Lawyers told a judge that the company, which operates from the Tri-Tech office tower in Minneapolis, can't be saved.
It looks like a controversial coin dealer in downtown Minneapolis will be having a going out of business sale.
John Stoebner, an attorney appointed to oversee the operations of International Rarities Corp. as it tries to reorganize its debts, told U.S. Bankruptcy Judge Robert Kressel Wednesday that the firm "has little prospect of improving its profitability" and should be sold or liquidated.
Michael Fadlovich, an attorney for the U.S. bankruptcy trustee, agreed. If the company's assets can be sold before a conversion to Chapter 7, that would be great, he said, but the process should be expedited.
"We are concerned about the sales process that's going on and how the sales staff at the debtor has continued to do business," Fadlovich said. "People are frustrated with the day-to-day dealings with the debtor's business staff."
Fadlovich explained that the Minnesota attorney general's office forwarded a recent consumer complaint about the company. Matthew Burton, an attorney for the creditors' committee, said he also "has heard rumblings there may be misdeeds going on" at the firm.
"It's a tough industry," Burton said, citing an investigation of Twin Cities coin dealers published last year by the Star Tribune. "There's no regulation, and they're all out to get each other."
Burton said the creditors' committee would support a motion for liquidation.
The newspaper's investigation found disturbing patterns in Minnesota's coin industry, which primarily does business with wealthy, elderly clients. Many Twin Cities coin brokerages, including International Rarities, have been staffed with ex-cons and individuals with substance-abuse problems. The investigation also raised questions about International Rarities owner David Marion's plan to take his company public.
The FBI said in a September court filing that it has reason to believe that Marion ripped off customers and investors in an unsuccessful national expansion, and spent lavishly on himself, including regular casino visits. In March, the U.S. Securities and Exchange Commission filed a lawsuit against Marion and a related entity, International Rarities Holdings, alleging securities fraud. An SEC attorney listened in by phone Wednesday during a bankruptcy status conference.
Marion has not been charged with a crime. In court filings, he blamed the alleged wrongdoing on consultants hired to help take his company public -- two of whom are dead -- as well as a score of former coin salesmen.
Stoebner said he recently got an inquiry from someone who wanted to buy the assets of International Rarities. That would include lists of customers and prospective coin buyers, and a small amount of office equipment and furniture.
"I'm fairly skeptical it's going to happen," Stoebner said in an interview.
Although the sales staff is generating revenue, he said, the company is not making a profit and any assets would be sold to fulfill creditors' claims. Marion recently asked permission to hire some experienced sales staff, Stoebner said, but they're convicted felons. Stoebner said he nixed that idea.
"Somebody's going to bring a motion to convert the company to a Chapter 7 within the next week," he said.
Dan Browning • 612-673-4493