PCI loses Court Battle

[physics-fan3.14]

Saw this while reading the news, and I hadn't seen it discussed here yet: http://www.coinweek.com/coin-clubs/coin-dealer-pci-hit-for-nearly-2-million-under-federal-racketeering-laws/

 

Any thoughts?

[World Colonial]

I read the article. My impression is that it was due to the selling practices of the coin dealer (PCA) side of the business vs. PCI's grading.

[Nutmeg Coin]

That's similar to the verdict against "Numisgroup": http://law.justia.com/cases/federal/district-courts/FSupp2/170/340/2402874/

 

http://forums.collectors.com/messageview.cfm?catid=26&threadid=295472&STARTPAGE=1

 

It would be interesting to know who the graders were at PCI in their various incarnations and how they may have benefited.

[RWB]

I understand that several of the graders received free driveways and foundation grading. Others, did snow grading in winter and pocketed the cash. Some graded FIFA football fields and got paid in turnips.

[Nutmeg Coin]

It seems that Long Inland, NY has a disproportionate number of coin scammers. And the Kearney/Romano boiler room was a 40 million plus dollar scam from LI. http://articles.sun-sentinel.com/2010-03-26/news/fl-coin-operation-arrest-20100326_1_joseph-romano-collectible-coins-inspector

 

Plus one of the defendants ended up charged with hiring a hit man for the judge who convicted them.

http://www.cnbc.com/id/101448754http://www.cnbc.com/id/101448754

[coinman_23885]

Good, I hope criminal mail and/or wire fraud charges are on the way.

[Nutmeg Coin]

A dealer I know said he bought a hoard of PCI MS64 $2 1/2 Indians all for around $300 each at the Melville, LI show a few weeks ago. I wonder if there is any connection. I checked out several of them, and there was only one borderline nice coin in what was left.

[cpm9ball]

I read the article. My impression is that it was due to the selling practices of the coin dealer (PCA) side of the business vs. PCI's grading.

 

It was learned that the owner of PCA was also the principal owner of PCI.

 

Chris

[cpm9ball]

Any thoughts?

 

The plaintiff may have won the award, but whether they collect or not is a different story.

 

Chris

[Conder101]

It was learned that the owner of PCA was also the principal owner of PCI.

Not principal owner, SOLE owner. He was principal owner of PCA. In short PCI was NOT a TPG for PCA it in effect WAS PCA. they were a self slabber.

 

A dealer I know said he bought a hoard of PCI MS64 $2 1/2 Indians all for around $300 each at the Melville, LI show a few weeks ago. I wonder if there is any connection. I checked out several of them, and there was only one borderline nice coin in what was left.

It would probably depend on what generation holder they were. PCI has been around (off and on) for almost 17 years and it has had at least six different owners.

[cpm9ball]

It was learned that the owner of PCA was also the principal owner of PCI.

Not principal owner, SOLE owner. He was principal owner of PCA. In short PCI was NOT a TPG for PCA it in effect WAS PCA. they were a self slabber.

 

 

Correction noted! I just got my PC "A's" and my PC "I's" mixed up.

 

Chris

[KMAG100]

I find it interesting...The same guy that owned a grading company who used slabs that toned coins, is prosecuted and convicted for fraud in his collectible business... ..Smells about right.....

[coinman_23885]

I find it interesting...The same guy that owned a grading company who used slabs that toned coins, is prosecuted and convicted for fraud in his collectible business... ..Smells about right.....

 

This was a civil case. There is both a civil cause of action for fraud and criminal fraud statutes/common law crimes. As such, he hasn't been convicted or charged with a crime yet.

[KMAG100]

I find it interesting...The same guy that owned a grading company who used slabs that toned coins, is prosecuted and convicted for fraud in his collectible business... ..Smells about right.....

 

This was a civil case. There is both a civil cause of action for fraud and criminal fraud statutes/common law crimes. As such, he hasn't been convicted or charged with a crime yet.

 

 

Sorry, I'm a laymen so prosecuted and convicted mean the same to me in a civil or criminal case. But I can see how clarification is important for those in the profession of law and coins sales.

 

 

[coinman_23885]

I do hope you are right about it ultimately though - I would love to see them tried criminally, but I doubt that will happen.

[coinman_23885]

I wonder if the NNC guy has seen this?

[RWB]

Now the tough part - obtaining and collecting a judgement.

[coinman_23885]

Now the tough part - obtaining and collecting a judgement.

 

At least it was a fraud judgment so it isn't dischargeable in bankruptcy. I'm sure the defendants have some sort of assets that can be reached, even if only through fraudulent conveyance suits. Unlike many individuals that do deplorable things, I do not believe that the defendants in the instant matter are truly judgment proof.

 

I hope the estate also pushes for criminal charges. Quickly paying restitution - especially if before trial - can favor a defendant in a trial for purposes of sentencing. It may give the plaintiffs leverage and be a way to reclaim all of the funds and attorneys fees quickly. I'm sure their lawyers have it all figured out by now.

[johnny9434]

Any thoughts?

 

The plaintiff may have won the award, but whether they collect or not is a different story.

 

Chris

yes, good luck to them with that one.

[jpcienkus]

It's a victory for the collectors vs. the coin scammers. Whether they collect or not will be another issue.

 

 

[Nutmeg Coin]

So for the lawyers, how does PCI stave off checkmate; stall through appeals? Didn't Numisgroup ultimately appeal it to the Supreme Court and they said that grading is ultimately subjective not a science? I hope I'm mistaken but legal maneuvers can tie up cases like this.

[coinman_23885]

A judgment is self-executing unless it is stayed by either the trial court or the appellate court. Since most of this is fact based and only the law is reviewed de novo on appeal (and the trial court findings of fact given enormous deference and upheld unless clearly erroneous), I don't see this as happening. To obtain a stay, you would need to show some probability of success on the merits of the case. This would surprise me. The defendants would also need to show injury if a stay were not granted, and monetary damages that could be recouped are usually not enough except in very, very rare cases.

[leeg]

Sorry, wrong thread.

[bstrauss3]

Lots of good stuff you miss if you don't read the decision... just the summary from a newspaper article - often written without bothering to read the documents. BTW- the opinions are free to download, although you need a PACER (US Courts e-filing system) account (for casual busybodies like myself, they waive the fees if you don't go over $10 or $15 a quarter) (and there is the per-page charge for the search)

 

The judge found against PCI (corporate) on all charges, not just the regular fraud, but negligence count AND the RICO count.

 

There was also quite a bit about the ownership structure - between

Father- Anthony J. Delluniversita

Son- Paul A. Delluniversita

 

6. PCA is a New York-based rare coins dealer. It purchases ungraded coins, grades the coins—sometimes through an independent third party grader—and sells the coins to customers.

7. PCA employs a team of sales representatives who solicit customers through a telemarketing operation.

8. PCA failed to follow a number of corporate formalities, including issuing stock, finalizing by-laws, and executing organizational meeting minutes. (Plaintiff’s Exhibit 22).

9. Defendant Anthony owns 60% of PCA while his son, Defendant Paul, owns 40% of the company. PCA distributes 60% of its earnings to Anthony and 40% to Paul on a weekly basis.

10. Paul serves as PCA’s president, but he is only a “figurehead” or “paper” president and his only responsibility is to make sure that salespersons are on the phone.

11. Anthony manages all PCA operations not handled by Paul, including the training of sales representatives and the setting of coin prices.

12. In November of 2010, Anthony purchased PCI, a coin grading company.

Anthony solely-owned and operated PCI, acting as its only coin grader.

13. Paul was unaware that Anthony was PCI’s sole grader and testified that no one at PCA knew that Anthony owned PCI. Anthony testified that he did not inform Paul that he was PCI’s sole grader because “it was not his concern.”

 

15. Anthony sold PCI in December of 2011.

 

Because of this, the Judge found Anthony's actions were sufficient to pierce the corporate veil, so his 60% of the judgment is personal, while Paul's is not

 

52. As previously discussed, Anthony, through PCI and PCA, orchestrated a fraud against Pereida. Anthony used the appearance of PCI as a separate corporation to deceive Pereida into believing that she was purchasing independently-graded coins through PCA. The Court concludes that Plaintiff can pierce PCI and PCA’s respective corporate veils to hold Anthony personally liable for the economic and exemplary damages established under the common law fraud claim.

53. The Court concludes that Plaintiff cannot pierce PCI and PCA’s respective corporate veils to hold Paul personally liable because he was not aware of or involved in the scheme to defraud Pereida.

 

That's going to make Thanksgiving and other family occasions a little difficult...

 

I'm just going to quote one of the three damage awards:

 

On the claim for common law fraud, Plaintiff is entitled to recover from PCI and PCA, jointly and severally, the sum of $536,934.00 for economic damages along with pre and post-judgment interest, and court costs of $1,332.45 and may hold Anthony personally liable for these amounts. Plaintiff is also entitled to recover an additional $536,934.00 for exemplary damages—$268,457.00 from PCI and $268,934.00 from PCA—along with post-judgment interest and may hold Anthony personally liable for these amounts.

 

 

So to Conder101's observation - we now know the 2010-2011 incarnation of PCI. I'm sure buried in the transcripts are the details of who he bought it from (probably DLRC when they shutdown Dominion Grading Service) and who he sold it to (which seems to still be alive - I've seen a 2015 ASE in an PCI slab on eBay).

 

[Nutmeg Coin]

The problem I have with outsized lottery-like awards generally is that there were doubtless many other customers scammed who will be left out in the cold if there are enough assets that can be recovered by this one customer. A class action would probably have created more equitable distribution. So they found a sympathetic judge, all the stars aligned for evidence to be damning, when similar cases in the past did not have such success. And RICO is a stretch designed by the originators of it to nab violent gangster types. http://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act

[tommy44]

If my memory serves me PCI was started by and owned by Lewis Revels in the beginning. It eventually ended up being owned by Brian Beardsley and his slabs were considered to be accurately graded in those days. Brian was a straight up guy in my dealings with him. It was unfortunate that he died so young.

 

I still have a few $20 double eagles I purchased from him at the Blue Ridge Numismatic Association show in September of 1990. None were in PCI slabs however one now resides in a AU50 NGC slab, Certification Number: 3896042-037.

 

When Brian passed away I believe the company, the equipment and the remaining slabs became part of his estate. It was purchased and run by several individuals including J.T Staton and David Lawrence Rare Coins (Dominion Grading Service "DGS" before control passed to PCA. The older slabs are still well accepted but remember what they say "buy the coin and not the slab".

[Nutmeg Coin]

The PCI gold holders were known for being loose. I got stung by an MS64 pq graded coin, graded two grades lower at NGC. And quite a bit of variability in the green older holders.

[Mr. Smith Guesser]

Disregarding the racketeering charges, does this ruling set a precedent for future cases involving overgraded coins?

[coinman_23885]

Attorneys and litigants can cite federal district court cases as persuasive, but they are not binding and do not have precedential value per se.

[Mr. Smith Guesser]

Attorneys and litigants can cite federal district court cases as persuasive, but they are not binding and do not have precedential value per se.

 

Gotcha. It seems that the racketeering part of the case would be the easiest to prosecute as grading can be somewhat subjective. Clearly there was some conflict of interest.