Firm ordered to refund WTC coin buyers

The New York State Supreme Court directed the National Collector’s Mint, Inc. Friday (Thursday, NY time) to pay restitution on all refund claims by those who purchased the “2004 Freedom Tower Silver Dollar” commemorative coins, directing the company to deposit $1.3 million in an escrow account.

The court also directed NCM to dedicate 10 percent of the gross proceeds from the processing of pending orders into a “Dedicated Fund,” which would be used to pay refunds to consumers. The court ordered that the fund be deposited in a separate bank account.

In a nine-page order, Justice Joseph R. Cannizzaro laid out a restitution mechanism for the payment of refunds to consumers. The mechanism compels NCM to mail a drafted letter and claim form to each consumer of the Freedom Tower coin no later than Feb. 23, 2005.

That letter would advise consumers that the coin is not a legally authorized government issued silver dollar and is not legal tender, and that it was manufactured, issued and marketed by NCM that is not affiliated with the U.S. government.

“[NCM] was authorized to privately mint and market the coin using the name of the government of the Commonwealth of the Northern Mariana Islands. The government of the NMI is not authorized to coin money or issue legal tender,” the letter states. “The plated coin is not solid silver. It is made from an alloy of copper and zinc and plated with a layer of silver that is approximately one ten-thousandth of an inch or .002301477 troy ounces of silver.”

The letter provides for instructions to consumers of the coin on how to make refund claims.

Cannizzaro directed NCM to deposit $1.3 million on or before Feb. 3, 2005 with a third-party escrow agent, and that the company and the agent enter into an agreement with New York attorney general Eliot Spitzer. The balance of the escrow account shall not be less than $500,000 until all refunds requested have been paid.

“In the event the escrow account goes below $500,000, it shall be replenished to the extent of $500,000 with the dedicated funds. If the dedicated funds are insufficient, respondent shall replenish the escrow account with other available company funds,” the justice said.

The judge also directed NCM to make the necessary steps for consumers to have first security interest in all of the company’s inventory and outstanding company stock to secure payment of restitution.

The judge deferred his determination on the request of Spitzer, represented by assistant attorney general Matthew J. Barbaro, for civil penalties against NCM for fraudulently marketing the Freedom Tower coins, pending the company’s compliance with the restitution directive.

The CNMI government is earning royalty from the sale of commemorative coins bearing the name and seal of the Commonwealth, after authorizing a U.S. company, Softsky, to mint and sell the commemorative coins. NCM was one of Softsky’s clients marketing the commemorative coins.

Last October, the CNMI government received $110,000 in royalties from Softsky from the sale of the coins. Softsky had also remitted a total of $50,000 in the summer of last year from the sale of 1933 Gold Double Eagle coins.

CNMI attorney general Pamela Brown said she would confer with Spitzer’s office on how to handle the royalties, after the primary complainant that brought the matter to the New York’s AGO, Rob Gallagher, urged that they be donated to the World Trade Center memorial fund.

“While I never bought a coin, in my complaint I was acting on behalf of the 184,000 who did,” Gallagher earlier said. “Most importantly, I was acting on behalf of the 2,752 innocent victims of the World Trade Center tragedy, their families and friends.”

The court has ruled that NCM 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. NCM marketed the coin as a product of the CNMI and that they were made of silver from the site where the WTC towers fell on Sept. 11, 2001.