Precious metal marketers banned from selling investment opportunities

ID-100144045They say all that glitters isn’t gold. Ironically enough, that also applies to gold investments, which aren’t always as valuable as you might expect. In fact, investing in precious metals can turn out to be a financial disaster.

Case in point: The Federal Trade Commission just extracted a settlement from the operator of a precious metals investment scheme it says misled consumers–including many  senior citizens–into blowing billions of dollars on bad investments. The defendant is permanently banned from selling any investment opportunities under a settlement with the FTC.

Anthony J. Columbo and his companies, Premier Precious Metals Inc., Rushmore Consulting Group Inc., and PPM Credit Inc., allegedly fooled consumers into buying precious metals on credit. Furthermore, they didn’t clearly disclose the significant costs and risks. These included the likelihood that consumers would have to pay more money later or lose their investments.

The settlement order bans the defendants from selling investment opportunities. It also permanently bans them from misrepresenting material facts about any products and services, violating the FTC’s Telemarketing Sales Rule, failing to provide consumer information to the FTC, selling or otherwise benefiting from consumers’ information, and failing to properly dispose of customer information. The defendants are also required to record all of their telemarketing calls for 10 years.

The defendants were issued a judgment of more than $3.6 million, which will be partially suspended after Columbo turns over assets estimated at about $3 million. The defendants must pay the full judgment immediately if they are found to have misrepresented their financial condition.

BBB has this advice for consumers considering cash for gold and/or silver offers:

  • Research Gold-Buying Businesses in Advance. Before buying anything, make sure you know the name of the company, its address and, preferably, the company’s top officials. Check out the company’s BBB Business Review at www.bbb.org for additional insight.
  • Beware of Leveraged Investment. You might be told that the price of metal is about to skyrocket and you can make big profits with a small down payment. In reality, you have borrowed money from an institution that will charge you storage fees and interest. The money will come out of your equity until it drops to a certain level.  If the price of the metal goes down, stays flat, or doesn’t go up enough to offset storage and interest charges, the lender will sell the metal to pay off your loan and send you a bill if it does not cover what you owe.
  • Do Not Make An Immediate Decision. Some sales representatives may push you to buy during their initial presentation, but do not buy anything until you have had an opportunity to compare their prices with prices offered by reputable coin dealers in your area, or through Internet auctions.
  • Compare Prices Carefully. When you compare prices, make sure you are comparing identical items. A vintage $5 gold coin, for instance, is usually worth more than a newer $5 gold coin.  The value of coins minted the same year likely will vary depending on the condition.

Check out the FTC’s detailed advice on the potential pitfalls of precious metal investment.