Sept. 23, 2010 -- Congress will open hearings Thursday into the 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.
Rep. Anthony Weiner, the New York Democrat who called the hearings, described Goldline sales tactics as a "profound rip-off" in an interview with ABC News. He plans to focus on methods that have turned the sale of gold coins into a multi-million-dollar bonanza for Goldline and other firms, especially in recent years as economic uncertainty has turned gold into a hot investment. The company, which is sending a top executive to testify, has said Weiner's attacks are motivated by "a political agenda."
But ABC News has learned the hearings may also draw attention to some of the controversial figures involved in the company, and activities they engaged in prior to taking jobs on the Goldline sales force.
Among them are three Goldline sales associates who were taken to court in the 1990s by the Securities Exchange Commission on allegations that they used deceptive mass mailings and what are sometimes called "boiler room" tactics to defraud 115 mostly elderly investors out of $1,180,000 over 13 months, according to court records. The scheme allegedly involved selling shares in a 1-900 telephone line. Investors were allegedly promised 24 percent returns after a four-month period or a 203 percent return after a sixteen-month period -- estimates the SEC called highly misleading and false, the court papers say.
Paul Land, Charles Boratgis and Morrey Wasserman settled the case without conceding guilt, but agreed to return all the money they had been accused of obtaining through their allegedly fraudulent scheme.
One of the three, Boratgis, later got involved in another controversial business, an investment business that the Commodity Futures Trading Commission described as engaging in "churning," or buying and selling excessively to generate commissions, in a scathing 2002 ruling. That year, the National Futures Association found that Boratgis had "made deceptive and misleading sales solicitations" and permanently banned him from the futures business.
Another of the salesmen, Wasserman, is identified in a complaint filed with the Federal Trade Commission this past February. The complaint against Wasserman includes a claim by a Goldline customer that Wasserman "outright lied to me" after the Goldline customer reportedly claimed he had been "ripped off big time." A spokeswoman for the FTC said she would not say whether or not Wasserman was being investigated, because the FTC does not comment on investigations.
Former Goldline Salesman Says Customers Were Urged to Buy Coins
Asked about the three salesmen, Scott Carter, Goldline's executive vice president and on-air pitchman, told ABC News he had only recently become aware of the allegations, but he did not consider them significant.
"It's something that's been resolved," said Carter from Washington, where he had flown to testify at Weiner's hearing. "Time has passed. The debt to society has been paid. All three are in good standing with the company. All three meet our standards. It's irrelevant to what Goldline does. These are three of 350 employees. There's not a death penalty here on their ability to work."
He also said that one FTC complaint against Wasserman after thousands of sales and years of service to the company did not warrant criticism of Wasserman.
Carl Holmes, who says he worked as a Goldline salesman from May to August 2008, described Land and Wasserman as "the cream of the crop" of the company's sales associates. According to Holmes, the two men trained new sales people, were responsible for handling the biggest accounts, and took over accounts from other sale reps who "needed help to close a deal."
ABC News attempted to contact Land, Wasserman and Boratgis at Goldline, but a company representative said they would not be made available for interviews. Carter said it would not have been unusual for any of the more experienced sales personnel to work with a trainee like Holmes.
The chief focus of the hearings will be allegations that company salesmen have nudged callers away from buying gold bullion and into purchasing collectable coins, which are unregulated and subject to sizeable mark-ups. According to Holmes, "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.
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."
Goldline Investigation in California
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.
Customer complaints about the company ultimately led to a formal, ongoing investigation launched jointly by the Los Angeles County District Attorney and the City Attorney in Santa Monica, where Goldline is based. The complaints also caught Weiner's attention. He has proposed legislation that would force Goldline, as well as other coin and precious metal dealers to disclose all fees as well as the melt value and reasonable resale value of any purchase in a clear and conspicuous manner. If it passes, the legislation would give the Federal Trade Commission the authority to fine companies that violate the law up to $16,000 per violation and gives states the authority to enforce this law as well.
Carter said he considers the current version of the legislation unworkable. Goldline has hired a top DC lobbying firm to help defeat it.
Carter also 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."