In three decades of investing in gold and silver, Dean Dellinger amassed nearly 27 pounds of coins.
His collection might have been worth more than $645,000 at current prices -- if he still had it. Instead, the 88-year-old Florida resident says his devotion to hard currencies made him an easy mark for a pitchman who cold-called and persuaded him to trade for a class of historic coins called "numismatics."
Dellinger alleges in a federal lawsuit that he lost more than $335,000 on a series of swaps. "The guy just skinned me," he said.
As gold has surged as high as $1,556 an ounce, many investors are learning the hard way that the marketing of valuable coins is a largely unregulated trade in which shady -- and sometimes illegal -- practices abound. Unscrupulous telemarketers misrepresent coin values, sell counterfeits or persuade customers to finance purchases with reverse mortgages or retirement savings.
"This industry is somewhat like the Wild West," said Ben Wogsland, a spokesman for the Minnesota state attorney general's office, which is investigating a half dozen local and national companies.
Gary Adkins of Edina, Minn., named Coin Dealer of the Year by the American Numismatic Association in August, says most firms are honest. But he acknowledged that some have persistent problems with fraud, theft and misrepresentation.
Adkins recalled examining some coins for an elderly Minnesota woman who took $250,000 from her savings and borrowed more to buy coins from a New Jersey dealer. The coins were worth about a quarter of what she paid, he said. "I hear these kinds of horror stories all the time."
Investors rally around precious metals as a hedge against inflation, a refuge from political storms that periodically roil world economies. As a result, the price of gold has tripled since 2005, adjusted for inflation, while silver nearly doubled to $48.70 an ounce at its April 28 peak.
Such precious metals as gold, silver, platinum and palladium trade in several forms. Bars and uncirculated bullion coins sell at or slightly above the market price of their metallic content, while the more subjective valuation of numismatics and other collectible coins makes them more prone to abuse.
Coin buyers are often wealthy elderly people whom firms identify from closely guarded marketing lists. Yet the kinds of protections that have evolved over the years in markets for stocks and other securities generally don't apply to coins unless pitchmen stray from scripts that carefully avoid characterizing them as investments.
Dellinger made his trade for the numismatics with Martin Klevens, a salesman who called from the Minneapolis firm International Rarities. He remembers Klevens as a smooth talker with a preacher's knack for instilling trust.
He didn't know that Klevens -- known as "Party Marty" by some former associates -- had been sentenced in 1997 to 25 months in federal prison after admitting to defrauding at least four coin buyers out of more than $160,000.
No law bars a person with criminal convictions from the coin industry.
It's impossible to say how widespread abuses are in the coin business. The Federal Trade Commission lumps coin complaints in with other art, gems and precious metals.
Experts say authorities never hear about most swindles, because those who get cheated eat their losses out of embarrassment or lack the money or records to file lawsuits.
Few lawyers will tackle the inherently complicated and expensive cases. It's hard to prove fraud, especially when elderly clients have memory problems or dementia.
But some consumers do fight back. Carlton Whetsel, 71, of Watertown, S.D., complained to the South Dakota attorney general after he had problems with Reputable Rare Coins.
He said the salesman on that transaction, Anthony Kloiber, told him the coins were worth $68,800. But last year, when Whetsel went to swap them, he says he learned they were worth far less even though the price of gold had roughly doubled.
Kloiber has been civilly committed twice because of heroin and crack abuse and mental problems, and has convictions for theft and passing bad checks.
Whetsel said a number of Minnesota coin dealers called pitching deals, and he finally agreed to a $48,800 trade offered by Reputable Rare Coins. This time, Whetsel said, he got nothing at all.
"I don't think I'll ever get anything out of it," he grumbled. "I'm not buying any more coins, I can tell you that."
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)