A white knight against coin scam and fraud

[Figleaf]

Curb on coin scams proposed
by ERIC FREEDMAN | February 01, 2008 10:15AM

LANSING--Not all that glitters is gold, and not every shiny new coin is a wise investment -- not even, say, a $5 Elvis Presley commemorative coin issued by the Marshall Islands.

But many unsophisticated coin investors and collectors don't understand that, according to a Macomb County lawmaker.

Rep. Steve Bieda, D-Warren, wants to extend Michigan's consumer protection law to companies and foreign governments that advertise coins as "legal tender" when those items aren't U.S. coins currently in circulation.

"If something is called a `coin,' it has face value or denomination, and there's the assumption you can use it as money in the country of origin or redeem it at the exchange rate," Bieda said.

"Sometimes you can't use them as money even in the entity that produced them," he said.

Bieda's new proposal would require mints, issuers or foreign governments that advertise in Michigan to "clearly and conspicuously disclose" that such coins "cannot be exchanged or redeemed at face value for U.S. currency in the United States." That requirement wouldn't apply to advertising by coin dealers in the state.

Non-collectors and casual collectors are the most common purchasers, often enticed by the prospect of profit.

Lansing coin dealer Patrick Heller said people are disappointed when they come to his store to sell such items.

"In most instances, enough time has passed that they feel like, well, `we didn't make such a sensible purchase but there's nothing we can do about it now,'" said Heller, president of Liberty Coin Service.

Wendell Wolka, a member of the American Numismatic Association board of governors, said the only way a coin will increase in worth is if the value of its metal rises or if it has collector value. His organization represents collectors and dealers.

"People should collect them because they like them, not because they expect to make a fortune," said Wolka, of Greenwood, Ind.

As an example of what he labels a "scam," Bieda cites the Marshall Islands, a now-independent former U.S. trust territory in the North Pacific Ocean with about 62.000 residents.

Its commemorative issues include $10 coins honoring the "heroes of D-Day," "heroes of the Philippines" and "heroes of Desert Storm" and $5 coins commemorating the space shuttle Discovery.

Bieda, a collector himself, said, "I've had a couple of pieces" from the Marshall Islands, adding, "Sometimes you like the design, but I recognize them for what they are."

Heller added, "The Marshall Island coins aren't even legal tender in the Marshall Islands."

Heller said another "violator" is the Commonwealth of the Northern Mariana Islands, a U.S. trust territory in the Pacific that uses U.S. currency. "It's technically part of the U.S. and doesn't have the authority to sponsor such an issue."

Among its coins are ones honoring scientist Albert Einstein, Pope Paul II and "endless love."

In 2004, a New York judge ordered an end to deceptive advertising for its so-called "Freedom Dollar" that carried the image of the former World Trade Center, the slogan "We Will Never Forget" and the coat of arms of the Northern Mariana Islands.

The private company that minted and marketed the coins with authorization from the Northern Mariana Islands government was assessed almost $370,000 in civil penalties in 2005 and refunded more than $2 million to defrauded consumers.

The advertising, telemarketing and sale of coins and similar items to collectors and investors periodically provoke complaints about deceptive business practices and fraud.

For example, last year the Federal Trade Commission investigated complaints that a national mail order firm failed to adequately disclose its practice of sending coins on approval to customers. The FTC took no formal action after the company revised its advertisements and other business practices.

Other cases have led to criminal convictions and partial restitution to cheated collectors.

Bieda's bill is awaiting action in the House Judiciary Committee.

Source: Capital News Service

[chrisild]

Which mints would be affected by such a regulation? I mean, even American "Non-collectors and casual collectors", as he puts it, would quite likely be aware of the fact that £ or € coins, for example, "cannot be exchanged or redeemed at face value for U.S. currency" in Michigan ...

So would it affect dollar denominated pieces only? And if yes, would any Canadian coin then have to be advertised with such a notice? I understand the motivation, but the way this is worded (at least in the article) it sounds very strange.

Christian

[Figleaf]

I think that as long as a currency is convertible it can be exchanged for USD in the US. I was at first afraid this would hit Chinese coins, as the currency is not fully convertible, but I found plenty of offers to buy and sell renminbi on the net. My fear goes the other way: it would not hit anything sold above face only.

However, I don't think anything will come of this. The pseudo coin lobby is rich and organized, the US collector's lobby not interested, maybe even against (see the "Coin of the Year" flogging of pseudo coins) and the Treasury and the US mint will hate it as it would put their own similar "products" in a bad light.

Peter

[bruce61813]

It does come down to 'legal' definitions of a 'coin'. Personally most of these commemorative items should be labeled as 'medallions', he term coin should be used for 'currency'.  That would solve most of the problems. Non-US currency can be converted to US through the normal means,and I don't see where the US Mint would have a problem. They keep coins separate from from non-currency. It would help with counterfeiting. There re a few coin oddities, I believe the Pobjoy Mint, that operates in the channel islands  produces 'coins'  and are considered legal tender on the islands, but may not act as currency in the UK. But, generally, I agree that a lot of material that is sold as 'coins' are not and casual collectors are generally the target. Also, some of the special coins minted will never increase in value in our lifetimes, or even over the next couple generations, unless coins are eliminated.

Bruce

[Figleaf]

Quite right, Bruce and there's the problem, I think. There is no easy way the distinguish coins from non-coins.

On re-reading, Mr. Bieda's concern may be quite limited. His examples come from regions that are within the US currency area, i.e. both groups of Pacific Islands use USD and the coins are denominated in USD. Personally, I'd be greatly surprised if John Q. Public could point to the Marshalls or the Northern Marianas on a map, let alone know what currency they use there, but I wouldn't be surprised at all if some people would take an ad for a legal tender coin denominated $5.00 as an offer of the equivalent of a 5 US dollar bill, even if it said Marshall Islands somewhere in the ad. However, since I expect that they'd be paying a multiple of USD 5 for the medallion, does it matter?

Peter

[BC Numismatics]

The Marshall Islands issues are medal-coins.They were listed in the 20th. Century Krause catalogue until recently.They will be listed in future editions of Krause's 'Unusual World Coins',which is where you can find the coins & medal-coins of the Principality of Hutt River,plus the Kelantanese gold coins.

Another country that has put out a ton of medal-coin issues,which should be listed in 'Unusual World Coins' are those issued in the name of the Republic of Palau.Palau is an independent country,although it uses the US$ as its official currency.

Aidan.

[bruce61813]

Personally, I'd be greatly surprised if John Q. Public could point to the Marshalls or the Northern Marianas on a map, let alone know what currency they use there,

Peter

Well I for one could, I spent 2 years on Guam, and did get to visit Saipan. However, you are right, most people would not know where the islands are, or what their currency is. The "psedo" coins are a problem, and should be listed as "Fantasy" and not 'current'.

Bruce

[BC Numismatics]

Bruce,
  All of Nauru's issues are medal-coins,as the actual currency in circulation is the Australian Dollar.

The Tokelau Islands,Niue,& the Pitcairn Islands all use the New Zealand Dollar,yet,they all have their own medal-coin issues as well.

A similar thing has occurred with the British Antarctic Territory,& the South Georgia & South Sandwich Islands.The official currency is the Falkland Islands Pound,yet,those 2 territories have had medal-coins issued for them.

I recently picked up one of the Nightingale Island 1 Crown medal-coins,which depicts the Queen Mother wearing a blue dress.You can find them shown here; http://www.thecommonwealthmint.com .They are listed in Krause's 'Unusual World Coins',as are the Kelantanese 1/4,1/2,& 1 Dinar coins,but not the commemorative 2 Dinars though.

Aidan.

[thelawnet]

There is a British scam along these lines where £5 coins are sold for £5. The catch is it is very difficult to redeem them and they then send you loads of unsolicited rubbish.

[translateltd]

At least they are sold for face and could theoretically, at least, be used in trade at no loss to the purchaser.  New Zealand's base-metal NCLT $5 coins (face value less than 2 pounds) sell for something like $29 when first released.  I believe my dealer colleagues will buy them in for $8 ...

[thelawnet]

At least they are sold for face and could theoretically, at least, be used in trade at no loss to the purchaser.  New Zealand's base-metal NCLT $5 coins (face value less than 2 pounds) sell for something like $29 when first released.  I believe my dealer colleagues will buy them in for $8 ...

The coins are only redeemable by returning them to the dubious mint that they originate from. Nobody would accept them at their face value.
http://www.londonmintoffice.org

[BC Numismatics]

The Tokelau Islands & Niue are also notorious for their medal-coin issues.In both countries,the New Zealand Dollar is the official currency.The Pitcairn Islands also use New Zealand Dollars as well,yet they have also had a medal-coin series as well.

The Falkland Islands Pound is the official currency of both the British Antarctic Territory & the South Georgia & South Sandwich Islands,yet both of the latter have now got their own medal-coin issues as well,as does the Falkland Islands themselves.

Aidan.

[Figleaf]

Indeed! London Mint Office is a front for a Norwegian company, Samlerhuset. These people are also hard to take serious. On their front page, they are offering Kennedy halves (one of the USA's most special silver coins!) for NOK 149 (€15,60). KM price quote: $6 (€4,31).

Peter

[BC Numismatics]

Peter,
  The London Mint Office is also acting as an agent for The Commonwealth Mint,which is even striking gold medal-coins in the name of Tristan da Cunha.It sounds like they're becoming like another Pobjoy Mint.

Aidan.

[translateltd]

The coins are only redeemable by returning them to the dubious mint that they originate from. Nobody would accept them at their face value.
http://www.londonmintoffice.org

Misunderstanding on my part - I thought you were referring to "real" £5 coins, not junk mint issues!