This article was originally printed in the latest issue of Numismatic News.
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Responding to a lawsuit initiated by Collectors Universe, parent company of the Professional Coin Grading Service, claiming “coin doctoring,” dealer Greg Krill and Tangible Investments LLC of Laguna Beach, Calif., have brought claims of their own in Orange County Superior Court seeking damages for multiple claims spelled out in a nine-page complaint that seeks a jury trial.
Filed Sept. 22, the complaint has five separate causes of action, mostly predicated on the alleged failure of the Professional Coin Grading Service to return coins that Krill and Tangible had each submitted for grading. The combined worth of the coins, according to the complaint, exceeded $55,000.
Coins involved in the claim, which Collectors Universe “refused to relinquish possession” of are an 1881 quarter eagle gold coin and an 1885 $5 gold piece (no grades mentioned). Krill submitted three $1 gold pieces (1851, 1854 and 1905 Lewis and Clark commemorative) along with an 1861 and 1909 gold $5 coin – also with no mention of grade.
Tangible’s website says it was “founded as Tangible Investments of America in 1984 by Silvano DiGenova, who has long been recognized as a leading market maker in the rare coin industry.” It goes on to say that the name was changed to Tangible Investments after a merger with Superior Galleries.
Back in May, PCGS took a multi-prong litigation approach, making a number of claims that might appear inconsistent to a layman, but which is allowed under a theory of alternative pleading in federal court. For example, it claimed a federal “Lanham Act” violation, as well as one under the California Unfair Competition statute.
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What got their goat? Their papers substantially claim that experienced numismatists tried to pull the wool over their eyes and submitted coins that had had “work” done on them to improve their visual appearance.
PCGS also claimed breach of contract – submitters must contractually pledge not to knowingly submit doctored coins (no use of putty, lasers and the like to enhance a coin’s appearance and its putative value), and common law fraud, which requires no written agreement at all.
Also slipped into the PCGS complaint: a “RICO” claim, typically put forth by the government on organized crime claims, but here used under a corruption theory under the Racketeer Influenced Corrupt Organization Act. To sustain that claim, proof must be offered that the defendants essentially ran this as a criminal enterprise.
At the heart of the PCGS claim against several defendants, one of whom is DiGenova, the grading firm complains that the identified Defendant “coin doctors” have submitted “doctored” United States coins to PCGS for grading on multiple occasions for a period of years, either directly through dealers ... or indirectly through other dealers.”
They give examples of that including a claim that “ Defendants knew that these coins had been “doctored,” by themselves and/or by other persons engaged by them for that purpose. Their methods included lasering the surfaces of extremely rare proof gold coins to remove surface imperfections, building up commonly -worn or weakly struck portions of coins with exotic metals, and other physical and chemical processes.”
They go on to claim that “Defendants represented to PCGS that these coins had natural surfaces, intending to deceive PCGS’s graders so that the “doctored” coins would be certified by PCGS and then sold in the rare coin marketplace, where they would be covered by PCGS’s cash guarantee.”
Given that Tangible’s coins otherwise unidentified, were an 1881 quarter eagle and 1885 $5 gold piece, which the complaint says had an “approximate value of $35,000,” it seems fair to look at NumisMedia’s price guide of Oct. 6, 2010, which lists the 1881 $2.50 in Proof-65 at $18,000 and the 1885 $5 in Proof- 64 at $13,850, it seems a fair bet that these coins were either nice proofs, or appeared to be.
There are a number of technical claims (“trespass to chattels”), designed to reclaim property; there is another claim for conversion or theft of property, and a demand for property damage that, when added up, is low six figures. Claims are also made for punitive damages against the grading service.
An intriguing question, at least for legal scholars, hangs on whether the “trespass” charge is appropriate in the 21st century, because a chattle is supposed to be an object or a thing, not money (which a coin certainly is).
An old federal case, U.S. v. American Gold Coin (reported in 1 Woolw. 217, 24 F.Cas. 780, from the Circuit Court of Missouri in October term, 1868, saw the problem immediately, but through a step-aside, characterized it as an item that could be the subject an action seeking damages.
“Whatever was its legal character as money, it had, in point of fact, ceased to be used as a medium of exchange, and had become an article of merchandise, bought and sold in open market as such, at varying and fluctuating relations to the actual current money of the country,” that old 1868 case said.
In another case, In re: Midas Coin Co. (Citation: 264 F.Supp. 193, D.C.Mo. 1967) a court-appointed referee found that “coins which circulate freely as a medium of exchange and could have been used as money, they are necessarily and for all purposes ‘money’ as defined by the Code. And since ‘money’ is excluded from the Article 9 definition of ‘goods”, or chattel, there was an inconsistency.
And the famed Legal Tender cases (1870) find the U.S. Supreme Court opining that “All writers upon political economy agree that money is the universal standard of value, and the measure of exchange, foreign and domestic, and that the power to coin and regulate the value of money is an essential attribute of national sovereignty. Goods and chattels were directly bartered, one for another ...”
Meanwhile, the parties duke it out with each other waiting for a response, which in this aspect of the case should come by the end of October or early November. The Court calendar says that “demurrer to complaint scheduled for 11/12/2010.”