International Rarities Corp., a Minneapolis-based coin dealer under investigation by the Minnesota Attorney General's office on allegations of consumer fraud, appears headed for bankruptcy "within the next several weeks."
Attorneys for the company broke the news in a federal court filing Friday in Florida in an attempt to explain why two representatives of the company had skipped a May 18 deposition in the case.
Dean Dellinger, 89, of Milton, Fla., alleges the company defrauded him of several hundred thousand dollars on his coin purchases.
David Marion, the coin company's co-founder and CEO, and Martin Klevens, one of its top salesmen, disregarded the advice of the company's Florida-based attorneys and failed to appear for the scheduled deposition, incurring costs and causing delays in related depositions.
Dellinger's attorney, Joe Zarzaur, cited a series of what he characterized as "willful" discovery delays by IRC and asked the judge for sanctions, including a default judgment. If granted, the only thing remaining to litigate would be the amount of damages.
IRC acknowledged that its attorneys, W. Lee Elebash and Charles Wiggins, had advised the firm that it was obligated to participate in pretrial discovery unless and until a judge granted a stay in those proceedings. They said the firm recently began discussing a bankruptcy petition with its attorneys in Minnesota and has decided to go forward with it.
"IRC did not attend the depositions ... based on the belief that it needed to devote limited resources to pursuing that reorganization as quickly as possible," the firm's attorneys wrote.
They said IRC contests Dellinger's fraud allegations and therefore opposes the request for a default judgment.
IRC apparently has been struggling financially. Another law firm that previously had represented the company in the Dellinger lawsuit withdrew in March, citing an impasse in the handling of the case, as well as nonpayment of fees.
Marion could not be reached immediately for comment Monday.
Zarzaur said in court filings that a criminal defense attorney had advised Klevens against attending the deposition because "he felt that the complaint somehow exposed his client to criminal punishment."
The Star Tribune reported in May that, unlike financial services firms, coin dealers are largely unregulated. As a result, no law or regulation bars a person with criminal convictions from the coin industry. The paper found that a number of Twin Cities coin firms have hired salesmen with criminal records, including some with previous convictions for coin fraud.
From prison to coin-dealing
Klevens was sentenced in 1997 to 25 months in federal prison after admitting to defrauding at least four coin buyers out of more than $160,000 when he was at International Rarities Group, a predecessor company to IRC. Klevens was sent to a halfway house in 1999 for violating the terms of his release by drinking alcohol. After walking away from the facility, he was sent back to prison for 10 months in 2000.
When he got out, International Rarities took him back.
Dellinger, a World War II veteran and former lab foreman for American Cyanamid, said Klevens called a couple of dozen times before he agreed to trade his accumulated stores of bullion coins for a class of collectible historic coins called "numismatics" in the industry. He sued to try to recoup the $335,000 he alleges he lost on his trades through IRC. Klevens did not respond to requests for comment on the allegations.
The newspaper reported May 29 that Marion attempted to capitalize on the growing interest in gold and silver by selling shares in a holding company with plans to expand nationwide. The plan failed to come together, though, and some early investors say they've been unable to get their money back, and they want to know what happened to it.
Dan Browning • 612-673-4493