From CoinWeek reported by Charles Morgan and Hubert Walker ………

On February 13, 2014, the Santa Monica City Attorney’s Office filed a consumer protection lawsuit against Santa Monica-based Seacoast Coin, Inc., which is better known as the precious metals dealer Merit Gold and Silver.

Merit is one of the most prominent precious metals dealers in the industry, advertising gold and silver investment instruments on national TV and radio outlets, as well as online. The company is headed by Peter M. Epstein and Michael J. Getlin.

The complaint, case number SC122066 filed with the Superior Court of the State of California for the County of Los Angeles, alleges that Merit engaged “in an aggressive, nationwide fraud scheme that has bilked consumers out of tens of millions of dollars.”

Attorneys for the city claim that Merit has, since at least September 26, 2009, operated a massive “bait and switch” scam, enticing customers–many of whom were senior citizens–to call to order gold and silver bullion at “1% over cost”, only to convince them to buy numismatic and semi-numismatic coins at a premium.

getlin2 Merit Gold & Silver Lawsuit: Third Bullion Firm Targeted Under California Consumer Protection Law

Peter Epstein and Mike Getlin are the two principles named in the suit.

Some of the alleged sales methods are detailed in the filing; they include falsely stating that numismatic and semi-numismatic coins:

• are a better investment than bullion

• offer more privacy than bullion

• are not “reportable” on consumers’ taxes

• can’t be confiscated by the government, while bullion can be.

In addition, the complaint alleges that Merit intentionally confuses consumers “as to which products they are buying, so that many still believe they are paying only one percent over Merit’s cost when in fact they are paying more.”

Santa Monica city attorneys are seeking injunctive relief, fines, and restitution of all monies wrongfully obtained from customers. The case falls under California’s Unfair Competition Law, which protects consumers from false advertising, fraud, and other unlawful business practices.

The suit bears some resemblance to the 2011 lawsuit Santa Monica brought against another bullion dealer, Goldine International Inc., which settled in February 2012 and refunded up to $4.5 million back to customers. The city then went after a second gold dealer in 2012, Superior Gold Group, which was ultimately placed in receivership. Attorney Alan Radinsky, who is involved with the present litigation and was also involved in the two prior cases, spoke with us by telephone about the charges his office is making against Merit.

Radinsky said, “The biggest problems with the precious metals industry is that consumers do not know they are being tricked. The main consumer allegation against Merit is that the 1% is merely the bait. The business model is based on switching consumers from bullion to marked up numismatic and semi-numismatic coins. Merit’s business model is to aggressively disparage bullion in order to get the customer to buy their other coins instead.”

CoinWeek contacted Merit and spoke with Executive Vice President Mike Getlin about the allegations. Getlin defended Merit, saying that Radinsky and city attorneys have misrepresented the facts and acknowledged that the investigation into Merit’s business practices have been ongoing for more than a year. “We were open with them, “said Getlin, “we substantiated our marketing practices and cooperated fully.”

In separate remarks prepared by Getlin in response to the lawsuit, Merit claims that city attorneys Gary Rhoades and Adam Radinsky are representing as facts “several statements that they know to be false and or misleading.”

merit3 Merit Gold & Silver Lawsuit: Third Bullion Firm Targeted Under California Consumer Protection Law

In an undated internal memo, Merit disallows practices charged in the suit.

Getlin insists that Merit, contrary to claims cited in the complaint, does not and did not use dubious sales pitches (like the possibility of future gold seizures by the federal government) to sell its products. Getlin provided us with a company policy form that shows that Merit forbids the discussion of taxes, tax reporting, and the threat of government confiscation in order to sell its products and penalizes its sales advisors with forfeiture of commissions and possible termination for violating this policy. Members of their sales staff are required to sign and acknowledge this form.

Getlin also says that his firm did not use misleading tactics to upsell customers on non-bullion coins, pointing to an article Getlin wrote for the International Business Times, where he cautions precious metals buyers to be dubious of sales pitches that claim that government seizure of gold is likely or imminent. In the same piece, he argues that buying rare or semi-rare coins offers many advantages from “an investment standpoint.

Still, Getlin says that despite his personal feelings on the matter, Santa Monica’s charges are without merit, as the firm Merit has sold hundreds of millions of dollars in bullion at 1% over dealer cost.

CoinWeek will continue to follow the legal proceedings closely and provide updates when the situation warrants.

 

 
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17 Comments

  1. Chingatch says:

    Radinsky said, “The biggest problems with the precious metals industry is that consumers do not know they are being tricked.”

    Uh, that’s true of ANY industry. You can only get tricked if you don’t know you are being tricked. Sheesh!

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  4. unbubbleslayr says:

    Upselling is a “bait and switch”? Since when? I also believe that a collectible coin often can be a better investment that bullion. The Attorney Office seems to have overreached its power. Frivilous lawsuit!

  5. Hank says:

    They sold me 21 four piece gold eagle sets for $99999.90. They were worth $67000.

    They are sleazy salesmen with 1% over spot banner ad campaigns.

    I hope they get shut down and stop taking advantage of people’s ignorance.

  6. Donald Hauser says:

    There is far greater profit potential with old rare American gold coins than there is with gold bullion.

  7. Charles Morgan says:

    @Donald,

    Sure, there is greater profit potential with “old rare American gold coins”. I’m not sure if that is what this firm or other telemarketing firms offer. By definition old rare American gold coins” are rare- and hardly would be sold through these channels to unsophisticated buyers.

    I don’t know what Merit did or didn’t do to draw the ire of Santa Monica’s attorneys. That will come out in the wash and be settled in court.

  8. James says:

    I’ve ordered gold and silver *bullion* from Merit many times and sure, they will take a moment to pitch you on higher markup *premium products*. Merit was never high pressure and it’s not against the law to make a profit. However, this smells like another “lawsuit for profit” where the government rushes in to protect consumers from themselves.

  9. Mark says:

    They were the first place I called when looking into bullion. I did not let them pressure me (they tried and two years later still trying) to buy anything. I looked into them after the phone call since I didn’t get a warm fuzzy over the phone and found many problems with customer complaints. I did however find a reputable mint/dealer down in Texas and have zero complaints. The customer is ultimately responsible for doing business with someone that won’t burn you.

  10. Vic says:

    Is what they do illegal? No. Is it crappy to prey on folks ignorance and fear? You betcha. It’s not just merit and goldlne, Most of the gold companies do it. The lears, rosilands, capitals, birchs, reagals, heritages, fortresses. Here is the deal. Bullion 2 to 6% above cost good and fair for the consumer.30-35% on numismatics, proofs or burnished, very, very bad for the consumer and fantastic lifestyle enhancer for gold salesman. Good rule of thumb. Check out A P M E X before you do anything. No faster way to get rid of an annoying gold telemarketer than mere mention of A P M E X. Caveat emptor, people. Caveat emptor. If you think you got a bad deal call them and complain and leave an honest review on ripoff report and the BBB. They really love it when you do that.

  11. Michael says:

    I’ve dealt with Merit for years and haven’t had a problem. Yes, they pitch collectible coins. But, they pitch bullion too. I’ve never gotten any pressure tactics from Merit. No spam e-mails. The 1% claim seems to be accurate. I’m not a coin collector although I have some old US gold that I bought back in the 1970-80′s and have sat on them. Today they’re worth a lot more than bullion coins. When I bought them, they weren’t. Tomorrow, who knows? That’s the problem with collectibles in general. It’s an area novices should stay out of.

  12. Chris says:

    If it sounds to good to be true, then it is. Do people really think a business can operate at a 1% markup? I don’t agree with bait and switch, and I do agree that Merit has mislead MANY of their customers, by not telling them the coins they were buying were not 1%, but if you as a consumer are ignorant enough to believe that you can buy ANYTHING for 1% then maybe you shouldn’t be buying gold.

  13. wacko jacko says:

    Caveat Emptor or Buyer Beware,

    The problem with this is the majority of potential clients are senile. How do I know, I work for one of them. They advertise on Fox and most senior citizens call in and get taken to the cleaners by slick guys who push them into 30% numis. Everyone of these companies I bet operates like this. Everyone working in the gold business knows it. There is no profit margin on bullion unless you are a big bulk dealer like Apmex or NWT Mint. I smell the government cracking down on all of us.

    Maybe I am having a Jerry Maguire moment.

  14. philip lippens says:

    I was a victim of bait and switch with merit . They got about $700.00 extra out of me . Can I get that back ? Could someone tell me who to call about this or give me any information or update on this matter ?

  15. Gary P. says:

    I’ve only had one dealing with them. All I can say is
    it went as smooth as butter. No pressure, salesman mention
    premium products but I said no and the conversation went
    back to bullion. If you don’t know what your buying then you need to do your research first. There is nothing wrong with asking what they may recommend but research it before purchasing. I mean really do you just test drive a new car and say I’ll take that one without looking at reviews(resale/trade-in value) on the web?

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