Coin Dealer Ethics - Counterfeit Coin Follow-up

Last week, our Coin Dealer Ethics question was about a teenage collector named Casey who took his 1914-D Lincoln Cent out of a grading service holder so he could put it in his Whitman folder. The coin later turned out to be counterfeit, but Casey had saved the little paper ticket from the slab to prove who graded it. The grading service wouldn't make good on the value of the coin, and the coin dealer Casey bought it from also refused to take it back, claiming that Casey lost his guarantee when he broke open the holder. (The entire scenario can be found on the original counterfeit coin question page, along with additional comments besides those quoted here.) We asked, "Should Casey be stuck with the counterfeit coin?"

This was actually a rather tricky scenario for many long-time ethics purists out there, because it has always been held that a counterfeit coin can be returned to the dealer, no matter what, and from there it passes backwards through the supply chain, hopefully to the perpetrator who entered it into the market. In practice this rarely happens; somewhere along the line a dealer eats it, usually because he bought the coin from a non-dealer at a low price in an "as is" transaction. In these days of wide acceptance of third party grading services, the dealer can simply return the slabbed coin to the grading service, who hopefully honors its grading and authenticity guarantee by replacing the coin or its cash value. When Casey broke the coin out of the slab, he created what reader Charles Du Bois calls "a can of worms":

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. --Charles Du Bois

Readers were divided about who should take the loss. Some felt that the grading service should have made good on it anyway:

It is a tough question? I think that the grading service should remit Casey money for making a mistake. --Lee Ethridge

Another reader would also hold the grading service liable, but with a caveat:

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. --Mike Diamond

Most people felt that Casey was out of luck:

Unfortunately, I think the consumer takes the loss on this one. Once it is out of the holder, you have no way of proving 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. --David

I have to agree taking the coin out of the slab voided its grade and authenticity. Can’t hold the grading service responsible for this one. --coinycom

As of press time, not one person had given the opinion that the coin dealer should make good on the coin. According to the American Numismatic Association's Code of Ethics, as well as the Professional Numismatists' Guild (PNG) Code of Ethics, not to mention longstanding tradition, the buck stops with the coin dealer. He is held to a higher standard because it is his professional trade, and I have to assert the idea that if we begin letting dealers off the hook, for any reason, they will have a lesser incentive to police the marketplace of counterfeit coins. Even if the coin is in the most prestigious slab in the business, I believe that dealers should still be on the lookout for counterfeit material in the areas they specialize in because they are the most highly qualified people to do this task for us all. If we begin excusing them of this responsibility, we all suffer a more dangerous marketplace.

Our next Coin Dealer Ethics question has to do with nasty practices. Check out the scenario and tell us what you think in the comments section for that page.