SANTA MONICA (CN) - An unscrupulous gold dealer rolled an elderly man for $2 million by persuading him to buy overpriced gold and silver coins that were worth little beyond their melt value, the man claims in court.
William Kraner, 77, sued Seacoast Coin dba Merit Financial dba Merit Gold and Silver and dba Merit Gold, and its employee Joe Grossman, in Superior Court.
Kraner claims he gave Merit Gold $4 million for what he was assured were rare gold and silver coins, but which were worth only half as much.
The Santa Monica city attorney two weeks ago claimed the same dealer "bilked consumers out of tens of millions of dollars" in a "massive bait and switch" scheme.
Santa Monica also sued Seacoast/Merit owners Peter M. Epstein and Michael J. Getlin. Kraner did not sue them; he sued Grossman, who appears to have been one of their salesmen.
Santa Monica in 2012 won two judgments against other Santa Monica-based precious metal dealers, Goldline International and Superior Gold Group.
Kraner claims in his lawsuit that Merit hooks consumers with a multimillion-dollar national advertising campaign promising to sell gold and silver bullion at 1 percent over cost, and sends emails suggesting that the price of gold will soon be increasing exponentially.
When customers call, Merit's salespeople "use deceptive and aggressive tactics to steer consumers away from buying bullion, persuading them instead to buy certain gold and silver coins," the complaint states.
The coins net the company a huge profit and enormous commissions for its salespeople, such as Grossman, because the coins are priced far above Merit's costs, and sales reps do not disclose the markups, Kraner says in his lawsuit.
"If a customer asks what the commission or markup is, as a matter of custom and practice, the sales representative misrepresents the actual markup being charged. As part of their 'sales pitch,' Merit sales representatives are also instructed to represent to customers, and did represent, that Merit's fees are the lowest in the industry," the complaint states.
Grossman, claiming to be a "Senior Account Executive" and a broker in the rare metals and gold industry, told Kraner he should buy gold coins that were "rare" and "non-reportable" on taxes, according to the complaint. He suggested that the coins were more valuable and a better investment than bullion, and told Kraner that he had just a few minutes to make the purchases before the coins would be gone, Kraner says in the complaint.
But the coins were not rare, and if sold for profit, they gains had to be reported to the IRS as income from property, not as an investment at the preferred capital gains rate, the complaint states.
"The coins had/have little or no value beyond their melt value for the actual gold or silver they contained," Kraner says in the lawsuit.
Kraner claims he gave Merit $3.6 million to $4 million for gold and silver coins from Merit, believing that Merit was charging him just one percent markup.
"Despite Merit's advertisements to 'invest in gold' and diversify your portfolio by trusting Merit and to avoid overpaying for gold, Kraner overpaid for gold. Instead of receiving anywhere near the purchase price in gold and silver for his investments, Kraner received approximately $2,000,000 in gold and silver coins that were not rare," the lawsuit states.
Kraner seeks $4 million and punitive damages for fraud, elder abuse, breach of contract, consumer law violations and breach of fiduciary duty.
He is represented by John P. Kristensen with Kristensen Weisberg.
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