Coin Dealer Ethics - Counterfeit Coin
Wednesday September 12, 2007
For this week's Coin Dealer Ethics question, I'd like to borrow an idea from this month's issue of the Numismatist. (The Numismatist is the official journal of the American Numismatic Association (ANA.)) Susan McMillan, the ANA's Consumer Awareness and Awards Coordinator, writes a monthly column where she invites a panel of ANA members to comment on an ethical dilemma related to numismatics. Her column for the September 2007 Numismatist concerns a counterfeit coin that found its way into a slab, which was then sold by an unethical dealer to a novice coin collector who cracked it out of the holder.
Our scenario is a little different, and much simpler, but I owe the inspiration for the idea to McMillan's column. Here's our situation:
Donny Dealer buys and sells a lot of coins. Somewhere along the way, he bought a 1914-D Lincoln penny, which was in a major reputable grading service slab and graded VF-20. Casey Consumer, a 14-year old novice coin collector, came along and bought the coin from Donny's downtown coin store. When Casey got the coin home, he cracked it out of the slab so he could put the coin in its hole in his Whitman coin folder and thereby finally complete his Lincoln Cent collection.
Casey proudly brought his Whitman folder to the next monthly local coin club meeting, to show off his newly-finished collection. One of the experts at the meeting told Casey he should have his 1914-D authenticated because he thought the coin looked like it wasn't genuine. Casey took this advice and sent the coin in to the same grading service whose holder it had been in before, along with the label from the holder, which Casey had saved. The grading service condemned the coin as a counterfeit and wouldn't re-holder it. Casey took the coin back to Donny Dealer, who told Casey he was out of luck and that he shouldn't have removed the coin from the slab.
Should Casey be stuck with the counterfeit coin? Please share your views via the "comments" link below, and next week we'll have a look at some of them.
Our scenario is a little different, and much simpler, but I owe the inspiration for the idea to McMillan's column. Here's our situation:
Donny Dealer buys and sells a lot of coins. Somewhere along the way, he bought a 1914-D Lincoln penny, which was in a major reputable grading service slab and graded VF-20. Casey Consumer, a 14-year old novice coin collector, came along and bought the coin from Donny's downtown coin store. When Casey got the coin home, he cracked it out of the slab so he could put the coin in its hole in his Whitman coin folder and thereby finally complete his Lincoln Cent collection.
Casey proudly brought his Whitman folder to the next monthly local coin club meeting, to show off his newly-finished collection. One of the experts at the meeting told Casey he should have his 1914-D authenticated because he thought the coin looked like it wasn't genuine. Casey took this advice and sent the coin in to the same grading service whose holder it had been in before, along with the label from the holder, which Casey had saved. The grading service condemned the coin as a counterfeit and wouldn't re-holder it. Casey took the coin back to Donny Dealer, who told Casey he was out of luck and that he shouldn't have removed the coin from the slab.
Should Casey be stuck with the counterfeit coin? Please share your views via the "comments" link below, and next week we'll have a look at some of them.
Comments
a COUNTERFEIT coin is the proverbial “WOLF IN SHEEPS CLOTHING” which is usually band news for the buyer and often the seller as well. Here’s a few examples. you’re at an auction. prior to the opening round, the auctioneer clearly states”all lots sold are “as is where is”… “no guarantee of originality or authenticity is suggested or implied !”: Fine we say, and we bid accordingly. But when we buy with good intent . we assume the seller has the same credo or the the same rule of conduct. BUYING can be tricky, and generally you will have recourse with a reputable seller or dealer. BUT,.. what about the guy who switches the coin and then yells “FOUL!” Removing a coin from a sealed or encapsulated holder negates it’s purpose. When you do so, you have just destroyed the validation of the coin. Oh, by the way, if your an “E-BAYER” watch out for those “Chinese bargin coins” These are about as valuable as a three dollar bill!
It is tough question? I think that grading service should remit Casey money for making a mistake.
Unfortunately, I think the consumer takes the loss on this one. Once it is out of the holder, you have no way of prooving that the coin wasn’t switched, so the dealer can’t take it back. And the grading service can’t take it back for the same reason, unless the grading service has detailed pictures of every coin they grade and can look up the archived photo and compare it to the one the consumer submitted. But I doubt there is much photo archiving done. Grading services do make mistakes. I have an 1899S certified Morgan from NGC in which the holder says 1899 (no mint mark). Of course, I’d like it to be an 1899. If I ever sell it, though, I would be honest and say it really is an 1899S but it is labeled wrong. The question here is whether the dealer knew the coin was counterfeit- if he did, then he was very dishonest/unethical. I’m willing to be tthe dealer did not know and probably purchased it as a part of a collection and never had time to really make sure it was genuine. Furthermore, most of us would assume the coin is genuine because it is in a holder and certified by a reputable grading service.
The coin should have never been removed from the slab. Removing the coin was just a way to open a can of worms. Since we are on the subject of ethics, maybe the coin dealer should have taken the time to educate the young collector to refrain from removal of a slabbed coin.
In defense of the dealer, who is to say that the consumer didn’t exchang the coin that had been slabbed for a counterfeit and tried to scam the dealer? I realze this is not your example but this is always another side.
A sensible precaution should entail taking photos of both sides of the slab, and close-up photos of the coin, before cracking it out. Then you’ve got documentation that the coin is one and the same. If you can provide such documentation, then the grading service should provide appropriate compensation for their flub.
I have to agree taking the coin out of the slab voided it’s grade and authentisity. Can’t hold the grading service reponsable for this one. On the other hand, the service should provide cutomers with a little more for the service they are getting paid for. I bought graded coins before NGC or PCGS came into being, and i got photographs with my slabed coins, as well as papers. So the quality of service was better from an unknown. Whom by the way coins have been down graded from the above mentioned services.
Sometimes an encapsulated coin constitutes a catch-22. Often the only way to detect a good counterfeit is to examine it closely under a microscope, weigh it, test its specific gravity, examine its edge, test its “ring”, and measure its diameter. Naturally, this requires the coin to be liberated from its slab. But when you do that, the “authenticity” guarantee is voided. I’ve found counterfeits in all of the top-tier slabs, so the problem does exist. Again, the best precaution is to take a lot of photos before cracking it out. Even then, there’s no guarantee you’ll be compensated for the grading service’s mistake.
One other thing. Those who insist that slabbed coins should never be cracked out and subjected to further scrutiny are arguing for the permanent validation of coins that may, or may not be authentic. They seem comfortable with the idea that a bogus coin, once encapsulated, should be immune from further questioning and should be allowed to pass from owner to owner in perpetuity. Sorry, I don’t agree. A piece of plastic and paper label are not a substitute for empirical study and objective reality.
i believe by the Law a crime is being committed here somewhere, to say that a counterfit coin is authentic is making a forged insterment and if the kid did it then he is in possession of a forged insterment, it is aginst the law to make or counterfit Government Money, if you buy counterfit money report it to the police, if you find counterfit money report it !!! lets stop these jerks !!!
Pat: You hit the nail right on the head. That was a very good statement. And a good example of one way to start policing an industry, that goes un-checked. The last person holding a phoney coin, should not left holding the bag. If my obeservations are correct, the grading services are not small fry fly by night operations. They are listed corporations on majore stock exchanges. What they sell are guarantees. If that is their stock and trade, then bad press is somthing they would want to avoid. A little police work could go a long way in this case.
Mike: I liked your comments too. The thing i noticed about PCGS slabed coins is they command higher prices at auction. Then say a simaler coin graded by a lessor known grading service. That in of it self seems to be the highlight of getting a grading from the highly regarded grading service. But there has to be a better way.
A final thought RE: my own comment up above to Mike. Ideas are not patentable. A simple device added to a slab, such as a seal. That once a seal is broken, the coin can no longer be validated. As genuine. I don’t know if PCGS does that. It’s an idea if they don’t … along with papers that stipulate once the seal is broken it invalidates the coins being what is stated on the slab.
The coin should have been re-submitted while in that slab once opened… you cant prove it’s the same coin! DUH..
GOOD LUCK and may we bomb china for allowing this to happen!?!?!