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CALIFORNIA COIN DEALER AGREES TO SETTLE - 06/92
Hannes Tulving, Jr., president of Hannes Tulving Rare Coin Investments, Inc., a California retail marketer of numismatic coins, has agreed to settle Federal Trade Commission charges that he created and maintained an artificial coin market to induce the purchase of coins at inflated prices.
Under the proposed settlement filed in federal court, Tulving would be prohibited from misrepresenting, among other things, the degree of risk or any other fact material to a consumer's decision to purchase any investment offering. The order also imposes a monetary judgment, which will be partially satisfied by the payment of $260,000 over a five-year period.
In August 1990, the FTC filed a complaint against Tulving and his company, Hannes Tulving Rare Coin Investments, Inc., of Newport Beach, alleging that they misrepresented the degree of risk and appreciation of their coins, falsely represented that the figures published in their coin price guide reflected the actual wholesale market price of their coins and that their customers' portfolio updates reflected the current value of the customers' coins; and that they failed to maintain a reserve of funds to enable them to honor their buy-back guarantee. The case against the corporate defendant, Hannes Tulving Rare Coin Investments, Inc., is still pending.
Under the terms of the proposed consent order settling the charges against Hannes Tulving, Jr., he would be prohibited from, among other things, falsely representing that his coins are an excellent, low-risk investment or that they have consistently appreciated in value; that portfolio updates given to customers reflect the current value of their coins; and that the prices he charged for his coins were at or near the prevailing market price.
He also would be prohibited from falsely representing the profitability of any investment offering, the services he offers in connection with such an offering, or the earnings of any of his customers.
Further, the proposed order would prohibit Tulving from falsely representing that he has a reserve of funds sufficient to honor any buy-back guarantee for a substantial number of customers, if he offers such a guarantee; misrepresenting any other fact material to consumers' decisions to purchase any investment from him; and from representing that the FTC endorses or approves his activities. Misrepresenting the terms of the settlement also would be prohibited.
The proposed settlement would further require Tulving to place a written notice on all coin-related promotional material to alert consumers to the risk of investing in rare coins. If he offers a buy-back option, he also would be required to disclose clearly and conspicuously the following notice on all promotional material:
"BUY-BACK OF COINS: We cannot guarantee that, when you desire to liquidate your coins, we will be able to repurchase them from you. Moreover, if we are unable to repurchase your coins and you are forced to sell them to another dealer at the current wholesale price, you will probably receive much less for the coins than what you paid for them."
Defendant Tulving has agreed to the imposition of a $10 million judgment. In light of his recent filing for bankruptcy and the absence of security, however, the Commission cannot be assured that it will collect the full judgment. The $10 million judgment against him would be non-dischargeable in bankruptcy -- that is, he still would owe it. Under the settlement, Tulving would pay $50,000 within 14 days of the entry of the court order, $210,000 over five years, and the remainder at the end of the five years.
The Commission vote to file the consent order was 4-1, with Commissioner Deborah K. Owen dissenting. Owen stated, "I find no financial justification for reducing the defendant's required monthly payments from $5,000 to $2,500 after two years. More- over, I disagree with imposing, on paper, a monetary judgment that may be 'empty' in practice. Such an empty judgment is a departure from recent practice, and could give the impression that the Commission's monetary judgments are illusory." |
