Ex-Cons Make a Killing in Coins; No Law Bars a Person From Working in the Coin Industry Because of Prior Convictions
Over the years, the 52-year-old Bloomington man added convictions for attempts to pass bad checks and several more thefts. But this record didn't stop him from getting hired at one Twin Cities coin firm after another -- Midas Resources, PFG Coin and Bullion, American International Gold & Silver Exchange, S & F Commodities.
Criminal records aren't unusual among the silver-tongued "fronters" and "closers" who spend hours cold calling prospects to get them to buy, sell or trade precious metals.
It's impossible to say just how many ex-cons permeate the unregulated industry because there are no licensing requirements. But a Star Tribune investigation of about 125 individual coin salesmen found that Gundy is one of six dozen who have worked for area coin companies since the 1990s. They've been convicted of crimes including fraud, forgery, theft and even bank robbery.
No law bars a person from working in the coin industry because of prior convictions, because in most cases precious metals are viewed as collectibles rather than investments. The result is an industry in which salesmen with long rap sheets handle tens of thousands of dollars of customers' savings.
"It's treated the same way as selling groceries or laptops or selling anything else, in that there's no regulation on who can buy or sell," said U.S. Rep. Anthony Weiner, D-N.Y. He sponsored legislation last year in an unsuccessful attempt to require fuller disclosures to protect consumers from abusive sales practices.
Weiner said he'd heard reports of firms that hired salesmen with questionable backgrounds and said at a hearing last year that three top sellers at the California firm Goldline International had been banned from the securities industry for fraud.
"The level that you're finding, though, it's pretty shocking."
Ron Wolfbauer, who operated International Strategic Assets in Eagan, was sentenced to two years in federal prison in 2006 and ordered to pay $1.76 million in restitution to some of his coin customers. Yet Wolfbauer went back to selling coins for about six months in 2008 at the Bloomington firm where he got his start, Investment Rarities Inc.
Owner Jim Cook said he runs background checks on everyone he hires at Investment Rarities, which has about 50 salesmen, and people in the industry credit it with a generally solid reputation. Cook said he gave Wolfbauer a second chance because he had worked there previously for 10 years without a complaint.
"Obviously, we're not going to hire a bad guy," Cook said.
What happened next is in dispute. Cook said Wolfbauer started tapping coin customers to buy stock in his wife's food business, Nature's Prime Organics. So he fired him.
Wolfbauer, who paints himself as an honest player in a murky business, said he quit because he wanted out of the industry. "I think the gold industry needed to be regulated a decade ago," he said. "There's some bad people out there who can do bad things to people."
Wolfbauer also made a stop at Twin Cities Gold & Silver Exchange (TCGS), a St. Anthony coin dealer owned by his cousin Jeffrey Wolfbauer. Ron Wolfbauer denied selling coins through TCGS, saying he advised management on "how to run a clean operation."
More than a dozen individuals with criminal records have been associated with TCGS over the years. Its owner, Jeffrey Wolfbauer, was convicted of fourth-degree sexual assault in 1992. He also has several gross misdemeanor convictions since then for drunken driving, and one for interference with a 911 emergency call. He has moved to Arizona and could not be reached for comment.
His father, Ken Wolfbauer, runs the office now. When asked about its workers, he said the company has "an equal employment opportunity" policy that doesn't discriminate against anyone, including ex-cons.
After the newspaper's inquiry, though, company attorney William Skolnick said it has begun doing background checks. He said they are mostly concerned with any fraud or theft as opposed to substance abuse.
A number of Twin Cities coin dealers said that drinking, drug abuse and gambling are rife within the industry.
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