Investigators are scrutinizing Twin Cities coin and precious metal dealers in response to widespread complaints of consumer fraud.
Last week, the state attorney general's office obtained a court order to shut down a St. Paul precious metals dealer. The office has referred a number of other cases to federal and state investigators and regulators. And the U.S. attorney's office in Minnesota already is considering criminal charges against some coin dealers in the coming months.
Indictments can't come soon enough for the Minnesota attorney general's office, which began making criminal referrals as early as June 2010, spokesman Ben Wogsland said on Tuesday.
"The most effective deterrent to financial crime is criminal prosecutions and jail time," Wogsland said.
A Star Tribune investigation last year reported that some Twin Cities coin dealers have drawn complaints for years about unscrupulous practices. Certain firms have hired ex-cons, addicts and drunks who target wealthy, mostly elderly clients. Many investors claim that the firms shortchanged them or sent them nothing at all in return for their cash and coins.
Complaints continue to roll in about this largely unregulated industry, Wogsland said.
"We do intend to recommend legislation in the area of these coin dealers" next year to rein in abuses, he said.
Meanwhile, Minnesota Attorney General Lori Swanson sought a temporary restraining order Tuesday to stop a 47-year-old St. Paul woman from selling precious metals after receiving complaints that she has been cheating clients around the country for months.
Tiffany Grady has operated the Stella Group from her home in the 100 block of Jenks Avenue. "She sounds like the kindest, sweetest person. You'd want to invite her over for dinner," said Jack Altomonte, a New Jersey dentist who regularly buys gold and silver. He said he sent Grady $21,500 in August but received nothing.
Matt Miele, corporate vice president for procurement at Ameristar Casinos in Las Vegas, said Grady took him for about $45,000 on a series of recent transactions. "She just knows her stuff and can talk the talk," Miele said.
A lawsuit filed by Swanson's office Nov. 2 alleges that Grady also bilked a number of unsophisticated elderly buyers, including an 82-year-old woman from Naples, Fla.
Grady couldn't be reached for comment. Court documents indicate that she no longer lives at her Jenks Avenue home and left no forwarding address. Her attorney, Robert Sicoli of St. Paul, confirmed that she's under investigation by the FBI, but declined to say more.
Going after Guardian
On Monday, Swanson's office referred a complaint about Guardian Gold & Silver Exchange in Plymouth to the U.S. Securities & Exchange Commission. Her move came the week after Guardian owner Ray Hanisco filed for personal bankruptcy amid a flurry of consumer and securities fraud allegations.
Hanisco, 62, of Eden Prairie, is a longtime coin salesman who started Guardian in 2009 with Schaun Waste, 47, of Osseo, after the two men quit Twin Cities Gold & Silver Exchange.
Edwina Hibel, 78, a retired attorney from Patterson, N.J., said she sent Guardian a $162,000 check in the spring of 2011 to buy gold bars and silver coins, which the company was to hold for her.
"The gold that they have been quote-unquote holding for me is 100 ounces," Hibel said. "The bars were going to be $1,300 apiece, which was more than reasonable at that time. ... I don't think they have them."
She said the company also owes her some valuable coins from another purchase. Hibel said Guardian has stopped communicating with her.
Hanisco's bankruptcy petition, filed Oct. 30, lists a debt of $237,000 to Hibel. He claims to be Guardian's sole owner as of last month and seeks to liquidate more than $1.7 million in debts, much of it related to the coin company. Several court judgments and a claim in a pending lawsuit could push the figure over $2 million.
Eleanor Dubey, 82, of Tacoma, Wash., said Hanisco owes her more than the nearly $275,000 listed in the bankruptcy petition. She said she sent him coins to be converted into bars, which are easier to store, but got nothing in return.
Neither Hanisco nor Waste responded to messages seeking comment. Hanisco's bankruptcy attorney, Chad Bolinske, declined to comment.
A complaint that Swanson's office referred to regulators involves a Guardian offshoot called Wealth Preservation Society. That entity originally listed Hanisco's residence as its address, but now it is listed as a creditor in his bankruptcy "in care of" William Lucas of Minneapolis. Lucas declined to comment.
Dr. Joan Balcombe, 59, of Ogden, Utah, said she invested $306,000 in Wealth Preservation Society in February. She said she'd been buying coins through Hanisco for 20 years and trusted him when he approached her about a process that would extract valuable metal ore from old mine tailings, then convert it into bars for sale at a profit in Bahrain. She said he sent her a contract promising to repay her the principal plus 25 percent within 160 days.
"If somebody had called me out of the blue I'd say, 'You've got to be kidding,'" Balcombe said.
When she last spoke with Hanisco in late August, he told her things were going fine. She said she hasn't heard from him since.
"I'm not a wealthy person," Balcombe said when she learned of Hanisco's bankruptcy. "This is devastating to me."
Dan Browning • 612-673-4493