Nickeled, Dimed and Screwed

Sonny Toupard, owner of Houston-based Royal Coin & Jewelry, says several former customers of

"They come to me under the impression that they made all this money," Toupard says, "then they get all upset."

Once known as a gentle hobby for kids, in just the last two decades rare coins have developed into a multibillion-dollar industry dominated by auction houses, large dealers and Wall Street brokerage houses.

Most numismatic coins in circulation today were minted between the Civil War and the Great Depression. Since their values are affected by rarity, quality and investor demand, the market is notoriously volatile, with certain types of coins falling in and out of favor fast.

The biggest factor in the industry's growth and increased legitimacy is grading, a measure of a coin's physical condition. National grading services, started in the mid-1980s, employ panels of experts to rate coins, which are then certified and slabbed into plastic cases.

The grading system has made rare coins more like commodities or stocks that can be bought sight unseen on electronic exchanges such as the Houston-based Certified Coin Exchange. Prior to grading, dealers could swindle buyers by

simply misrepresenting a coin's condition.

Haynes describes today's rare-coin industry as a relatively small, tight-knit community that tends to stand together. He compares the industry's acceptance of aggressive phone solicitors to South American businesspeople who thrive off the underground economy, though they may not actively participate in it.

"In the legitimate numismatic industry, there are people who would never call up a naive person and say, 'Buy this coin,'" Haynes says. "But those legitimate dealers benefit immensely because of the money that the [phone solicitors] pour into the industry. And they are reluctant to talk about it."

Fuljenz writes the esteemed monthly newsletter Investor's Profit Advisory and has authored several self-published books that have won awards from the Numismatic Literary Guild, a national trade group based in New Jersey. "Some say we have too many awards, that we give one to everybody," says Ed Reiter, executive director of the guild and senior editor of COINage magazine.

A collector since age 8, Fuljenz served as a coin authenticator and grader for the American Numismatic Association, a nonprofit educational organization based in Colorado. He later became vice president of Blanchard and Company Inc., a New Orleans-based rare-coins giant, before moving to Beaumont in the mid-1990s.

Today Fuljenz, along with business partners Tyrrell Garth and Elaine Henderson-Millar, are majority owners of 1st American Reserve and Universal Coin & Bullion. Fuljenz is also a paid consultant for First Fidelity Reserve and 1st National Reserve, owned by Garth and Henderson-Millar.

Neither Garth nor Henderson-Millar responded to interview requests for this story. Garth, a prominent Beaumont attorney, backed out of a scheduled phone interview. "Mr. Garth decided to take an unexpected vacation," explained Fuljenz, who denied requests to tour the buildings, including the companies' salesrooms and vault, which has an inventory that exceeds $10 million, he says.

All four companies were founded at different times and have separate ownership structures. They share employees and, occasionally, customers.

They also share space in four interconnecting, single-story red-brick buildings with white columns on a commercial street on Beaumont's west side. During the day, the interior parking lots are filled with BMWs, Cadillacs and Hummers. There are no signs identifying the businesses located on the property; drawn blinds cover the windows.

Fuljenz serves as the public face of all the companies, which are in good standing with the Professional Numismatists Guild, a California-based nonprofit group that requires members to adhere to a strict code of ethics, and the Better Business Bureau of Southeast Texas. Fuljenz is a frequent co-sponsor of the BBB's annual marketplace ethics award.

First Fidelity Reserve and 1st National Reserve, the oldest of the companies, were bought some 20 years ago from Milton Verrett, a veteran Texas coin dealer with a checkered past. In the late '90s, the Securities and Exchange Commission permanently barred Verrett from serving as an officer or director of a public company after his publicly traded film-marketing company made "false and misleading statements" about a movie's revenues.

Then in late 2004, the state of Georgia charged Verrett with violating the state's consumer protection laws by running magazine advertisements for rare coins that "exaggerated claims about the immediate and potential increases in the price and value of gold" and falsely implied "that the company is associated with the federal government." To avoid a lawsuit, Verrett, who denied liability, agreed not to market products in Georgia.

Verrett, who could not be reached for comment, remains affiliated with the Austin-based U.S. Rare Coin & Bullion Reserve, which has numerous outstanding complaints with the FTC and the attorney general of Texas. Verrett has continued his ties with the Beaumont coin companies, occasionally selling Fuljenz advertising copy.