Noe scandal goes international dragging prominent names to the forefront.

[truthteller]

Absolutely fascinating. Expect a wild ride next year.

 

 

http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20051127/SRRARECOINS/311270001/-1/SRRARECOINS2

 

 

European fund tied to Noe falters

Firm backed by rare-coin money supplied international stamp deal

 

 

 

 

 

Zoom

 

 

By JOSHUA BOAK

BLADE STAFF WRITER

 

 

The Ohio investigation into Tom Noe's failed $50 million rare-coin funds is now drawing attention to a $1.4 billion rare-stamp investment group in Spain.

 

 

Federal and state investigators are scrutinizing the dealings of a former New Jersey company that Mr. Noe put more than $10.7 million of state money into.

 

The company, Escala, known until September as Greg Manning Auctions Inc., is the publicly traded arm of an international stamp venture.

 

Mr. Noe, who was indicted last month on three felony counts of laundering money into President Bush's re-election campaign, has been accused by Ohio Attorney General Jim Petro of stealing more than $4 million from the two rare-coin funds he set up and managed for the Ohio Bureau of Workers' Compensation.

 

The former coin dealer's relationship with Greg Manning Auctions is absent from the company's filings with the U.S. Securities and Exchange Commission and hidden from a public without access to the 500,000 pages of coin funds records. It involved loans, direct payments to a Greg Manning subsidiary, and the off-market purchase by Mr. Noe of company stock from a former lieutenant of Michael Milken, the junk bond king convicted for securities violations in 1990, according to those records.

 

More than Ohio's money is at stake.

 

The investigation's findings could damage the fortunes of 140,000 Spanish and Portuguese investors who have invested more than $1 billion in rare postage stamps kept in distant vaults.

 

The story begins four years ago, shortly after Mr. Noe received the second installment of $25 million from the state bureau established to help pay for the treatment of injured workers.

 

On Aug. 1, 2001, Mr. Noe lent Greg Manning $1.6 million from the state's rare-coin fund, Capital Coin Fund II.

 

On the same day he transferred $3 million from the coin fund to a subsidiary he established: the Spectrum Fund.

 

Correspondence released by the state indicates that Greg Manning agreed to send Mr. Noe $3.1 million worth of rare coins as collateral for the loan.

 

State investigators allege the financial transactions with Greg Manning are linked to other transactions Mr. Noe made with the state's rare-coin funds that were fraudulent.

 

On the same day Mr. Noe wrote checks to Greg Manning, he also wrote a $2 million check from the coin funds to his own company, Vintage Coins and Collectibles, to buy coins.

 

Mr. Petro alleges part of the $2 million actually repaid a $393,000 commercial loan owed by Mr. Noe that was unrelated to the coin funds and that Mr. Noe used more of the money to falsify a $786,000 profit distribution to the state from his first state coin fund, Capital Coin Fund Limited.

 

That profit distribution supports Mr. Petro's claim that Mr. Noe operated the coin funds as a "Ponzi scheme," paying out recently collected principal from new investors as returns to earlier investors.

 

Leonard Palaibis, a forensic accountant working for the attorney general, concluded in an affidavit that Mr. Noe deceptively labeled the $3.1 million in rare coins Greg Manning used as collateral as inventory of the coin funds to cover up the theft.

 

Stock sale

Mr. Noe also invested coin-fund money directly into Greg Manning, holding 4.5 percent of the company's shares at one point.

 

On Jan. 14, 2002, Mr. Noe purchased 500,000 shares in the company off-market and at a 36 percent discount, months before the announcement that Afinsa Bienes Tangibles, a privately held Spanish postage stamp investor, would acquire 70 percent of the U.S. auction company.

 

The stock - sold off in a series of trades over the next two years - yielded more than $2.73 million in profits for the coin funds.

 

A wire transfer record included in more than 40 boxes of coin-fund documents turned over to The Blade by state investigators identified the seller of the shares as Warren Trepp, once Michael Milken's chief trader at the Beverly Hills office of Drexel Burnham Lambert and a prominent [embarrassing lack of self control] donor.

 

James B. Stewart's book Den of Thieves portrays Mr. Trepp as an aggressive trader who smoked four packs of cigarettes a day and stayed cool as federal investigators closed in.

 

"I'm not the kind of guy who could ever be a fink," he told his lawyer over dinner, according to the book.

 

Unlike his boss, Mr. Trepp fought and beat the SEC. He did not return calls seeking comment about his deal with Mr. Noe.

 

Before the June 17, 2002, announcement that Afinsa would buy Greg Manning Auctions, Mr. Noe purchased 85,000 shares in the company through Scott J. Savage, a Toledo-area financial adviser who runs SJS Investment Consulting. Mr. Savage also did not return calls seeking comment.

 

Mr. Noe sold most of the coin funds' holdings after the Afinsa buyout was completed in 2003, according to the coin fund general ledger.

 

Material relationship

All told, Mr. Noe lent more than $4.2 million to the collectibles auctioneer and placed $6.5 million in the Spectrum Fund, which was controlled by Greg Roberts, a member of Greg Manning's board of directors.

 

Cashed checks from the coin funds' records show that the Spectrum Fund shared the same bank account with Spectrum Numismatics, then a division of Greg Manning.

 

In mandatory filings with the SEC, the company only reported $4 million in loans from a "privately held capital fund."

 

Obligated to disclose only "material" information, it chose not to mention the Spectrum Fund or its association with Mr. Noe.

 

Last week, investors considered the relationship to be material.

 

After learning of the company's dealings with Mr. Noe in a Wall Street Journal article that credited The Blade for uncovering the state scandal and its connection to Escala, investors sold off company stock.

 

The share price dropped to $14.75, erasing about $107 million from a $430 million market capitalization.

 

Escala has declined interview requests from The Blade during the previous three months. It will hold a phone conference tomorrow morning to discuss its entanglement with Mr. Noe.

 

According to a Friday news release, Escala described itself as a "witness" in the federal and state investigations of Mr. Noe.

 

"Baloney," William Brandt said. "Their characterization of themselves as a witness is wrong."

 

Mr. Brandt is working with federal and state officials as his company, Development Specialists Inc., oversees the liquidation of the coin funds' assets.

 

Independent of Mr. Noe, Escala is the subject of an inquiry by the SEC, according to a Sept. 22, 2005, letter that denied a request for documents pertaining to the company.

 

"Staff responsible for the commission's investigation have confirmed that releasing the withheld information could reasonably be expected to interfere with an ongoing commission investigation," read the letter, which was sent to an investment firm.

 

It cites exemption 7(A) in the Freedom of Information Act. The exemption authorizes withholding any "records or information compiled for law enforcement purposes."

 

The letter offers no clues regarding the inquiry's cause or purpose.

 

Spanish watchdog

Afinsa is far from unique on the Iberian Peninsula. A corporation with a similar name and business model, Banfisa, went bankrupt three years ago.

 

Afterward, ADICAE, a Spanish consumer watchdog, lobbied the government to regulate collectibles investments and attempted to monitor Afinsa, among other collectibles brokers.

 

Unable to verify the company's inventory, ADICAE issued a report in 2002 with a shocking observation. Afinsa paid out nonexistent profits.

 

"If we reviewed the results of the last year, Afinsa's group of companies lost 6 million euros [$7.6 million]" it said. "These losses would eliminate the benefits that Afinsa recognizes in this year!!!"

 

Greg Manning's revenues and profits reversed course after the Afinsa acquisition was finalized in 2003, ending chronic losses in preceding years while Mr. Noe was buying its stock for the state's coin funds.

 

In fiscal 2005, Greg Manning, now Escala, reported sales of $240 million and a net profit of $38 million.

 

About 50 percent of Escala's revenue and 70 percent of its profits came from Afinsa, according to its SEC filings.

 

As part of the takeover, Greg Manning signed a 10-year agreement to sell $1 billion worth of antique postage stamps to Afinsa at a rate 10 percent higher than the stamps' purchase price.

 

Afinsa then resells the stamps it bought from Greg Manning to Spanish and Portuguese investors.

 

As of last year, 142,697 individuals have entrusted roughly $1.4 billion with Afinsa, according to corporate disclosures.

 

The company claims that the stamps wait untouched in vaults, as "clientes" receive annual payments between 6 and 8 percent on their investment.

 

After a certain period of years, Afinsa agrees to buy the stamps back, allegedly guaranteeing a profit without any risk.

 

Ken Lawrence, a former vice president of the American Philatelic Society, said the global market for high-quality stamps is not large enough to accommodate this arrangement, leading him to be suspicious of the investment's authenticity.

 

"It is inconceivable that [Escala] can harvest $100 million a year in stamps and provide them to Afinsa," he said. "There is no place in the world where anybody advertises to buy stamps on that scale."

[DaveG]

This is all getting just too weird!

[Tradedollarnut]

My ... what tangled webs we weave, when first we practice to deceive.

[IGWT]

So, what does this mean for the likes of Bowers & Merena and Teletrade? I haven't read the article close enough to understand fully the shenanigans. Perhaps the most amazing "fact" is the existence of "$1 billion worth of antique postage stamps" in this world.

 

I do wonder . . . who took the responsibility for certifying the financial books of all these companies under the Sarbanes-Oxley Act in the wake of the Enron scandal?

 

Mr. Noe and Mr. Manning, I'd like to introduce you to Elliot Spitzer.

[michael]

biz as usual in the coin game

 

 

one of only a few to get caught

[truthteller]

Frankly, I've never seen a billion $ enter the coin market over 10 years. Maybe a few million invested, such as with the 1988-90 run up on speculation that wall street money was entering the marketplace. And, of course, there are expected profits, especially on the high ticket coins. However, I've never seen a billion $ exit the coin market either. KABOOOMMMMMM! The numismatic nuke. Just when and where, nobody will know.

 

 

 

TRUTH

[Oldtrader3]

$1 billion in stamps? That ought to dig a hole for the stamp market that will require (40) years to climb out of. I almost hope Noe has stolen more of the coin inventory than disclosed so that (a supposed balance of) $40+ million in coins won't be dumped into the coin market on fund liquidation.

[Here]

My of my. Somewhere around here is a thread someone started last week that has to do with some of this. Particularly the Escala Group and this stamp thing in Spain. Well, it's going to be interesting to say the least.

 

 

 

Jerry

[Tradedollarnut]

$1 billion in stamps? That ought to dig a hole for the stamp market that will require (40) years to climb out of. I almost hope Noe has stolen more of the coin inventory than disclosed so that (a supposed balance of) $40+ million in coins won't be dumped into the coin market on fund liquidation.

 

Morse's collection just realized $20M+ ... and appealed to just two series of collectors [saints and late eagles]. $40M will barely make a ripple in the full market any more.

[chinook]

The coin market is so small compared to other investment classes. I think it could absorb $1 billion.

 

For example. Back in October Goldman Sachs bought 25 million shares of ExxonMobile for $58 a share. Thats $1.45 billion. All that stock was dispursed within a week.

 

$1 billion is not alot of money in the grand scheme.

[Tradedollarnut]

In the coin market it is - no way the coin market could absorb $1B.

[chinook]

Perhaps as things are structured rigth now.

 

But with a little encouragement from the big boys it would be a drop in the bucket.

[truthteller]

I agree with TDN. A billion $ entering the coin market with long term expectations of making money is unrealistic. In addition, the concern should be with money leaving the coin market dramatically. Remember, this is cash from outside the coin marketplace and speculation to boot.

 

 

 

TRUTH

[IGWT]

Not a pretty scene at Escala Group (or, I imagine, its North American affiliates). Link to Story

[Morgannut]

So much for Bowers and Merena Auctions----There are too many auctions in the market and I always wondered who would drop first. Hope Teletrade holds up--sort of a dealers CCE for collectors.

[truthteller]

Over the years, many high grade US coins have been purchased by foreign buyers, groups and individuals. Although many coins do not leave the US, the ownership does. Expect a shakeup this year in cash flow, but not prices.

 

 

 

TRUTH

[michael]

oh my

 

my my my my my my my my my my my my

[Excaliber]

Man! this thing just took on a WHOLE new face! Check that stock, down from $32 to $12 a share in one day! OUCH!

[4ucoin-migration]

I thought Afinsa was mostly stamps with just recently getting into the coins. I don't think their inventory of coins is anywhere close to $ 1 billion.

 

ESCLA should have the capital to last as long as they were not directly implicated in fraud. I think they will have to write off any receivable they have from Afinsa.

 

My take is that Forum was the primary problem and Afinsa is now caught up in the net. Looks ugly but you if the news starts to clear, looks for some cheap stocks on ESCLA around 5.

 

They are the largest wholeseller of gold bullion. This isn't going away.

[Excaliber]

Looks ugly but you if the news starts to clear, looks for some cheap stocks on ESCLA around 5.

 

They are the largest wholeseller of gold bullion. This isn't going away.

 

 

Down to $6.55 right now, if you are gonna catch it at $5, you might want to get it tomorrow, before it hits $4.!

[4ucoin-migration]

Agree. As I noted, you need to let the smoke clear before trying to catch a falling knife.

 

The smoke has started to clear on ESCL. But, it looks even worse then before now. It looks like there is a good chance that the credit line for the Adams bullion operations could be pulled. That would be the end of that business.

 

I wouldn't touch this stock at any price until there is some clarity and some facts that show it may survive. At this point, there is a good chance it is headed to zero.

[Excaliber]

Agree. As I noted, you need to let the smoke clear before trying to catch a falling knife.

 

The smoke has started to clear on ESCL. But, it looks even worse then before now. It looks like there is a good chance that the credit line for the Adams bullion operations could be pulled. That would be the end of that business.

 

I wouldn't touch this stock at any price until there is some clarity and some facts that show it may survive. At this point, there is a good chance it is headed to zero.

 

 

From the news report, there are alot of people losing their life savings in this deal. Very sad, hopefully it isn't as bad as it appears right now and those people can gain something back.