Arrest in New Jersey Sept. 9 of former U.S. Philadelphia Mint guard William Gray for theft of more than $2 million worth of numismatic $1 error coins sets the stage for the government to seek a stiff jail sentence. It also marks a new era in collecting, because the criminal information charging Gray seems to set a new standard for how some coins are legally issued by the Mint and may be legally acquired.
U.S. Attorney for New Jersey Paul Fishman held the press conference that announced the prosecution of Gray, who received about $75 for each error coin he purloined out of the Philadelphia Mint – meaning that about 32,000 coins were removed, evidently over some period of time.
But the real story, which the daily media has yet to pick up on, is in the criminal “information” – a claim of criminal activity that is usually superseded by an indictment coming from a empaneled grand jury – is that the government believes that these error coins are illegal to own initially as well as in the secondary market.
Stripped of legal niceties, the viewpoint essentially is that there is no way that these coins could have left the Mint other than through illegal means, and hence lack the essential attribute of having been “monetized.”
This new theory smacks of the recent prosecution to retrieve 1933 double eagles, and could well go beyond Presidential error coins lacking the “In God we Trust” motto on its edge and include any coin with a questionable history, including rarities such as the 1913 Liberty nickel, the 1804 silver dollar and a host of other coins.
In the “information,” a nearly 3,000- word document, the government begins with an explanation of how coins are designed and then how they are made. “The Mint had a highly structured and controlled process for making coins. The first step in modeling a coin was drawing and designing the coin,” it says.
“After a design was approved, the Mint produced a digital database that was measured and verified to confirm adherence to all design and manufacturing guidelines. All final designs were reviewed for defects such as misaligned letters, missing or misinterpreted design elements and manufacturability.”
Finally, once approved, the information continues, “ a new project was created and the data was placed in a comprehensive coin database and released to manufacturing.”
Production process comes next, followed by shipment from the Mint. The “information” from Fisher is quite specific as to the next series of steps that are taken, which becomes important when it is apparent that some of the steps were either omitted or intentionally circumvented.
“The next step was production, which includes how coins were formed, treated, circulating coins. Making working dies started with a ‘master’ hub, created with a durable steel blank. The Mint used Computer Aided Manufacturing software to read and interpret the design data.”
Next discussing how blanks are made, it proceeds such that, “Planchets then traveled to the stamping press through a press feed system. The presses contained finger feeds, also known as ‘feeder finger tips.’ Finger feeds were made of zinc, aluminum and other alloy metals and varied in size depending on the coin denomination that they were feeding.”
It continues, “They were installed on the press and functioned to guide each planchet into the area where the planchet was struck by the dies with the coin design. Finger feeds were routinely replaced when they became damaged due to wear and tear (break, bend, or became loose), or accidentally became misaligned and struck by dies with coin images.”
Struck coins, the document continues, “were placed in a collection box called a trap, where they were inspected to see if they met the Mint quality standards. If an error was spotted, coins in the collection box were scrapped and sent to coin destruction machines called wafflers.” Then they were recycled.
Here’s the key part that follows this detained explanation: “There were only two ways for nonexpendable property belonging to the Mint lawfully to be removed from the Mint facility or come into the hands of a private owner: (1) proper sale of the property as a numismatic item; or (2) proper disposal of the property through the General Services Administration (GSA), commonly through public auction.”
The further explanation: “Although the Mint had sold some coin-making equipment as numismatic items (die sets that had been “cancelled” or otherwise obliterated), the Mint had not sold finger feeds, mule coins, or missing edge letter coins as numismatic items.”
The information then charges Gray would “knowingly and willfully embezzle, steal, purloin and convert to his own use money and things of value of the United States, in an amount over $1,000, that is error coins, specifically, Presidential dollar coins with missing edge lettering, belonging to the United States Mint, which came into his possession” improperly.
This is a major change in the Mint’s position and indeed, the U.S. attorney. It essentially argues that a coin must be perfect when it leaves the Mint, because if it is not, it is removed from the trap and scrapped. It does not seem to admit that imperfect coins, which the hobby calls errors, can legally leave the Mint in normal shipments to the Federal Reserve. This is because all of the Mint’s screening efforts to prevent release of error coins are not 100 percent effective. It ignores things like the riddling process which separates many imperfect coins from their well-rounded brethren.
Arnold Margolis and Fred Weinberg in their book The Error Coin Encyclopedia (3rd edition, 2000) explain the riddling process as using a screen with “holes which are slightly smaller than the size of a blank” and which let planchet errors drop through.
In more than 400 pages, the Encyclopedia shows how individual error coins are made. The problem arises with intentional errors (the motto is not added to the rim), and then with the imperfect specimen finding its way out of the Mint.
No end user would ever know, or notice, though even that is not a proper test, for the essence of money is not that the government has somehow said that a slab of metal is exchangeable for goods or services, but rather its acceptance by the people who use it without a second thought.
In Legal Tender Cases, 79 U.S. 457 (1870), a justice of the Supreme Court put it this way: “the power is confined to metals. This grant is not a grant to create money, but simply ‘to coin money’ – a power that can be exercised only on money that admits of being coined; that is, a bare power to ‘strike coin,’ which was the phrase used in the Articles of Confederation as the equivalent of ‘to coin money.’”
So future battle lines between the hobby and the government are being drawn, even as the former Mint police officer is justifiably charged with a crime. But how far the government will extend its definition of what constitutes a crime – to end users, or in-betweeners – remains to be seen.