PCGS TAKES AIM AT COIN DOCTORS

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V13 2010 INDEX E-SYLUM ARCHIVE

The E-Sylum: Volume 13, Number 22, May 30, 2010, Article 24

Dave Perkins of Centennial, CO forwarded the latest press release from PCGS about their planned service to detect altered coins and their lawsuit against several alleged "coin doctors." -Editor

Professional Coin Grading Service (PCGS) today revealed additional steps it is taking to improve its ability to detect altered coins. PCGS announced that it has a process in development which will detect any foreign substance on a coin's surface, and also announced a major lawsuit filed against alleged coin doctors.

According to PCGS officials, in conjunction with the development of coin recognition technology launched in March of this year, PCGS has been developing a process to detect foreign materials and other enhancements to a coin's surfaces. Using energy dispersive X-ray spectrometry (EDX), Fournier Transform Infra-Red Spectral analysis (FT-IR), Raman Spectroscopy and other similar analytical techniques, this detection process (code-named by PCGS the PCGS Coin Sniffer�) will analyze the surfaces of a coin in a matter of seconds to detect foreign substances and provide quantitative information about the coin.

"Coin doctors" often apply numerous materials to the surfaces of coins to conceal problems with the coin, and/or alter the surfaces to improve its appearance in an attempt to artificially increase its value. The simultaneous alloy determination will further aid in the detection of counterfeits as an additional benefit.

Additionally, Collectors Universe, Inc. (NASDAQ: CLCT), the parent company of the PCGS, has filed a Federal Court suit in United States District Court, Central District of California, against several individuals claiming they engaged in a pattern of racketeering activity, breach of contract, conspiracy, unfair competition and fraud for allegedly submitting 'doctored' coins to PCGS for grading on multiple occasions for a period of years.

The suit claims the dealers violated federal laws, including the Lanham Act involving interstate commerce and RICO racketeering statutes, and also alleges "unlawful, unfair and fraudulent business practices" for submitting coins that were deceptively altered in an attempt to increase their value.

The Complaint states: "Defendants knew that these coins had been 'doctored,' by themselves and/or other persons engaged by them for that purpose. Their methods included lasering the surfaces of extremely rare proof gold coins to remove surface imperfections, building up commonly-worn or weakly-struck portions of coins, and other physical and chemical processes. Defendants represented to PCGS that these coins had natural surfaces, intending to deceive PCGS's graders so that the 'doctored' coins would be certified by PCGS and then sold in the rare coin marketplace."

This detail image of a "doctored" Standing Liberty quarter shows the decomposition of soft metal that was applied to the coin and shaped, apparently with a jeweler's engraving tool, to simulate a "Full Head." (Photo by PCGS.)

The lawsuit should generate some interesting reading in the coin press. Three of the defendants are Professional Numismatist Guild members, and ten are unnamed "John Does". The suit invokes the RICO statute, claiming "a pattern of racketeering activity".

Some of the dealers are demanding the return of their coins, but the plaintiff says they're holding on to them as evidence; the suit also calls for the defendants to "be ordered to deliver for destruction all "doctored" coins in their possession which have been placed in PCGS holders". Here's a quote from the filing describing the types of alleged "doctoring". -Editor

Defendants knew that these coins had been "doctored", by themselves and/or by other persons engaged by them for that purpose. Their methods included lasering the surfaces of extremely rare proof gold coins to remove surface imperfections, building up commonly-worn or weakly-struck portions of coins with exotic metals, and other physical and chemical processes.