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Collectors willing to overpay for silver, value 'all in the eye of the beholder'

| Saturday, Nov. 21, 2015, 9:00 p.m.
Keith Hodan | Trib Total Media
At the Coin Exchange in Downtown, a selection of silver bars and coins are on display as Alex Litman, vice-president, background, writes up an order, Wednesday, Nov. 11, 2015.
Keith Hodan | Trib Total Media
At the Coin Exchange in Downtown, a 10 oz. silver bar by Johnson Matthey is a selection on display at the store Wednesday, Nov. 11, 2015.
Keith Hodan | Trib Total Media
At the Coin Exchange in Downtown, a selection of silver bars are displayed by Alex Litman, vice-president, Wednesday, Nov. 11, 2015.
Keith Hodan | Trib Total Media
At the Coin Exchange in Downtown, a selection of silver bars and coins are on display at the store Wednesday, Nov. 11, 2015.

Real “U.S. State Silver Bars,” a full troy ounce and available for a limited time to Pennsylvania residents.

The offer, made in full-page newspaper advertisements by Ohio-based U.S. Commemorative Gallery Inc., promises “a real steal” at $57.

It's a steal, all right, experts say. But not for you.

“For one ounce? That's insane,” said Chris Wiles, a financial adviser in Mt. Lebanon and president of the CFA Society of Pittsburgh, an association of investment professionals.

At that price, buyers would be paying four times the going rate for silver, about $15 an ounce. And yet, people buy them, tempted by a tone of false urgency (“call before the order deadline ends”) and the suggestion of government-backed legitimacy because of the endorsement of a former U.S. treasurer.

There is no official tie between the federal government and U.S. Commemorative Gallery — a subsidiary of a privately held company, North Canton, Ohio-based Suarez Corporation Industries. The company's founder, Ben Suarez, is serving a 15-month prison term for witness-tampering in a campaign financing scheme.

Suarez spokeswoman Dana Skemp said demand for the state silver bars is “extremely high” and stock outages have been reported in virtually all 50 states.

“U.S. State Silver bars have become extremely popular numismatic collectibles for consumers to enjoy,” she said in response to questions from the Tribune-Review.

Selling silver bars at inflated prices is not illegal. But the Suarez promotion offers an example of the murky waters through which the direct marketing industry wades. It is an industry that benefits from the ignorance of its audience and promises made in small print.

“Everything they say is true,” said Kitty Litman, owner of The Coin Exchange, a Downtown dealer. “But the value of this stuff is all in the eye of the beholder.”

Not an investment

Litman can't recall any customers bringing the silver bars produced by U.S. Commemorative Gallery to her to be appraised. But she has seen products like it, which they've purchased from late-night infomercials or the back pages of a Parade magazine.

Someone will bring in a handsome case of what they believe to be precious coins, but are in fact worth little more than the packaging in which they came.

“I feel very sorry for people,” Litman said. “It's a gift item. It's not an investment.”

Dealers say they see a lot of coins sold through direct marketing outfits. The advertisements claiming incredible value are over-hyped, coin experts say, but they don't lie. You just have to know how to read it.

Phrases like “24 karat gold embellishment” or “silver wash” suggest value, but actually refer to a thin gold coating that is essentially worthless, said Patrick McBride of McKeesport, treasurer of the Pennsylvania Association of Numismatists.

“You have to watch those trick words,” McBride said.

In the Suarez silver pitch, consumers who miss disclosures in fine print could be lulled into believing they are dealing with U.S. government agencies. The newspaper ad uses bold type that refers to its silver offerings as a “United States Distribution Notice” and labels them as “U.S. State Silver Bars.”

The two entities that market and distribute the bars — United States Commemorative Gallery and Lincoln Treasury — sound like official federal agencies but are actually subsidiaries of Suarez. A disclosure in small type at the bottom of the page does say both entities “are not affiliated with the U.S. government, a bank or any government agency.”

Mary Ellen Withrow, a former U.S. treasurer under President Bill Clinton who lives in a retirement community in Marion, Ohio, says she is paid by the company to endorse the silver promotion. The ads describe Withrow as “the emeritus 40th Treasurer of the United States of America” and “executive advisor to the Lincoln Treasury.” She is quoted as urging buyers to snap up “as many (silver bars) as they can before they're all gone.”

Reached by phone, Withrow confirmed that she approved the quotes and the use of her name in the ads but declined to say how much she is paid.

Otherwise, she said she has no duties at the company. Does she believe the products are worth what the company is charging?

“I think you'll have to ask the company,” she said.

The cost of the silver bars reflects more than the value of the silver, Skemp said. The bars are vacuum sealed and, when purchased in amounts of five, come in a collector case. She compared them to collectible silver stamp ingots sold through the U.S. Postal Service.

“Some companies sell silver ingots or bullion to consumers who are looking to purchase as an investment,” she said. “Although they are made of valuable precious metals the U.S. State Silver Bar Program is not promoted for that purpose.”

Controversial history

U.S. Commemorative Gallery coins have been the subject of 11 consumer complaints to the Better Business Bureau in the past three years, mostly about delivery issues rather than product quality, said Amanda Tietze, vice president of operations in the BBB's Canton office.

Suarez's other products, which range from space heaters to back massagers, have been more controversial.

The company has been the subject of hundreds of consumer complaints and numerous civil lawsuits brought by the U.S. Postal Service, West Virginia, New Jersey and Washington. It has an “F” rating from the Better Business Bureau, which has received 178 complaints in the past three years about the company's products and service.

“We're very familiar with that company,” Tietze said.

Last year, Suarez paid $1.8 million in penalties and restitution to settle a consumer fraud lawsuit brought by a group of California district attorneys over some of its dietary supplements.

Prosecutors said the company falsely claimed some of the products would improve the immune system and provide relief for everything from headaches to parasite infections and bad breath. One of the products, AbGone, had lead levels above the state's legal requirements.

But it was the company's response to these allegations that led to its CEO's imprisonment. Prosecutors said that Ben Suarez and his chief financial officer, Michael Giorgio, orchestrated a scheme to secretly provide $200,000 in campaign contributions to an Ohio congressman and the state treasurer, seeking their political clout to fight the consumer fraud lawsuit in California. Suarez, 74, was acquitted of most charges, but convicted of obstruction of justice.

He is serving a 15-month sentence at a medium security prison in Glenville, W.Va., and scheduled to be released in February. Efforts to reach him for an interview were unsuccessful.

Better ways

Suarez's legal troubles have made the company a notorious example in the direct marketing industry, but its product hyping and price hiking are strategies so prosaic that they elicit shrugs of indifference from coin and silver dealers.

“This is not a new thing. It's just one of many, many that hype it up,” Kitty Litman said.

There are better ways to invest in silver.

The first step is to know what it is worth. Spot prices are published in plenty of places online, such as kitco.com. Then buyers should search for dealers willing to give them a reasonable price, expecting a markup of perhaps 5 percent to 10 percent, Wiles said. Any more than that is paying too much.

Silver prices fluctuate all the time and even rose above $40 in 2011. But it can go the other way, too.

“It is very speculative,” Wiles said.

The same principles apply to investing in coins, said McBride, of the Pennsylvania Association of Numismatists.

Do the research up-front, visit coin shows and talk to dealers. Know what you're buying, he said.

If you still like how a coin looks and want to pay 10 times more than you could expect to sell it for, then at least you're doing so with no illusions.

“It's like buying all those little statues of Venus de Milo or David at the souvenir shop,” McBride said. “It wasn't made by Michelangelo.”

Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or cfleisher@tribweb.com.

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