Goldline Agrees to Refund Millions to Customers
In settlement, gold dealer will also change sales practices.
Feb. 22, 2012 — -- The precious metals dealer Goldline will have to operate under a strict new set of rules as part of a California court settlement late Wednesday of a 19-count criminal fraud complaint brought against the company last year.
"No one should have to suffer from predatory and deceitful sales practices," said Adam Radinsky, who heads the consumer protection division for the Santa Monica City Attorney. "Whether they are buying gold or anything else, consumers expect a fair deal. We insisted that Goldline give them just that."
As part of the settlement, all criminal charges were dropped.
One of the nation's largest dealers of gold and precious metals, Goldline had amassed hundreds of millions in sales in part by relying on endorsements from Glenn Beck and other conservative icons, and had boasted of an A-plus rating from the Better Business Bureau in a barrage of ads that aired during television and radio talk shows.
But an ABC News investigation found numerous unsatisfied customers who said the company had persuaded them to buy expensive collectable coins instead of gold bullion, a switch that enabled Goldline to add a sales mark-up but made the investment less lucrative. Customers said they were tricked by Goldline's insinuation that the government could confiscate their gold unless they purchased collectable items that carried a larger mark-up.
WATCH the original ABC News report on Goldline.
In late 2011, the Santa Monica City Attorney's office filed a criminal complaint alleging that Goldline was running "a bait and switch operation," according to a statement released by the City Attorney's consumer protection unit. The City Attorney alleged that Goldline misled customers by falsely telling them the government could confiscate gold bullion, but not the costlier coins. And the city alleged that Goldline customers were paying more than 55 percent over the actual value of the coins, mark-ups that were concealed by Goldline's salespeople.
The company was charged with misdemeanors that included theft by false pretenses, false advertising, and conspiracy. In addition to the charges against the company, the complaint accused former CEO Mark Albarian, executives Robert Fazio and Luis Beeli, and salespeople Charles Boratgis and Stephanie Howard of defrauding customers. Current CEO Scott Carter was accused of making false or misleading statements. Each of the charged offenses carried a maximum penalty of one year in jail and maximum fines of between $1,000 and $10,000 per offense.
In Wednesday's settlement, approved by California Superior Court Judge Lisa Hart Cole, Goldline agreed to refund up to $4.5 million to former customers and to pay $800,000 into a fund for future claims. The settlement also sets up a series of new requirements for the company moving forward -- including provisions that the company clearly disclose its mark-up, stop telling customers that the government wants to confiscate its gold, and stop trying to persuade customers to guy collectable coins if they have called Goldline asking to buy bullion.
To ensure the company's compliance, the settlement requires Goldline to hire a monitor -- a former federal prosecutor -- to oversee its business practices for the next five years.
"We hope this case is a wake-up call to other large coin dealers and to other businesses," Radinsky said. "They need to know that it's against the law to mislead consumers with false fears and misinformation."
Goldline Denies Wrongdoing
In exchange for signing the agreement, city officials agreed to drop the 19 criminal charges against the company and top executives. In the settlement order, Goldline denied all wrongdoing.
Goldline officials heralded the deal as a victory for the firm -- issuing a press release announcing that all charges against the company had been dropped.
"This is a great outcome for our customers and for the company," Goldline CEO Scott Carter said in the press release.
Carter said the company "is proud to raise the bar once again by enhancing disclosures and procedures that are unprecedented in the precious metals industry."
In reports that first aired on ABC News in July 2010, 63-year old Joe Kismartin of suburban Detroit described how he lost almost half of the $5,000 he spent when he sold the coins, because, he says, the Goldline salesman pressured him to buy gold coins, not the gold bullion he had seen in the commercials. "You know, I'm living month to month, that's a big loss."