the water and shark analogy.
If money is pouring into numismatics, and people are being ripped off, the attorneys won't be far behind. It might not be widescale litigation, but it will happen.
I can easily see at least 12 class action lawsuits involving this industry already. Several that could wipe out major players in it.
Lawman --- What about 17200, that would be much easier to certify under. You really don't even need a class. I know the Court of Appeals has narrowed some of it, but it's still a very viable law with teeth.
Michael
To clarify I was referring to: if they want to create a market for all people and not just the dealer and the graders....then by God let justice take its place...so that all can particapate in an equal and just coin market for which the whole purpose of grading coins was suppose to create. NOT that there wouldn't be lawsuits.
Joe.
Michael