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Continued: Sale, theft of customer lists fuel coin fraud

  • Article by: DAN BROWNING , Star Tribune
  • Last update: May 5, 2012 - 3:12 PM

Dennis Helmer says he got his hands on "The List" in the 1990s, while he was working in sales at a long-defunct Twin Cities coin company called National Rarities.

The database included hundreds of thousands of names and phone numbers for established gold and silver customers and others who had expressed interest in precious metals.

Such leads are themselves like gold in the industry, and Helmer knew their value from experience. After his boss at National Rarities was busted for swindling, Helmer said he continued using the list for his own coin sales.

And he found another way to turn it into cash: He sold it to other brokers.

"I called up everybody here locally," Helmer said. "I sold the list for anywhere from $200 to, I think I sold one copy for $4,000."

Though Helmer says he's out of the coin business, his legacy lives on. Versions of the list are traded so widely that many brokers refer to them simply as the "DH leads."

The circulation of the lists has exposed consumers to frauds ranging from high-pressure coin deals to the $194 million Ponzi scheme run by Trevor Cook, a former coin salesman.

Several versions of the customer lists exist. Outdated information is removed, and new prospects are added. Sometimes newer versions get stolen and resold, too.

"Many gold coin salesmen have criminal backgrounds and a history of dishonest dealings. They jump from one outfit to the next, taking customer data with them and using it to repeatedly target the same victims," said Ben Wogsland, a spokesman for Minnesota Attorney General Lori Swanson, who has investigated a number of alleged frauds involving Twin Cities coin brokers.

Gary Adkins, an Edina coin dealer and past president of the Professional Numismatist Guild, called the problem of stolen customer lists "fairly widespread." Mostly, it involves brokers who try to launch their own firms, he said. They'll call known coin buyers and talk about their last purchases to gain their confidence, then start doing trades.

"The primary purpose of this is churning," Adkins said. "It's kind of a semi-Ponzi scheme, if you will."

The mother list

Industry sources say the names on Helmer's list originated four decades ago at a Bloomington firm called Investment Rarities Inc. (IRI), widely considered the progenitor of a bare-knuckles coin telemarketing industry in the Twin Cities. Over the years IRI built a valuable database, spending an estimated $13,500 on average to find a paying customer, according to court documents.

Employee defections from IRI and other Twin Cities coin firms have led to a cottage industry in the theft and resale of customer lists. The trail can be followed through lawsuits that inevitably follow.

Records in these cases also provide a glimpse into the dirty underbelly of some Twin Cities boiler rooms, where telemarketers pitch visions of financial security to customers around the country and then sell them anything but.

Some Twin Cities coin dealers have drawn complaints about unscrupulous practices. The Star Tribune reported last year that certain firms have hired ex-cons, addicts and drunks. Adkins says he's planning to work with legislators next year to craft licensing or regulatory standards to help protect consumers.

IRI's longtime attorney, Tom Dillon, declined to be interviewed. But he explained in a recent lawsuit why reputable dealers pursue employees who take customer lists when they leave.

"Court records show they lie, cheat and steal," Dillon wrote. "These businesses fail and when the dust settles, we learn that some customers have been cheated out of their life savings."

Jim Cook, who founded IRI in 1974, said he's hired more than 1,000 brokers and fired at least 400. "When they leave, they sometimes take customers' names with them. This becomes a problem if the names fall into the hands of an unethical dealer," he said.

For decades Cook has been suing competitors who allegedly got their hands on his customer lists. In one case, the defendants included former IRI salesman Trevor Cook (no relation to Jim Cook), who is now serving a 25-year federal prison term for defrauding more than 700 people in the second-largest Ponzi scheme in Minnesota history.

Customer lists came up several times in the ongoing federal trial of three of Trevor Cook's former associates, each of whom had worked at Twin Cities coin companies. One former salesman testified that he was given a box of old IRI leads to work from.

Eric Cheney, an Oregon financial planner who lost $30,000 in Trevor Cook's scheme, testified that he got solicited to invest because he'd called Investment Rarities years earlier to make an inquiry, but he didn't buy any coins.

Jack Reif, a 65-year-old farmer from Wapello, Iowa, says he lost a valuable family coin collection last year after fielding unsolicited pitches from several Twin Cities firms.

"I don't know where they got my name," Reif said. "I just felt like all at once I was being flooded with phone calls from these outfits."

A new start

Lawsuits often accompany the launch of coin companies. The new firms sometimes disregard noncompete agreements and recruit former colleagues, who occasionally bring more than their skills with them. A few years later, the owners find themselves bringing similar lawsuits.

Twin Cities Gold & Silver Exchange (TCGS) provides an example of the legal leapfrog.

In 2003, Jeff Wolfbauer started a telemarketing company for TCGS, a St. Louis Park retailer of coins, jewelry and other valuables. Charles Lewensten, who founded the company about 45 years ago, said Wolfbauer hired some salesmen he knew from an earlier job at International Rarities Corp. (IRC) in Minneapolis.

Martin Klevens, who worked at IRC at the time, said in an affidavit that he found Wolfbauer and other salesmen gathered around a desk at TCGS with IRC's invoices and customer list. Helmer says he had sold IRC owner David Marion a copy of the list.

IRC sued Lewensten, TCGS and some of its former salesmen, alleging that they had stolen it. One defendant, Jim Benvie, 37, of Andover, admitted taking IRC's customer list in a deposition taken in August as part of an unrelated lawsuit.

"Now, when you say you took the paper, was that with Mr. Marion's knowledge and approval?" an attorney asked.

"Nope," Benvie said.

TCGS settled the suit for $35,000 and agreed not to hire IRC employees or target its customers for a year. Lewensten said he parted company with Wolfbauer because of his association with Benvie and others like him, though Lewensten and Wolfbauer each own companies called Twin Cities Gold & Silver.

Reversal of fortunes

Wolfbauer's operation at the second TCGS had its own exodus in 2009, when its former office manager, Schaun Waste, set out with salesman Ray Hanisco to form Guardian Gold & Silver Exchange in Plymouth. Waste said they opened shop with a copy of the DH leads and began recruiting salesmen.

Wolfbauer's TCGS sued, alleging that Guardian recruited its salesmen and improperly obtained a copy of its customer list.

Guardian settled that suit in January 2010 for $35,000 and agreed not to solicit TCGS clients or employees for a while. But TCGS sued Guardian again last year, alleging that it had breached the agreement.

Waste said he bought the customer list for $2,000 from a now-former TCGS salesman who assured him he had the rights to it.

Wolfbauer said in a deposition that it was the Helmer list, and that he had sold it to a former salesman named Jerry Watkins "based on the strict understanding he was going to use it for other purposes, and not to resell the list."

Watkins was involved in a $20 million Ponzi scheme. While he was under investigation in that fraud, he also pitched Trevor Cook's currency program. He died in 2010 after his release from prison.

TCGS and Guardian recently settled their latest dispute for an undisclosed sum.

Waste said TCGS seemed eager to move on after depositions revealed damaging details about the company, including drug and alcohol use at the office.

Benvie, asked if he'd ever been paid in gold at TCGS, cited his Fifth Amendment right not to incriminate himself and refused to answer.

Though Waste categorically denies stealing the TCGS customer list, Benvie said he did advise Waste on how to pilfer it, and went on to explain why.

"Because the problem with the gold industry is this. If you ... today wanted to start a gold company, I don't care how good of a closer you are, I don't care how much money you have in your pocket," Benvie said. "If you don't have leads of people who hold gold and silver or have a history of purchasing it, you have no business."

Dan Browning • 612-673-4493

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