The FBI says it has reason to believe that the owner of a downtown Minneapolis coin firm ripped off customers and investors in a unsuccessful national expansion, and spent lavishly on himself, including regular casino visits.
David Marion, the owner of International Rarities Corp. (IRC), has not been charged. He blamed the wrongdoing on consultants hired to help take his company public -- two of whom are dead -- as well as a score of former coin salesmen whom he suspects of unscrupulous activities, according to a filing Friday in the company's bankruptcy case.
Details about Marion's legal troubles were made public Friday in federal search warrant documents filed in St. Paul.
A Star Tribune investigation this year found disturbing patterns within the largely unregulated coin industry, which primarily conducts business with wealthy, elderly clients. Many Twin Cities coin brokerages, including International Rarities, have been staffed with ex-cons and individuals with serious substance-abuse problems. The Minnesota Attorney General has been investigating complaints of consumer fraud by IRC and other firms.
Federal agents raided the company's fourth-floor offices in the TriTech Building at 331 Second Av. S. on Wednesday. Records show they seized large volumes of business records, dozens of computers and digital storage equipment, and more than $250,000 worth of gold and silver coins and silver bars.
Jared Kary, a special agent with the FBI white-collar crime squad in Minneapolis, said in a sworn statement to justify the search that Marion is being investigated for mail fraud, wire fraud and money laundering at IRC and a related entity called International Rarities Holdings (IRH).
In a statement, IRC said it proposes to repay creditors over five years.
"David Marion is fully cooperating with investigators and has stated that this is an unfortunate result of bad business decisions from the founders of IRH, a separate entity that has no current affiliation to the operations of IRC," the statement said.
Alleged scams detailed
Kary's affidavit describes an exchange between IRC and one of its unsatisfied customers, an elderly man identified only as G.E. This customer spoke with IRC employees numerous times by phone and was told that his coins were worth $196,100, Kary said. But after the man shipped the coins to IRC, he got a check for just $40,000.
The customer held the check and demanded his coins back, to no avail. IRC sent him three other coins with an appraised value of just $20,000, Kary said. G.E. then tried to cash the $40,000 check from IRC, but it bounced.
"Customers also sent IRC money and/or coins to purchase or exchange for IRC coins," Kary said. "However, instead of receiving what was promised, customers would receive something different or nothing at all."
Kary noted that IRC's Aug. 19 bankruptcy filing lists 25 customers who sent the company $750,000 in money, coins or both.
When Marion and others solicited investments for IRH in the first half of 2009, Kary said, they claimed the money would be used for legal fees, filings, accounting, printing and commissions in an effort to expand IRC nationally. "However, the IRC and IRH bank accounts reveal that a majority of the funds from IRH investors were instead used by Marion for his personal benefit," he said.
Marion withdrew about $200,000 from IRC's bank account between December 2008 and August 2009 while he was at the Mystic Lake Casino, Kary wrote.
Marion's ex-wife, Dana Golden, described him in an affidavit filed in their 2009 divorce as a pathological gambler, drug addict and compulsive shopper. Though he claimed to have stopped gambling, she said, she found evidence to the contrary.
Marion steps down
Marion stepped down as president and CEO of IRC in mid-July. His replacement, Stephen Hastings, said in a bankruptcy court filing Friday that IRC grew steadily from 2000 through 2008. That's when Marion decided to expand nationally through IRH, the filing says.
Marion contends that he was misled by people promoting the expansion, the filing says. They raised nearly $1 million for IRH before Marion abandoned the effort in mid-2009. His efforts to rekindle the expansion after that went nowhere, and he was left with substantial bills, the filing says.
IRC says its $24 million in revenues in 2009 set a company record. But its filing said more than 20 employees then quit to start competing companies, sometimes taking client lists, and revenue declined significantly.
Marion, as IRC's only shareholder, received distributions from the firm. But he took out more money than he was entitled to, according to the company's bankruptcy filings. The company's proposed reorganization plan would treat the excess distributions as loans. The filing says as of the end of 2010, he owed the two companies a total of $1.35 million. The reorganization proposal would have him repay the outstanding debts over five years, plus annual interest of 4 percent.
Dan Browning • 612-673-4493