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Texas coin companies target elderly investors

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Most numismatic coins in circulation today were minted between the Civil War and the Great Depression. Since their values are affected by rarity, quality and investor demand, the market is notoriously volatile, with certain types of coins falling in and out of favor fast.

The biggest factor in the industry's growth and increased legitimacy is grading — a measure of a coin's physical condition. National grading services, started in the mid-1980s, employ panels of experts to rate coins, which are then certified and slabbed into plastic cases.

The grading system has made rare coins more like commodities or stocks that can be bought sight unseen on electronic exchanges such as the Houston-based Certified Coin Exchange. Prior to grading, dealers could swindle buyers by simply misrepresenting a coin's condition.

Haynes describes today's rare-coin industry as a relatively small, tight-knit community that tends to stand together. He compares the industry's acceptance of aggressive phone solicitors to South American businesspeople who thrive off the underground economy, though they may not actively participate in it.

"In the legitimate numismatic industry, there are people who would never call up a naive person and say, ‘buy this coin,'" Haynes says. "But those legitimate dealers benefit immensely because of the money that the [phone solicitors] pour into the industry. And they are reluctant to talk about it."

Michael Fuljenz has not exactly been hiding underground. The 52-year-old Lake Charles, Louisiana native has made two dozen appearances on CNBC shows such as Smart Money. He is also a regularly featured speaker at the Greater Houston Money Show and other similar conferences across the country.

Fuljenz writes the esteemed monthly newsletter Investor's Profit Advisory and has authored several self-published books that have won awards from the Numismatic Literary Guild, a national trade group based in New Jersey. "Some say we have too many awards, that we give one to everybody," says Ed Reiter, executive director of the guild and senior editor of COINage magazine.

A collector since age eight, Fuljenz served as a coin authenticator and grader for the American Numismatic Association, a nonprofit educational organization based in Colorado. He later became vice president of Blanchard and Company, Inc., a New Orleans-based rare-coins giant, before moving to Beaumont in the mid-1990s.

Today Fuljenz, along with business partners Tyrrell Garth and Elaine Henderson-Millar, are majority owners of 1st American Reserve and Universal Coin & Bullion. Fuljenz is also a paid consultant for First Fidelity Reserve and 1st National Reserve, owned by Garth and Henderson-Millar.

Neither Garth nor Henderson-Millar responded to interview requests for this story by press time. Garth, a prominent Beaumont attorney, backed out of a scheduled phone interview with the Houston Press. "Mr. Garth decided to take an unexpected vacation," explained Fuljenz, who denied requests to tour the buildings, including the companies' salesrooms and vault, which has an inventory that exceeds $10 million, he says.

All four companies were founded at different times and have separate ownership structures. They share employees and, occasionally, customers.

They also share space in four interconnecting, single-story red-brick buildings with white columns on a commercial street on Beaumont's west side. During the day, the interior parking lots are filled with BMWs, Cadillacs and Hummers. There are no signs identifying the businesses located on the property; drawn blinds cover the windows.

Today Fuljenz serves as the public face of all the companies, which are in good standing with the Professional Numismatists Guild, a California-based nonprofit group that requires members to adhere to a strict code of ethics, and the Better Business Bureau of Southeast Texas. Fuljenz is a frequent cosponsor of the BBB's annual marketplace ethics award.

First Fidelity Reserve and 1st National Reserve, the oldest of the companies, were bought some 20 years ago from Milton Verrett, a veteran Texas coin dealer with a checkered past. In the late '90s, the Securities and Exchange Commission permanently barred Verrett from serving as an officer or director of a public company after his publicly traded film-marketing company made "false and misleading statements" about a movie's revenues.

Then in late 2004, the state of Georgia charged Verrett with violating the state's consumer protection laws by running magazine advertisements for rare coins that "exaggerated claims about the immediate and potential increases in the price and value of gold" and falsely implied "that the company is associated with the federal government." To avoid a lawsuit, Verrett, who denied liability, agreed not to market products in Georgia.

Verrett, who could not be reached for comment, remains affiliated with the Austin-based U.S. Rare Coin & Bullion Reserve, which has numerous outstanding complaints with the FTC and the Attorney General of Texas. Verrett has continued his ties with the Beaumont coin companies, occasionally selling Fuljenz advertising copy.

1st American Reserve and Universal Coin & Bullion sell rare coins as investments, whereas First Fidelity Reserve and 1st National Reserve sell rare coins as collectibles. The distinction is significant. Collectible coins, like art, jewelry or sports memorabilia, can be sold with huge price markups, whereas coins marketed as investments cannot.

Gibson, the plaintiffs' attorney, alleges that the Beaumont companies frequently blur this distinction, selling collectible coins with high markups as investments — a big no-no that in the past has led to federal and state prosecutions on fraud charges.

In the early 1990s, the FTC prosecuted a string of cases against coin dealers in California and Florida for deceiving customers about the investment potential of coins, and charged a large coin-grading service with misleading investors in ads and promotional materials.

But the FTC has been silent since then, not bringing a single case against a coin dealer anywhere in the country for 15 years, says Lois Greisman, associate director of the commission's division of marketing practices. "We have not publicly sued any member of this industry in a while," says Greisman. "There is no one [at the FTC] with expertise in the industry."

Fuljenz says the FTC had received virtually no complaints against the four companies he either consults for or owns. In fact, an open records request revealed more than three dozen complaints filed with the FTC against those companies since 2000.

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