Late Friday afternoon, Collectors Universe, the parent company of PCGS, announced that they are suing six defendant and 10 “Does” (unknown people) in U.S. District Court for the Central District of California for allegedly doctoring coins. The named defendants are:
- Al Rossman of Nevada
- Eric Steinberg, a PNG member and owner of Broward County Coins in Plantation, Florida
- Rick Wesslink of Mission Viejo, California (it is possible this name is misspelled in the complaint)
- Silvano DiGenova, a PNG member and owner of Tangible Investments in Laguna Beach, California
- Greg Krill, a PNG member and co-owner of North Bay Rare Coin & Jewelry of St. Helena, California
- Robert Lehmann a coin shop owner in Cumberland, Maryland
The complaint alleges that the defendants conspired to doctor coins using “techniques [that] are designed and intended to avoid detection by [PCGS] and the coins’ owners for many years.” Amongst the method allegedly used are chemicals that would show up over time and laser alteration to fix or enhance coins. Owners of doctored coins later received compensation from Collectors Universe under the PCGS Guarantee.
Twelve examples of coin doctoring dating back to 2001 were listed as examples in the complaint.
CU alleges that the defendants are in violation of the Lanham Act (Trademark law) by allegedly misrepresenting the details of the coin; the Racketeer Influenced and Corrupt Organizations Act (RICO) alleging that they knowingly acted as an “enterprise” to defraud CU and PCGS; that the “Defendants acted willfully, fraudulently, maliciously, and in wanton disregard of CU’s rights;” and violated the California Unfair Competition Law.
As part of the complaint, it says that “PCGS is a leading coin authentication and grading service in the world,” and spends several paragraphs describing their work and guarantee. This is followed by the complaint that the defendants doctored coins. However, if PCGS is a professional service, how could they allow these defendants to allegedly submit and they encapsulate coins for over nine years without prior action?
There have been informal discussions in various forums as to whether the third party grading services may becoming overwhelmed with submission and questioning the results of their services. Along with the grading of classic coins, the third party grading services grade many modern coins, some directly from the packaging as shipped to dealers from the US Mint. Could coin doctors use this to try to hide their patterns over the years?
One solution was the formation of a service that verifies the grading of the third party graders. After a very public “spat” between the top grading services and notable dealers, some came together to form the Certified Acceptance Corporation (CAC), an authentication service that verifies the grading of the third party graders. While this may have slowed the coin doctors, it has not eliminated the problem.
In the mean time, PCGS reports that they have paid over $7 million under their guarantee over 24 years. While PCGS should pursue those that attempt to defraud them and the collecting community, PCGS may need to examine its own grading practices to understand how these coins passed their scrutiny.