By Doug Shadel and Joe Eaton
They were heavy—a single coin weighed about as much as a half-dozen quarters. But a stack of 14 didn't look much grander than the spare change on a dresser. It was hard to believe that this little pile of metal was worth $32,000.
Or was it?
Daphne Clark* bought the gold coins in December 2012. They were U.S. Saint-Gaudens Double Eagles, named after their designer, the sculptor Augustus Saint-Gaudens. Coin aficionados — numismatists, they're called — prize these $20 pieces, minted from 1907 to 1933, as the most beautiful American currency ever made.
Clark was no numismatist. A 50-year-old Denver-area small-business owner who considers herself a small-government-minded libertarian, she bought gold for its value, not its beauty: She was uneasy about the state of the U.S. financial system. A few years ago, she purchased shares of gold through a broker, but all she got was a certificate; the gold was in a vault in Australia. If something terrible happened to the economy, she wanted to be able to physically get her hands on her stuff.
A company called Merit Gold & Silver ran ads offering bullion for 1 percent over dealer cost. When she called, the salesman told her that collectible coins were a better investment, outperforming bullion by more than 2 to 1. And he said Merit could buy them back anytime, charging only that 1 percent fee. She bought 14 coins.
Six months later, Clark began to worry. The price of gold had dropped more than $300. The salesman had assured her that these coins would help protect her from short-term fluctuations. How much were hers worth now? She didn't know. She had never received condition reports from Merit, just an invoice. And when she opened up her safe-deposit box and inspected her hoard, she saw that all the coins had different dates, and they looked dull and worn. Although Clark called Merit repeatedly to ask about this, she kept getting sent to voice mail.
Her fears were confirmed when she had the coins appraised at a local shop: Instead of 1 percent over cost, she'd been charged $600 more per coin, and more than $8,000 in total — a 35 percent markup. And as the price of gold plummeted, the value of her investment kept melting away.
Online, she found that several customers were suing Merit for deceptive marketing. Later, she learned that the Santa Monica, Calif., City Attorney's Office had launched a consumer protection lawsuit against the firm, alleging it engaged in an "aggressive, nationwide fraud scheme that has bilked consumers out of tens of millions of dollars."