As of Thursday, state will require bonds, background checks for metals vendors.
The days when a convicted bank robber could get a job selling gold coins in Minnesota are coming to an end.
A state law takes effect Thursday that will provide consumer protections for precious metals buyers and, effective next July, give the Minnesota Department of Commerce oversight over dealers and their employees.
The new bullion coin law will require criminal background checks and will ban from the industry anyone convicted of a financial crime in the preceding 10 years. Dealers also must post a surety bond that can be tapped by consumers in the event of misbehavior. Those who violate the law could be charged with a misdemeanor and pay a fine of $10,000 per incident.
A Star Tribune investigation in 2011 found that the unregulated industry was rife with addicts, ex-convicts and con artists who routinely misled or defrauded customers, frequently seniors looking for a safe investment.
While the state has laws regulating pawn brokers and other “secondhand” precious-metal buyers, Minnesota appears to be the first state to regulate retail coin dealers and telemarketers like financial advisers.
Some dealers said the new law was needed to clean up Minnesota’s reputation as a hotbed of unscrupulous coin dealers. But others said the law goes too far and will likely drive some smaller companies out of state or out of business.
“We had some rotten apples in the business,” said Jim Cook, owner of Investment Rarities Inc. in Bloomington, who is considered the grandfather of coin telemarketing in Minnesota. “The big thing is keeping the felons out of the business.”
Cook cited the activities of former business rival David Marion, who’s scheduled to be sentenced Aug. 29 in federal court for securities fraud, mail fraud and money laundering related to his now-defunct company, International Rarities Corp. At its peak in 2009, the company did $24 million in annual business.
“I’m glad that he finally got his comeuppance. He was the main cancer,” Cook said. “Then the personnel that learned the business there would go out on their own and fleece some more people. It’s horrible.”
It’s impossible to say just how many ex-cons permeate the industry because there have been no licensing requirements. The newspaper investigation found six dozen Twin Cities salesmen with serious criminal records who had worked for area coin companies since the 1990s.
The new law wouldn’t have barred Marion from the industry, as he had no criminal record when he started. But it would have barred some of his former employees who’ve been convicted of fraud, forgery, bank robbery, burglary, or theft.
Gary Adkins, an Edina coin dealer and a past president of the Professional Numismatists Guild, said some regulation was warranted. But he said the new bullion law was “ramrodded through” the Legislature by Attorney General Lori Swanson and needs revisions.
“I think it was ill-prepared,” Adkins said. “The result is that it will probably put some smaller dealers that have done nothing wrong out of business.”
Adkins said the law may interfere with interstate commerce laws by imposing restrictions on out-of-state dealers who do business in Minnesota.
‘We’re looking forward to it’
The attorney general’s office is comfortable that the law will meet constitutional muster, said spokesman Ben Wogsland. He said the regulatory scheme is similar to the state’s oversight of payday lenders, and noted that a Ramsey County judge recently granted summary judgment to the state in a dispute with a Delaware lender that did business in Minnesota without a license.
“It’s a great law and we’re looking forward to it,” said Mike Rothman, commissioner of the Minnesota Department of Commerce, whose agency will enforce its provisions. “We know there were a lot of complaints about scams, and particularly with senior citizens.”