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Gold Dealers Goldline, which has received endorsement from well-known television personalities such as talk radio host Glenn Beck, agreed this week to pay $4.5 million to customers who had bought Gold Coins. A further $800,000 will be paid into a fund towards settling any future gold fraud claims.
The Santa Monica City Attorney brought a 19-count criminal fraud charge against Goldline last year, following complaints that it was conducting a "bait and switch" operation, ABC News Radio reports.
The "bait-and-switch" is a form of gold fraud in which customers are initially offered one type of gold coins but are then encouraged during the sales pitch to buy another, "collectible" type at a considerable mark up over their Gold Bullion content.
This example of gold fraud often involves argument that while the US government could confiscate bullion coins, it would not confiscate collectibles, because Gold Coins recognized as having special value to collectors were exempt from President Roosevelt's Executive Order 6102, which in 1933 banned the domestic hoarding of bullion by US citizens.
As part of the settlement, Goldline will be given tighter rules within which it can operate, and will have to hire a former federal prosecutor to monitor its activities for the next five years.
"No one should have to suffer from predatory and deceitful sales practices," Adam Radinsky, head of the City Attorney's consumer protection division, said following the settlement.
"Whether they are Buying Gold or anything else, consumers expect a fair deal. We insisted that Goldline give them just that."
Radsinsky added that the decision to press fraud charges could serve as a warning to Gold Dealers that engaging in fraudulent practices carries a penalty.
"We hope this case is a wake-up call to other large coin dealers and to other businesses," he said.
In May 2011, the Federal Trade Commission issued an FTC Consumer Alert warning of a variety of different kinds of gold fraud. The FTC advises those thinking of buying collectible coins to also ask for the coin's intrinsic bullion value. Goldline was accused of charging customers over 55% more for their coins than the value of the gold they contained.
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