National Coin Dealer Must Also Refund Up To $4.5 Million To Customers, Set Up Fund For Additional Claims
The Santa Monica City Attorney’s Office has obtained a judgment and injunction against Goldline International, Inc., one of the nation’s largest gold coin dealers. The injunction, believed to be the strongest ever levied against a precious metals dealer, requires Goldline to change its unfair sales practices and provide accurate price information to consumers. It also requires Goldline to refund up to $4.5 million to former customers and to pay $800,000.00 into a fund for future claims. The court has appointed a Monitor to ensure Goldline’s compliance.
The judgment was signed today by Judge Lisa Hart Cole of the Los Angeles County Superior Court. The injunction is part of an agreement between prosecutors and the gold dealer in a consumer protection lawsuit filed by the City Attorney’s Consumer Protection Unit. The City Attorney’s Office had previously filed criminal charges against Goldline which have now been dismissed.
- Consumers from around the nation said they wanted to buy gold bullion as a safe haven for their savings or retirement accounts. But Goldline’s salespeople scared them into buying the overpriced coins instead, saying the coins were a safer and better investment than bullion. Only later did the customers discover that the opposite was true: they instantly lost a large portion of their savings due to the high markup on the coins.
- Consumers were falsely told that the government could confiscate and seize gold bullion, but that this could not happen to the overpriced coins.
- Consumers typically paid more than 55% over the actual value of the overpriced coins, but Goldline’s salespeople concealed this markup even when consumers asked about it.
- Former employees came forward and said the company trained them how to switch consumers from bullion to the overpriced coins through misleading fear tactics.
- Most consumers found Goldline through its TV ads. They trusted the company based on its well-known celebrity endorsers. Only later did they discover they had been misled into paying far over market value for coins that were worth little more than gold bullion to begin with.
The injunction requires Goldline to:
1. Disclose its actual price markups, in recorded calls before each transaction.
2. Not tell consumers that the government can confiscate gold bullion.
3. Follow a strict, factual script when discussing topics that were used in the past to mislead consumers.
4. Not attempt to sell customers higher-priced coins once they have already paid for bullion.
5. Give customers prompt refunds without hassle.
6. Set up a new phone line, manned by non-commissioned employees, for refunds, liquidations, and other customer service.
The injunction will last for five years. It can be terminated after three years if Goldline maintains a clean record for the last six months.
“This injunction requires Goldline to overhaul its business model,” said Deputy City Attorney Adam Radinsky who heads Santa Monica’s Consumer Protection Unit. “Consumers will now know the company’s true price markups, and they won’t be scared or tricked into buying something they don’t want. False and misleading fear-mongering, bait and switch tactics, and vast hidden markups cannot be tolerated. All consumers deserve to be treated fairly.”
The judgment also requires Goldline to offer refunds to customers who complained to authorities, in the total amount of up to $4.5 million. Customers getting refunds will return the coins they had bought.
Goldline must pay an additional $800,000.00 into a fund for future restitution claims. Consumers who purchased coins after November 1, 2008 and were defrauded in similar ways are eligible to receive restitution. Any funds remaining after restitution has been paid will go to the statewide Consumer Protection Prosecution Trust Fund.
Former customers who believe they were defrauded by Goldline must file a claim at this website by May 22, 2012: gold.smconsumer.org
The court order appoints Anthony Pacheco of the law firm Proskauer Rose in Los Angeles, as Monitor of the injunction. Pacheco will have full access to all company records. He will attend staff meetings, perform undercover test buys, and review actual sales calls, to assure that the company adheres to the court order.
Pacheco, a former federal prosecutor, also served as President of the Los Angeles Board of Police Commissioners, overseeing the federal consent decree of the L.A. Police Department for two years.
Goldline will pay the cost of the Monitor.
“This is a new day. Consumers in California and elsewhere, many of whom invested thousands of dollars and their life savings in the belief that the gold they were buying was a valuable and safe investment, will now get substantial relief. No one should have to suffer from predatory and deceitful sales practices,” said Radinsky. “Whether they are buying gold or anything else, consumers expect a fair deal. We insisted that Goldline give them just that.”
“We hope this case is a wake-up call to other large coin dealers and to other businesses,” said Radinsky. “They need to know that it’s against the law to mislead consumers with false fears and misinformation. And consumers need to be especially careful when investing in this uniquely unregulated industry.”
Contact: Adam Radinsky, Head, Consumer Protection Unit