Real Wealth #307 03/21/2012
Why I Keep Warning Investors NOT To Store Their Gold, Silver, Platinum and Rare Coins with Dealers or Dealer Owned Depositories
About a year and a half I visited Delaware’s First State Depository Co. and met with Bob Higgins who represented himself as one of its owner’s and the principal owner of a rare coin company, Certified Assets.
I was considering merging with another rare coin dealer and lightening my work load. I’ve known Bob Higgins for many years but only on a very casual, distant basis.
A former partner of mine (20 years ago) had been encouraging me to consider working with Mr. Higgins. So I agreed to accept his offer of an all expense paid trip to visit with Mr. Higgins and take a tour of First State Depository and his rare coin and precious metals offices.
During my visit and tour of both businesses, First State and Certified Assets, I became very concerned about the potential for abuse of the clients’ assets that were being stored in the depository. My concerns prompted me to do a deeper investigation.
I spoke to several former and then current employees as well as several rare coin and precious metals dealers with knowledge of both of Bob’s businesses. I was alerted to some serious problems.
First, I was told that not only had Bob earned a reputation as a slow pay, but also as someone who on several occasions had bounced checks on fellow dealers and vendors.
I discovered his real financial condition almost immediately when I tried to collect the paltry sum Bob promised me before visiting him in Delaware. The cost of my one day visit was just $660. After several attempts of being reimbursed I was finally paid... only after sending him this article for his comments (he had no comments).
Second, after visiting I wrote him via email that I was very concerned that his depository was being run by one or more of his sons and pointed out that I believed this nepotism was a mistake and that if anything bad happened with the depository, his son(s) would be at risk of civil and potential criminal liability.
I suggested to Mr. Higgins that he should hire a retired FBI agent holding a CPA license to run First State Depository Co. which would keep the depository at arm’s length from his rare coin firm and anyone connected with his family from even the appearance of impropriety.
Third, current employees at the time as well as former employees began revealing that Mr. Higgins’ rare coin firm (Certified Assets) was frequently bouncing checks and that some clients were not receiving the rare coins or precious metals they purchased. This wasn’t a case of a delay of a few days or weeks, but a situation that was becoming a matter of at least a year of non delivery.
The more I learned about Mr. Higgins, the more alarmed I became. I ordered my staff... NEVER do business with Mr. Higgins or his firms -- absolutely NEVER.
It was and still is my belief that anyone doing business with Mr. Higgins or his firm Certified Assets could get caught up in a bankruptcy and possibly a financial scandal.
One of the clients to whom Mr. Higgins’ rare coin firm owed and still owes an enormous six figure amount lodged a complaint for arbitration in 2011 with the Professional Numismatic Guild (PNG). The arbitration was postponed because one of the true heroes in the rare coin industry managed to negotiate a repayment schedule for the client with Mr. Higgins. This resulted in the PNG arbitration hearing being postponed. Soon after the hearing was postponed Mr. Higgins chose to resign his membership in PNG.
An genuine industry leader did help the situation and during 2011 and so far in 2012, Mr. Higgins rare coin firm (though staggered and slow) has reduced the amount of the debt to less than half of the original amount. Higgins firm still owes this client (a man in his mid 80s and disabled) well into the six figures.
I stayed completely away from Mr. Higgins and his rare coin firm, but watched with great concern as I heard through the rare coin and precious metals industry grapevine that checks were still bounced from time to time and payments were being delayed to both private clients and dealers.
At the Chicago American Numismatic Convention, an annual rare coin show, one of my employees was approached by Mr. Higgins in an attempt to open the door to do business asserting that “James has me all wrong. I’m a giver not a taker”.
My response was and remains BALONEY! I just don't believe anything Mr. Higgins says.
Recently Mr. Higgins announced he and a new partner were launching a $250 million dollar rare coin fund. It is my belief that he has been unable to get this project off the ground. Regardless if he can get it launched I am still left with some enormous questions because...
A little longer than a month ago on February 15, 2012, Bloomberg reported that the Israel Discount Bank (IDB) filed suit against First State Depository Co over a “$17 Million Coin Cache”.
The Israel Discount Bank of New York sued Delaware’s First State Depository Co. and is asking a judge to preserve a $17 million collection including rare gold and silver coins being held as collateral for loans.
The lawsuit filed on Feb 13th alleges the Wilmington depository has been transferring the coins in violation of an agreement with the bank, a unit of Tel Aviv-based Israel Discount Bank Ltd.
“In addition, IDB discovered that the defendants are marketing for sale and are attempting to sell” some of the assets without permission, according to the court papers filed.
The bank is asking the presiding judge to freeze the assets still in Delaware, forbid coin transfers and enforce its right to inspect the deposits.
Included in the cache, the bank says, are more than 12,000 rare presidential or Sacagawea dollar coins with missing edge markings; other collector-quality gold and silver coins; and bullion, according to court papers.
Keep in mind that First State Depository Co. also stores gold and silver IRAs for investors.
“Israel Discount Bank of New York won a contempt order against Delaware’s First State Depository Co. after asking a judge to preserve $17 million in coins and bullion being held as collateral for loans.
“Delaware Chancery Court Judge Donald F. Parsons Jr. today imposed a $5,000-a-day fine on the depository company until it complies with a Feb. 29 order that gave IDB the right to have the coins returned to Delaware for safe-keeping, inspection and appraisal. “
If you’re doing business with First State Depository Co, Certified Assets or Mr. Robert Higgins, the principal of these firms, I believe you should cease and desist and IMMEDIATELY get any rare coins, coins and or precious metals back into your possession that he and or his firms may be holding for you. It is my belief that this may be very hard given the court order(s) issued by Delaware Chancery Court Judge Donald F. Parsons Jr.
Mr. Higgins may believe this my writing this article is a personal vendetta but it’s not. I’ve been in the rare coin and precious metals business since I was 16 and I have seen depositories collapse into bankruptcy as well as many precious metals and rare coin firms. As the editor of the fiercely independent Silver & Gold Report from 1992 to 1997, I exposed scam after scam and warned about companies that later collapsed and saw their principals go to jail.
Bad firms hurt the rare coin and precious metals markets and harm the investor and collector community. When companies collapse and are holding private investor assets: Investors often wind up with pennies on the dollar if they are lucky.
It’s not personal. I think it’s an obligation as a member of the precious metals and rare coin industry for over 35 years to warn the public when there is smoke. The smoke is thick in my opinion.
I believe, anyone thinking of investing in Mr. Higgins new $250 million fund should do their due diligence. All of this reminds me of a lot of the nasty revelations we’ve seen come to light as Wall Street melted down in 2007 through 2010.
My recommendation: Steer clear of Bob Higgins, Certified Assets, First State Depository Co. and his $250 million fund. It’s my belief that this is a giant mess to be avoided.
James Di Georgia
Please see risk disclosure link below.
All rights reserved.