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It is not our policy to knock competition, but that said, we also feel it is very important to call attention to what can happen when a firm sells their products too cheaply.  We see it happen over and over again.  When business is strong, during a bull market’s early stages, companies increase their overhead and skate along with mark ups that are too low but they manage to get by on a very large volume/very low mark up.  Then, when business slows down or a correction takes place, the firms fall by the wayside.  The low mark up pricing no longer works as volume drops and net revenue fails to pay the bills.

Here is what King World News reported on Tulving on February 24:

Is A Popular Precious Metals Dealer Stealing People’s Money?

King World News has received concerned emails from KWN readers about a well-known precious metals dealer in Newport Beach, California.  These emails revolve around delivery problems.  People were not getting delivery of their precious metals after very lengthy delays.  Now it appears that more victims are coming forward and some have even filed lawsuits.

According to the Orange County Register, “The Better Business Bureau has fielded more than 150 complaints since June regarding The Tulving Co.”  These complaints had to do with the popular metals dealer Tulving & Company in Newport Beach, California.

According to the Los Angeles Times this is not the first time that Tulving has run into this kind of trouble.  Back in 1991, the Los Angeles Times reported, “The FTC suit alone seeks at least $40 million in compensation for investors that the commission claims were charged up to five times the actual worth of the coins they bought from the Tulving firm.”

According to the Orange County Register two lawsuits have already been filed against Tulving for non-delivery of gold coins.  In light of the latest lawsuits being filed against Tulving, KWN reached out to Stephen Quayle, who is the founder of Renaissance Precious Metals.  His firm has been selling gold and silver coins and bullion for more than 30 years but does not sell any numismatic coins.  Below is what Stephen Quayle had to say.

Quayle:  “Eric, one of the most important things that people need to keep in mind is delivery is everything.  Let me just give you a statistic that’s amazing:  $750 million will buy every single ounce of gold and silver that is available from the major distributors in the United States in any given day….

“That’s not a lot, and that’s just in one day.  Sometimes gold and silver buyers focus on just price.  But what good does it do for someone to save $10 or $20 an ounce when buying gold, if they have to fight for the next 6 months to 12 months in court just to try to recoup their money?

There is no reason in the precious metals world that you should not be able to get your metals within one week or two weeks at the outside.  As I said, delivery is everything, not price, because you can have the best price in the world but if the guy gets away with your money, how much did you pay for the gold or silver you never got?  The answer is, you paid too much and you paid for a valuable lesson.

I have been in the precious metals business for over 30 years, and what I can tell you is that when people start getting excuses from their dealer, they need to demand their money back.  No matter what dealer you are dealing with, whether it’s in California or Colorado, you need to remember the price is secondary if you never get what you bargained for in the first place.

The other thing I have seen over the years are a lot of dealers that play the ‘paper market,’ betting one way or another.  In other words, if they suspect the metals are at a one week or two week high, they will take orders promising delivery and then they will short the market.  Well, if the market goes against them, those dealers have lost their clients’ money.  People have to ask dealers, ‘Are you playing the paper market with your clients’ money?’  In other words, are they gambling or betting with their clients’ money?”

King World News, February 24, 2014

Tulving is not the only firm that is in trouble.  In 2012, Santa Monica obtained judgments against Goldline International and Superior Gold Group, both of whom were said to be using schemes similar to what Merit is being accused of. Goldline agreed to provide more than $5 million in refunds and to a sweeping injunction; its practices are still being scrutinized by a court-appointed monitor, according to the City Attorney’s Office.

Now Merit Gold is under scrutiny for bait and switch tactics, for allegedly luring in investors with low-ball offers only to hustle them into high mark up “rare bullion coins” whose value is, in most cases, only the bullion melt value.  Ripoff Report details the issues and here is one of the comments that they posted…

I bought silver with Merit in March. My check was cashed in 3 days. Their ad says “right Gold right time.  “I waited 123 days for delivery. They were rude, my salesman Dave Martell hung up on me repeatedly. The office manager Mike Getlin would not return my calls. This was unprofessional company that used my money for almost four months. Avoid these people at all costs! One day I bet they get someone’s money and don’t deliver (ever).

The Santa Monica Daily Press reported the issue locally per below:

City Hall takes on gold, silver dealer-smdp.com

By Kevin Herrera on in News

CITY HALL — One of the nation’s largest precious metals dealers is being sued by City Hall for allegedly engaging in a nationwide “bait and switch scam” by using false, deceptive and aggressive sales tactics to trick customers into buying heavily marked-up collector coins instead of gold or silver bars.

The Consumer Protection Unit of the City Attorney’s Office filed the lawsuit Thursday against Santa Monica-based Seacoast Coin, Inc., which does business as Merit Gold and Silver. The company has been in business since 1986.

The complaint alleges that when consumers call in to buy bullion, Merit’s salespeople tricked them into buying heavily marked-up so-called “collector” coins instead, including falsely telling consumers:

  • That the coins are a better investment than bullion;
  • That the coins offer more privacy than bullion;
  • That the coins are not “reportable” on consumers’ taxes;
  • That the coins can’t be confiscated by the government, while bullion can be.

The complaint further alleges that the collector coins pushed by Merit have none of those advantages over gold or silver bullion.

City attorneys claim the scheme bilked consumers out of tens of millions of dollars. Many of Merit’s customers are seniors, according to the complaint.

The complaint names Merit co-owners Peter M. Epstein and Michael J. Getlin as defendants for their role in training, controlling, and overseeing the operation.

Getlin told the Daily Press that the company has some of the lowest pricing available in the industry and more than 50 percent of the ounces of gold and silver shipped is bullion “and priced at 1 percent over dealer cost.”

Continue reading on Smdp.com.

I am not picking on Merit (or Tulving) – this is public knowledge.  This is just the tip of the iceberg.  There are many other firms like Tulving and Merit out there and you really have to be careful who you deal with and where you send off your money.

Please do your due diligence and be wary of those firms who are giving away their merchandise.

We have earned a flawless reputation for our 25 years in business.  A long list of industry icons endorse and recommend us.  We never bait and switch.  We hold our mark ups down to just a couple of percent over our actual wholesale cost.  Our business is well run and we are able to survive during slow periods, like the past two and a half years, without using bank credit or client funds (which Tulving appears to be doing).  We ship in a short and reasonable time frame and let our customers know how long they will have to wait for shipment.  It is not only our practice, as a good business policy, it is also required by all precious metals firms in the State of Minnesota.

Honestly, I don’t see how any legitimate business can be profitable and survive if their prices are meaningfully below what we charge.  If a firm is constantly losing money, even if they are a large firm, make that especially if they are a large firm, the customers are potentially putting their money at risk and delivery is not a given.  These days, delivery is EVERYTHING and price is not the most important consideration.