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Texas coin companies target elderly investors

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These complaints echo the ones from plaintiffs in pending lawsuits. Many were from customers ages 70 to 90 who claim they were pressured and conned by his salespeople into frittering away tens or even hundreds of thousands of dollars.

Fuljenz dismisses the volume of complaints as insignificant. "It's a feather," he says.

In fact, Fuljenz claims he is the true victim, targeted by a predatory lawyer. Last month, he sued Gibson for libel, slander and business disparagement.

"They're trying to create another story to take the heat off themselves," Gibson says.

Neither the FTC nor state attorneys general offices will confirm whether they are currently investigating the Beaumont coin companies. "We do not make potential targets aware," says Paco Felici, a spokesman for the Texas Office of the Attorney General.

While leafing through the pile of complaints against them from her office in Washington D.C., Greisman offers some "general comments" on why a company might use names such as First Fidelity Reserve or 1st National Reserve, which sound like financial institutions.

"Companies can use names that try to deceive consumers about their government affiliation," she says, "or that they're a different type of entity than they are."

Greisman also suggests a reason why closely related companies like the ones in Beaumont may use different business names. "It's to mask their true identity," she says, "so that when complaints come in, it looks as if there were complaints against 20 different, wholly unrelated companies."

The total client base for all four companies, estimated at 175,000, was built by direct advertising, in which customers such as Maureen O'Neill mailed coupons in response to coin ads, says Fuljenz. The ads contain disclosures, in tiny print, informing consumers that "we may contact you from time to time regarding items of interest."

The ads are vetted by Barry Cutler, former director of the FTC Bureau of Consumer Protection. Cutler confirms he has earned more than $20,000 as an hourly consultant for Fuljenz.

Fuljenz says he does not target the elderly since he advertises not only in places like AARP The Magazine but also in several mainstream national publications, including National Geographic, Newsweek, Parade, Smithsonian, Time and U.S. News & World Report.

All the companies offer a ten-day refund policy, he adds. And since May 2006, they have operated a phone recording system to provide double verification on sales, meant to protect customers against unauthorized credit card charges made by "rare rogue salesmen," he says.

The majority of complaints, says Fuljenz, are the result of miscommunication or buyer's remorse. "Most clients are wonderful people," he says. "Once in a while they lie; once in a while they puke."

According to his deposition, John Rollins got sick of lying.

In 2005, Rollins sold $4.6 million in coins, earning him $366,000 and the title of top salesman at Universal Coin & Bullion. He was the first person ever at the company to exceed $1 million in sales during a single month. He was 27.

The key to his success, he said: following orders handed down by management under the direct supervision of Fuljenz and his business partners.

In depositions taken last summer, Rollins and several other former salespeople provided a description of the inner workings of the Beaumont-based coin companies that contradicts Fuljenz's claims and provides support for the scores of former customers seeking redress.

(Many of the former employees who have given depositions, including Rollins, were sued by Fuljenz and his business partners for allegedly breaking their employment agreements, which prohibit them from disclosing any confidential company information.)

In his deposition, Lance Loftin, a salesman for two years at First Fidelity Reserve, said managers instructed him to tell customers that putting money in coins was like putting money in the bank. "If they buy $10,000 worth of coins from First Fidelity, it's really worth about $4,500," Loftin said.

In his deposition, Mark Fumoso, who still works as a sales manager at Universal Coin & Bullion, said that he often encouraged customers to move money out of government-insured certificates of deposit and into coins. When pressed, Fumoso admitted he didn't even know what CD stands for.

"I would tell [a customer] to go to whatever measures, you know, sell stock, do whatever you've got to do as far as moving some other investment dollars around to make it happen because it will benefit you," Fumoso testified.

In his deposition, Fumoso said customers can always say no to buying coins: "I can't jump through the phone and make them do it."

But Rollins and other former employees said in their depositions that customers were in fact forced to buy coins since managers instructed them to make unauthorized charges to customer credit cards.

Rollins also testified that salesmen would run out the clock on the companies' ten-day return policy by avoiding phone calls from irate customers, and then inform them that any refunds would include an expensive restocking fee.

In her deposition, Stacey Hernandez, a saleswoman for 11 years at First Fidelity Reserve, explained the importance of storytelling. "It was because people bought stories," she said. "We were always told to build a story because people buy stories. Not the coin, the story."

And many stories were outright lies, according to Hernandez.

For instance, she said, there was the moose head story, about a couple who bought a cabin in the woods and discovered a trove of one-of-a-kind rare coins in some taxidermy on the wall. Then there was the divorce story, about an amazing deal on rare coins hastily unloaded by a couple in the midst of a messy separation. And, perhaps most common of all, was the tall tale that Fuljenz — known to customers as "the Warren Buffet of coins" — had personally handpicked some coins from the vault for that customer's collection.

The building that formerly housed First Fidelity Reserve even had a "heat room," Hernandez said, where salespeople told made-up stories as part of hyper-aggressive sales pitches to customers. In order to create a false sense of drama and urgency, as if they were operating on an actual trading floor, salespeople often yelled things like "Ten coins gone! Fifty thousand gone!" according to Hernandez.

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