Contract with coin maker suspended

The CNMI has suspended its contract with a U.S.-based coin manufacturer in the wake of a court injunction imposed against the company in New York over alleged fraudulent acts.

Gov. Juan N. Babauta said the CNMI is suspending its Nov. 3, 2003 agreement with Softsky, which authorized the latter to develop and market commemorative coins.

The governor said that the injunction entered by the state court of New York against Softsky on Nov. 10, 2004 alleges fraud and false advertising regarding its Freedom Tower coins.

“We are very concerned about these events. To date, both coins that have been marketed under this program have been fraught with controversy and, in the case of the Freedom Coin, apparent fraudulent action,” said Babauta.

A state judge in New York has reportedly found that National Collector’s Mint Inc. engaged in civil fraud, false advertising and deceptive business practices when it marketed its “2004 Freedom Tower Silver Dollar” for $19.95 in television and print ads.

The company, which markets Softsky coins, reportedly claimed the medallions were made of nearly pure silver recovered from the World Trade Center site in lower Manhattan.

But New York attorney general Eliot Spitzer said they were made of inexpensive metal alloy plated with about one-ten-thousandth of an inch of silver.

Spitzer had filed an $8-million lawsuit against the Port Chester-based company.

Babauta said that his office is in the process of evaluating the court finding.

“When we have developed a complete record, we will make a final decision regarding our agreement. Until that time, you are not authorized to develop, mint, or market any coins utilizing the authorization of the CNMI,” said Babauta in a Nov. 12, 2004 letter to Softsky president Joseph Hartman.

In terms of money remitted to the CNMI, Babauta said, “we are also evaluating our options in how these funds should be handled.”

“We are not happy taking these actions but the events surrounding this agreement warrants this suspension,” he told Hartman.

Hartman came to Saipan last July to personally hand the “royalty fee” to the CNMI. SoftSky has issued two $25,000 worth of checks to the CNMI from the proceeds of the sale of minted CNMI coins.

Last month, Babauta said that the company was about to send an additional $110,000 to the CNMI as royalty fee.

The U.S. Mint had said that advertisements for the Freedom Tower coin appear confusing because the company uses phrases such as “legally authorized government issue,” “U.S. territorial minting,” and “silver dollar.”

The product itself may also be confusing because it bears the inscription, “In God We Trust,” which Congress requires on all U.S. coins, and the inscription, “One Dollar.”