by Charles Morgan and Hubert Walker for CoinWeek….
Breaking Down the PNG Alert ……….
Yesterday, one of CoinWeek‘s principles received an email communication from the Professional Numismatists Guild concerning a U.S. Justice Department initiative known as “Operation Choke Point”. The original email was intended for PNG members only, but was subsequently published yesterday on the NGC website. Having entered the public domain, CoinWeek did some research and fact checking on the content and conclusions drawn, and here is our analysis.
In the email, PNG Executive Director Robert Brueggeman claims that the “Choke Point” program has the potential to “shut down every coin dealer” and kill the rare coin industry. In addition, the email states “this urgent email is sent to make sure every PNG member is aware of this profession-killing peril, and to encourage members to promptly take appropriate action.” …… and to “personally contact your local member of the United States House of Representatives and your state’s two U.S. Senators to strongly urge them to vigorously oppose the frightening, sweeping generalizations of Operation Choke Point“. 
Details concerning the initiative have emerged in recent months, drawing concern from government watchdog groups and some in the media who feel that the Department of Justice (DOJ) is using extralegal means to browbeat banks and keep them from funding certain businesses in order to make them go away.
Issues surrounding Operation Choke Point caused enough concern for California Congressman Darrell Issa (R-CA49) that his Committee on Oversight and Government Reform launched an investigation into the program. In the committee’s report, published May 29 of this year, Issa and the committee’s Republican members found that the DOJ was using the program to target companies that the Obama Administration considers “’high risk’ or otherwise objectionable…”.
The committee’s ranking Democrat, Maryland Congressman Elijah Cummings (D-MD7), dismissed the charges, telling Mother Jones, “Contrary to the chairman’s accusations, documents produced to the committee show that the Department is using lawful investigative techniques to reduce consumer fraud.”
The Department of Justice also defended its program, pushing back against those that say it is targeting industries not favored by the Obama Administration. The Department says that it was going after only those companies engaged in fraudulent activities.
A May 7 blog post highlights the biggest success story of the anti-fraud campaign, which led to a $1.2 million settlement by North Carolina-based Fair Oaks Bank, a company that knowingly processed fraudulent transactions through a third-party payment processor.
So how does this Department of Justice effort to curtail online payment fraud and the partisan squabbling that accompanies it affect the rare coin industry?
In the email, the PNG characterizes the initiative as having the “potential to shut down every coin dealer… in the United States” because “according to the Justice Department, you [PNG Coin Dealers] are engaged in a business with high risk for fraud.”
Yet despite the urgent nature of the PNG’s email, the evidence does not support the narrative. When contacted, neither the PNG nor Darrell Issa’s office could provide any examples of a coin or bullion dealer whose accounts were frozen or suspended due to Operation Choke Point. Furthermore, the email’s author misinterprets the documentary evidence of a government threat to the industry.
The Department of Justice did not claim that coin dealers are “high-risk” merchants. The “high-risk” label was used in relation to “coin dealers” in an article published by the Federal Deposit Insurance Corporation (FDIC) in the Summer of 2011—two years before Operation Choke Point was first disclosed.
That article, “Managing Risks in Third-Party Payment Processor Relationships”, describes “potential risks associated with relationships with third-party entities that process payments for telemarketers, online businesses, and other merchants.” The FDIC was prompting member financial institutions to “develop policies and procedures addressing due diligence, underwriting, and ongoing monitoring of high-risk payment processor relationships.”
Some parts of the rare coin industry operate online and past legal issues with telemarketers may be one reason for the inclusion of coin dealers in the 2011 report. It should also be noted that the FDIC article was generated in the shadow of precious metals dealer Goldine’s legal woes in 2010 and the very public feud between Glenn Beck and former New York Congressman Anthony Wiener (D-NY9) over Goldline‘s business practices.
In any event, the Industry Council for Tangible Assets, an organization that lobbies state and federal legislators on behalf of the rare coin and precious metal industry, are sending out a press release today saying that its legislative consultant, Jimmy Hayes, attended the House hearings on Operation Choke Point and….. “Based on these hearings, Hayes does not believe that coin dealers will be a target of this overreaching initiative by the Department of Justice.“
As of now, it would appear that there is no evidence that the coin industry is in peril. However, we will continue to follow the issue and keep you informed when and if the facts on the ground change.
The Slow Decline of the Baseball Hall of Fame Coins
With apologies to Kagin’s, Inc. and the the Saddle Ridge Hoard, the 2014 National Baseball Hall of Fame Commemorative Coin Program has been the numismatic story of the year. The curved coins have not only drawn huge collector interest, but slow delivery of the sold-out gold $5 and silver $1 coins on the part of the U.S. Mint has spurred widespread speculation for the cup-shaped coins.
If recent Buy/Sell prices on the dealer-to-dealer Certified Coin Exchange mean anything, then the gravy train may be slowing down. The Buy/Sell price for one prominent dealer (published 6/19) indicates a bear market, at least in the short term, with an offer price of $630 for proofs delivered over the next two to five weeks. This is down $51 from the dealer’s current buy level. Other dealers who post on the site anticipate similar declines. 
This comes on the heels of the Mint finally delivering its orders. The bulk of the issue has now shipped, with the remaining pieces scheduled for delivery at the end of June. How the market handles 50,000 gold Baseball coins remains to be seen, but the fact remains that the issue has become much less scarce in recent days.
The silver dollar coin, which also sold out, has a much higher mintage (400,000 coins), but as David Harper at Numismatic News points out, deliveries on this coin has been slower. The Mint told Harper that only one third of the issue has been shipped, and they anticipate that it might take until the end of July to fill all of the outstanding orders.
Current Buy prices for the dollar coin are in the $74-$76 range. Dealers are offering to pay just $55 for coins delivered in July.
While dealer support for limited edition labels remains firm, the collapse of industry support for the Baseball Hall of Fame coin in its raw form may be a signal that the bubble is about to burst on the most heavily promoted coin in recent memory.
You can read the Congressional Committee on Oversight and Government Reform report on Operation Choke Point here.
 Brueggeman, Robert. “Urgent Message to PNG Members RE: U.S. Justice Dept.” Message to PNG Members. 19 June 2014. E-mail. and on NGC Website
 http://www.motherjones.com/politics/2014/06/benghazi-gun-scandal-issa-operation-choke-point. Accessed 6/19/2014
 Brueggeman email.
 http://www.fdic.gov/news/news/financial/2012/fil12003.html. Accessed 6/19/2014.
 http://us2.campaign-archive2.com/?u=3a90934e89a30d36e46945425&id=7e73a66801. Accessed 6/19/2014.
 http://www.certifiedcoinexchange.com. Accessed 6/19/2014.
 http://www.numismaticnews.net/article/news/general/baseball-coin-deliveries-still-lag. Accessed 6/19/2014.