July 20, 2010 -- Congress will ask top executives from Goldline, the precious metals dealer that is a major sponsor of Glenn Beck's television and radio programs, to testify about the company's aggressive sales tactics.
"My view is that these commentators are doing a disservice to their viewers," said Rep. Anthony Weiner, a New York Democrat, in an interview with ABC News. " I don't know and it remains to be seen whether Goldline is doing anything illegal. It sure seems that way."
Weiner and Rep. Bobby Rush (D-Illinois) announced the hearing Tuesday after an ABC News report in which some customers of Goldline described how they felt cheated by the company. Consumer complaints have also prompted an investigation by local officials in California, who said they were disturbed to hear about the high pressure approach used by Goldline and one other company, Superior Gold Group. And they have prompted a class action lawsuit, filed in South Carolina Tuesday morning against the company on behalf of customers who allege they have been ripped off.
The most pervasive complaint focused on what one former Goldline employee described as a push to convince customers to invest their money in collectable gold coins, rather than in gold bullion. Unlike bullion, the coins carry a hefty mark-up. Goldline customers told ABC News that they found the coins were also much more difficult to sell without taking a loss.
In an interview on Good Morning America, Goldline executive vice president Scott Carter responded to allegations that his company has made a fortune by persuading gold investors that collectable coins are worth buying, despite the hefty mark-up. He said the firm, which weaves its sales pitches into broadcasts by popular conservative political personalities – including two former presidential candidates and Fox News host Glenn Beck – is simply offering its customers sound advice.
"You should hold this three to five years," said Carter, "preferably 10." He said that some of the price of the gold coins his company sells can be traced to "upfront costs." He noted that his firm had been in business more than 50 years, and earned half a billion dollars, and enjoyed an A plus rating from the Better Business Bureau.
Carter also restated a central point of Goldline's sales pitch – that the federal government took gold bullion from private citizens during the Depression, and could always do so again. That's why the company encourages customers to buy collectable coins instead. "It's hard to determine what the government will do," said Carter. "I don't know whether it's a possibility. But [it] has been done before and people are concerned. Many people are paralleling 1933 to today."
In 1933, the federal government paid market value for private stocks of gold.
A lawyer for Superior Gold said the company would not comment on the ongoing investigation by Los Angeles County and Santa Monica.
The Santa Monica City Attorney's office has asked any Goldline International customer with a complaint to visit its website at www.gold.smconsumer.org.
Congressional hearings are likely to extend the long-running debate between Weiner and Beck about the business practices of the precious metals dealer. Beck and Weiner have traded barbs on Fox News over Goldline, with Beck even creating a special web site to poke fun at the New York congressman.
But as the ABC News investigation revealed, the questions about Goldline appear to be moving beyond political theatrics. In addition to the joint investigation launched by the Los Angeles County District Attorney and the Santa Monica City Attorney, a law firm in Texas announced Tuesday that it has filed a class action lawsuit against Goldline in the U.S. District Court in Greenville, South Carolina.
"Goldline grossly overcharges for its numismatic coins and bullion, falsely and deceptively claims that its products are 'good' investments, and its sales persons misrepresent themselves as 'Investment Advisors' or 'Financial Advisors' able to give 'investment advice' and imply that they have a fiduciary responsibility to get customers the most return on their investments," the lawsuit alleges.
"Goldline products are, in fact, a bad investment, and its marketing scheme is nothing more than a scam designed to induce market-wary investors to purchase numismatic coins and bullion worth far less than represented by Goldline and its outside associates," said the lawsuit filed by Houston attorney W. Craft Hughes.
Carter, the Goldline executive, attempted to address the question of whether the company offers investment advice during his interview on Good Morning America this morning.
"You're talking about investments here but in fact your sales people are not investment advisers," George Stephanopoulos noted to Carter during the interview. "And the reason for that is so they can avoid regulation by state regulatory authorities and the [Securities and Exchange Commission]. They don't have this legal and fiduciary responsibility to look out for the customer."
"You're absolutely right," Carter replied. "We are not legal advisers, but they do understand precious metals, and individuals are calling to diversify their portfolio … And we take great pride in how we treat our customers."