A doctor from suburban New York told Congress Thursday that a salesman for the precious metals firm Goldline convinced him to convert his entire $140,000 IRA into gold coins, and that he lost almost $60,000 overnight by making the switch.
Dr. Julius Bazan's claim before a House committee echoed what a former salesman for Goldline told ABC News in an exclusive interview about the precious metal firm's alleged drive to convert retirement accounts into gold coins.
The hearing, which began Thursday afternoon, is meant to explore the reportedly controversial sales practices of Goldline, the precious metals dealer that pioneered the practice of weaving its sales pitches into broadcasts by popular conservative political personalities such as Glenn Beck, Mike Huckabee and Fred Thompson. Company salesmen have allegedly nudged callers away from buying gold bullion and into purchasing collectable coins, which are unregulated and subject to sizeable mark-ups.
"This industry is an orchestrated effort to scare people, to lie to them, and then to rip them off," said Rep. Anthony Weiner, the New York Democrat who called for the hearings, after Bazan had testified. The company has said Weiner's attacks are motivated by "a political agenda."
Bazan, a Czech-born neurologist from Lynbrook, New York, said in a prepared statement that in the fall of 2009, having seen Goldline's advertising, he decided he should "look into the purchase of gold" with the funds from a $140,000 IRA account.
Bazan said that he had wanted to buy bullion, but when he talked to a Goldline sales representative, the man steered him toward coins. "The representative steered me toward the purchase of gold coins because he said the price of bullion could be fixed by the government, but the price of coins cannot." Bazan said the sales rep told him gold would likely reach a value of $3,000 per ounce within the year.
"Thinking that I was doing something wise and safe for my retirement," testified Bazan, "I purchased approximately $140,000 worth of gold coins." Many of them were "eagle proofs," said Bazan, that cost more than $3,000 apiece.
Becoming concerned six months later when the price of gold did not move significantly upward, Bazan said he tried to sell the coins back to the company, only to find that they were valued at less than $85,000.
"Overnight, I lost almost 40 percent of the value of my retirement account," said Bazan, who said he believed he was "deceived" and "manipulated."
"I felt robbed," Bazan told the committee. "It felt like legalized robbery. I didn't expect to lose $60,000 the minute I purchased the gold."
Dr. Bazan's attorney, John White, told ABC News that the Goldline sales rep recommended to Bazan that he "go all in," and put all of the money in his IRA account into Goldline coins. White says the Goldline rep never mentioned that he should keep his investment to the five to 20 percent of his portfolio that the company claims is Goldline policy.
However, Goldine executive vice president Scott Carter, who also testified Thursday, said that Dr. Bazan had been fully informed of the risks of selling the coins before the company's recommended hold time, and that Bazan decided to sell anyway, knowing that he would lose money from the sale.
Goldline spokesperson Eric Hoffman told ABC News the company "strongly disputed" Bazan's contention that its sales rep encouraged him put all of his IRA funds into the gold coins, saying such action would be in strict violation of the company's policies and training.
But Carl Holmes, who worked as a Goldline salesman in 2008, told ABC News that during his time at Goldline, customers were steered toward coins, and that sales representatives were encouraged to get customers to move their retirement funds into gold coins.
Homes said that "if a customer were to call in and only want gold as far as bullion, then it was my job to persuade them to buy the collectors' gold."
"If I was unsuccessful, then I would turn the call over and get somebody else who was more quote unquote, "experienced," to see if they can persuade them to buy collectors' coins and get a higher commission," Holmes said.
Holmes also claimed that Goldline wants customers to put their retirement funds into "Gold IRAs," specifically eagle proof coins. "They encourage people to put their retirement money into these proofs," alleged Holmes.
In an interview, Goldline's Carter disputed Holmes' characterization of Goldline's sales strategy, but has defended the company's emphasis on collectable coins, which he said would be less likely to be subject to government confiscation.
Carter says the company is up front in its advertising that it wants customers to buy coins.
"Ultimately, our view is we believe in customer choice, full disclosure and a friendly and open sales process," he said. "Our most popular product, the Swiss 20 Franc, has earned a 240 percent return, excluding our fees. It's tough to argue with that return."
But Holmes told ABC News that the coins have largely resulted in poor returns for Goldline clients because he says they often find it difficult to resell them for anything close to what they paid. Even with the rapid rise in the value of gold, he said, most of those he sold coins to "have yet to break even."
Holmes said he eventually stopped pushing them and was eventually let go by the company for poor performance.
In his testimony Thursday, Carter stressed that Goldline "offers among the most comprehensive and clearly written disclosures in the precious metals industry. These disclosures include detailed information regarding Goldline's sales staff, the risks of investing in precious metals, and Goldline's pricing policies." He also said that Goldline encourages customers to consult financial advisors, and that 40 percent of Goldmine's customers are at any one time are repeat customers.
Carter had earlier questioned Weiner's motives for calling the hearings. Goldine has an A rating from the Better Business Bureau. "In an industry with a lot of F-rated companies, there's a reason why Goldline was selected," said Carter. "He's pushing a political agenda."