FOR RELEASE: AUGUST 13, 1993
FTC CHARGES RARE-COIN SELLERS MISREPRESENTED PROFIT POTENTIAL AND RISK OF INVESTMENTS
The Federal Trade Commission has charged a California-based rare-coin marketer and its principals with deceptively telemar- keting rare coins as investments to consumers by misrepresenting the value and risk of such investments, as well as the markups on the coins they sell. As a result, the FTC charged that consumers were misled into buying overpriced coins and risked losing a sub- stantial part of their investment money. In addition, the FTC alleged that, by holding themselves out as providing expert information and advice on rare-coin investments, the defendants falsely implied that their coins are offered at prices similar to those that could be obtained by informed investors elsewhere.
The FTC asked the federal district court to permanently bar the defendants from engaging in the alleged deceptive practices. In the meantime, at the FTC's request, the court has appointed a receiver to handle the defendants' financial affairs, frozen the defendants' assets to preserve funds for consumer redress, and temporarily ordered them to halt the alleged practices.
The FTC's complaint names Goddard Rarities, Inc. (Santa Barbara, California), its affiliate, Goddard Rarities of Los Angeles, Inc. (Encino, California), as well as Dennis S. Goddard and Iraj Sayah-Karaji, who are officers and directors of one or more of these firms.
The FTC complaint, which details the charges, cites several statements made in the defendants' telemarketing calls and promo- tional materials, through which they allegedly represented to prospective investors that:
- more - Goddard--08/13/93)
-- they are a large full-service brokerage firm providing expert investment advice on the purchase and sale of rare coins;
-- they sell coins that are excellent, low-risk investments; and
-- they offer competitive prices and low markups.
According to the FTC complaint, the latter two representa- tions are false and misleading. The FTC charged that, by holding themselves out as providing expert information and advice on rare-coin investments, the defendants have implied that the coins they sell to consumers are offered at prices similar to those at which an informed investor could obtain the same or similar coins elsewhere. In fact, according to the FTC, the defendants sell coins for as much as two to six times their market value and at markups that are much higher than the prices the consumer would pay through a market purchase. Thus, the FTC charged that the coins are neither a low-risk nor an excellent investment, adding that it is "virtually inevitable that many consumers will lose a substantial part of their investment capital."
The Commission vote to file the complaint was 5-0. It was filed under seal on Aug. 3, 1993, in the U.S. District Court, Central District of California, in Los Angeles. The seal was lifted late yesterday.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.
The FTC has issued a consumer alert titled "Investing in Rare Coins," which is available free by writing the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. Copies of the complaint are available from the same address.
MEDIA CONTACT: Bonnie Jansen, Office of Public Affairs 202-326-2161
STAFF CONTACT: Hugh G. Stevenson, Bureau of Consumer Protection 202-326-3511 or Michael C. McCarey, Bureau of Consumer Protection 202-326-3303
(Civil Action No. 93-4602JMI(GHKx)) (FTC File No. 922 3340) (goddard)