Mixed Messages
During Merit’s transition of ownership, a number of strange encounters with Merit customer service representatives have come to light.
On August 12, we reported that Merit was no longer accepting bullion orders. When Hubert Walker of CoinWeek called Merit, he was told that the reason for this was due to a change in ownership, but customers could order 2014 silver Lunar Britannia coins. That associate specifically denied that Merit was going out of business.
In a later call, a Merit sales associate contradicted the first agent’s claim and told Walker that the firm was indeed winding down.
In yet another call, a representative said that the firm was no longer offering bullion products due to the prevalence of counterfeits in the marketplace.
CMA could not explain why Merit’s customer service representatives conveyed confusing and contradictory messages but did say that the entire sales staff had been let go.
Our call to Merit’s toll-free number on September 4 was picked up by an automated answering system instructing customers to mail all correspondence to the company’s Wilshire Blvd. address. The company’s website now says “We are no longer accepting orders and are in the process of closing our operation. All paid orders will be shipped in accordance with our standard shipping policies.” It also thanks its customers for their business, saying “It’s been a wonderful 28 years.”
Most sections of the website, including its market news and various video channels, have been scrubbed.
The last activity on Merit Gold’s twitter account was on August 4.
Merit Named in Second Lawsuit
On June 6, a second lawsuit was filed against Merit Gold and Silver on behalf of Merit customer William C. Kraner. The suit names Merit parent company Seacoast Coin, Inc. and former Merit sales representative Joe Grossman as defendants.
The suit (case number SC122137) alleges that Grossman and Merit committed fraud, breach of fiduciary duty, and financial elder abuse. It also alleges that the firm violated California Business Professional Codes 17200 & 17500.
California Business Code Section 17200 covers unfair or fraudulent business practices, including the use of untrue or misleading advertising. Section 17500 enumerates a number of marketing strategies deemed unlawful by the State of California, including a prohibition on the practice of “disseminat[ing] any such statement as part of a plan or scheme with the intent not to sell that personal property…. So advertised at the price stated therein, or as so advertised.”[2]
The plaintiff is a 77-year-old Ohio man who purchased between $3.6 and $4 million dollars of gold and silver coins from Merit that his lawyers claim are worth approximately 50% of the price paid. The complaint also argues that the “rare” coins that Merit sold Kraner are not rare at all. Kraner also alleges that Merit “Senior Sales Associate” Grossman misrepresented Merit’s costs for the collectible coins Kraner purchased and knowingly employed deceptive tactics to convince him of the benefits of buying the more expensive coins.
Kraner’s purchases took place between July 22, 2011, and October 4, 2012. Mr. Kraner is seeking a minimum of $8 million dollars in damages (his complaint can be read here).
CoinWeek spoke with John Kristensen, the attorney representing Kraner. Kristensen told us that Merit’s business practices were in clear violation of California law and that his firm was confident that they would prevail in court. He also said that Kraner was not alone and that the firm had two other clients who alleged similar misconduct from Merit.
When we asked Kristensen whether he felt the complaints against Merit could result in a class-action suit, he said that his firm wasn’t interested in that outcome at this time. He also said that since Merit had filed the ABC paperwork, his firm would likely file no additional suits.
Getlin and Epstein Maintain Silence
Determining what happened exactly in Merit Gold’s final months is difficult without insider knowledge. Getlin and Epstein have not released a public comment on the matter.
This is a reversal of the firm’s position in February when Getlin was eager to talk with CoinWeek about the firm’s legal problems and its strategy to overcome them.
Getlin even appreciated the even-handed tone of our first report, telling us that CoinWeek had given Merit a “fair shake” and that they would keep us informed of any developments. At the time Getlin seemed upbeat, though he was concerned about the legal implications.
Since the ownership change in August, CoinWeek has made numerous attempts to reach out to Getlin and Epstein, but have been unsuccessful so far.
While silence regarding an ongoing legal matter isn’t surprising, the quickness with which Merit collapsed and was sold off should be a wake-up call for gold and silver buyers. Glossy national television campaigns and slick political sales pitches do not ensure that the companies you purchase precious metals from are being honest with you or will be around tomorrow, in the event that someone alleges criminal wrongdoing.
As for the coin industry, Santa Monica attorney Adam Radinsky sounded an ominous warning when he spoke with Coinweek.
“There seems to be a lot of fraud in your industry,” he said.
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References
2. http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17200-17210
