In the Matter of the Complaint Against

 RICHARD W. VERRET
 2480 Overbrook Street
 Beaumont, TX 77703-2828

 MILTON VERRET
 925 Shakespeare Street
 Beaumont, TX 77706-5340

 VERRET ENTERPRISES, INC.
 450 Bowie Street
 Beaumont, TX 77701-3004

 U. S. COIN RESERVE
 Post Office Box 148
 Houston, TX 77001-0148

 U. S. COIN RESERVE
 Post Office Box 13587
 Denver, CO 80201-3587

 U. S. COIN RESERVE
 Post Office Box 7736
 Beaumont, TX 77706-7736

 and

 U. S. COIN RESERVE
 Post Office Box 2832
 Beaumont, TX 77704-2832*

 P.S. Docket No. 20/63;  

 07/30/85

 Duvall, William A.  

 APPEARANCES FOR COMPLAINANT:
 Thomas A. Ziebarth, Esq.
 Timothy J. Mahoney, Esq.
 Consumer Protection Division
 Law Department
 United States Postal Service
 Washington, DC 20260-1112 

*Added to Complaint by amendment, Dec. 27, l984.  

 APPEARANCES FOR RESPONDENT:
 Theo W. Pinson, Esq.
 Diana Resnick, Esq. 
 Greenwood, Koby, Old, Pinson & Bussey
 1900 American General Tower
 2727 Allen Parkway
 Houston, TX 77019-2115

The General Counsel of the United States Postal Service (Com plainant) filed a Complaint in which it is alleged that Respondents, Richard W. Verret, Milton Verret and Verret Enterprises, Inc., are conducting a scheme or device to obtain money or property through the mails by means of false representations in violation of 39 U.S.C. § 3005.

In paragraph 2 of the Complaint it is alleged that: Respondent Richard W. Verret is an individual whose address is 2480 Overbrook Street, Beaumont, Texas 77703-2828; that Respondent Milton Verret is an individual whose address is 925 Shakespeare Street, Beaumont, Texas 77706-5340; that Respondent Verret Enterprises, Inc., is a corporation organized and doing business under the laws of the State of Texas at 450 Bowie Street, Beaumont, Texas 77701-3004; that Respondents Richard W. Verret and Milton Verret conduct and control the activities of Respondent Verret Enterprises, Inc., which trades as U. S. Coin Reserve; and that Respondents seek the remittance of money or property through the mails to Post Office Box 148, Houston, Texas 77001, to Post Office Box 13587, Denver, Colorado 80201, and to Post Office Box 7736, Beaumont, Texas 77706, as described below.

Complainant alleges in paragraph 3 of the Complaint that by means of advertisements appearing in publications of general circu lation, Respondents request members of the public to remit money or property to them in return for coins, specifically Silver Dollars. ^1/

In paragraph 4 of the Complaint it is alleged that in such advertisements Respondents, directly or indirectly, in substance and effect, whether by affirmative statements, implication or omissions, make representations which are alleged to be materially false as a matter of fact. These representations will be stated and discussed later in this decision.

It is charged that the representations set forth in paragraph 4 are materially false as a matter of fact.

Complainant requests the issuance against the Respondents of orders of the types authorized under 39 United States Code § 3005(a) (1), (2), and (3).

Answering paragraph 2 of the Complaint, Respondents deny that Richard W. Verret conducts and controls the activities of Verret Enterprises, Inc., but admit that Milton Verret does conduct and control the activities of Verret Enterprises, Inc. The remainder of the paragraph is admitted, as is all of paragraph 3.

With respect to paragraph 4(a) through (r) of the Complaint, Respondents admit making the allegations in Paragraphs 4(d) and 4(k), and deny making the remainder. Respondents deny that the representations in paragraph 4(a) through 4(r) are false.

Respondents request that the relief sought by Complainant be denied.

The matter came on for hearing in Washington, D.C. on January 8 and 9, l985. Both parties were represented by counsel who partici pated in the introduction of evidence and the examination and cross examination of witnesses, and who filed written Proposed Findings of Fact, Conclusions of Law and supporting arguments, the last of which latter documents was submitted on March 26, l985.

Basically, this case involves the Respondents' use of the mails in the sale of silver dollars. The fundamental issue is whether Respondents, in their advertising, accurately describe and characterize their merchandise. In dealing with this question it will be useful at the outset to have at least a nodding acquaint ance with the vernacular applicable to and employed in the area of interest.

The system of grading the various conditions of coins estab lished by the American Numismatic Association (ANA) is widely accepted. (Tr. I, 100 ^2/ ) This grading system has been designated the Official American Numismatic Association Grading Standards for United States Coins, and it has been published in book form. (CX 192) In the book's preface the design of the numerical grading scale is credited to Dr. William H. Sheldon, as its originator (CX-192, p. 5); and in the introduction, earlier works on the subject by Martin R. Brown, John W. Dunn, and James F. Ruddy are cited. (CX-192, p. 7) The Grade nomenclature adopted by ANA is as follows:

GRADING ABBREVIATIONS

Corresponding numbers may be used with any of these descriptions

MS-70 Perfect Uncirculated Perf. Unc. Unc.-70

MS-67 Gem Uncirculated Gem Unc. Unc.-67

MS-65 Choice Uncirculated Ch. Unc. Unc.-65

MS-63 Select Uncirculated Select Unc. Unc.-63

MS-60 Uncirculated Unc. Unc.-60

AU-55 Choice About Uncirculated Ch. Abt. Unc. Ch. AU

AU-50 About Uncirculated Abt. Unc. AU

EF-45 Choice Extremely Fine Ch. Ex. Fine Ch. EF

EF-40 Extremely Fine Ex. Fine EF

VF-30 Choice Very Fine Ch. V. Fine Ch. VF

VF-20 Very Fine V. Fine VF

F-12 Fine Fine F

VG-8 Very Good V. Good VG

G-4 Good Good G

AG-3 About Good Abt. Good AG

(CX-192, p. 23)

In view of the narrowing of the numerical spans, particularly in the upper grades, it is not surprising to find in the section headed "Why Is Grading Important?" starting on p. 7, CX-192, the following paragraph at the top of p. 8:

"In evaluating coins, considerations such as striking, surface of the planchet, the presence of heavy toning (which may obscure certain surface characteristics), the design, and other factors each lend an influence. ^3/ A panel containing a dozen of the foremost numismatic hobby leaders justifiably could have some slight differences of opinion of the precise grade of some coins." (Emphasis in the original)

On September 25, l984, Postal Inspector Roderick Sullivan, attached to the Philadelphia Division of the Postal Inspection Ser vice, was shown an advertisement (hereinafter "ad") in a Hagerstown, MD, newspaper in which Respondents offered silver dollars for sale.

Inspector Sullivan then placed a call to Respondent via the toll-free number shown in the ad, and he ordered five coins. Dur ing the telephone conversation, a man who said he was Joe Hamilton told Inspector Sullivan that the coins were uncirculated and that they "had a nice mix of dates." On or about October 25, l984, the coins (CX-1A through 5A) were delivered by mail.

During the course of his investigation of Respondents' activi ties, Inspector Sullivan learned that U. S. Coin Reserve* was under investigation by the Houston Division of the Postal Inspection Ser vice. Inspector Curtis L. Woodard, of the Houston Division, advised Inspector Sullivan that he, Woodard, had received some coins with a complaint from William N. Cash, of Springfield, Illinois. At Sullivan's request, Woodard sent the coins to Sullivan, who intended to have the coins appraised. (CX-6A through 10A) Inspector Sullivan delivered the latter five coins to Inspector Daniel C. Smires, of the Philadelphia Division. (Tr, I, 9-17)

Inspector Smires took the coins he received from Mr. Cash by way of Inspector Sullivan to two coin dealers in the Philadelphia area

*Sometimes referred to as USCR

for grading and appraising. These coin dealers are Alan Faden, pro prietor of Neshaming Stamp and Coins, Neshaming Mall, Langhorne, PA 19047, and S. M. Colavita, 214 State Road, Trenton, NJ. Mr. Faden has been in the coin business for 15 years and he has been a collec tor for 30 years. Mr. Colavita's experience in the same activities has been 10 years as a coin dealer and over 20 years as a collec tor. (Tr. I, 20-21)

William N. Cash, is the individual by whom CX- 6A through CX-10A were received from Respondents. Inspector Smires had spoken with Mr. Cash on more than one occasion concerning Mr. Cash's transaction with Respondents. The affidavits of Messrs. Faden and Colavita and the declaration of Mr. Cash are with the record as CX-33, 34 and 35, as are the declarations of five other persons who, because they indicated they had been misled by Respondent's advertising represen tations, were aggrieved with their dealings with the Respondents. (CX-36-40; Tr. I, 32-35) On November 10, l984, Insp. Smires sent CX-1A-10A to the American Numismatic Association Headquarters in Denver, CO where they were graded and, on November 24, l984, they were returned to Insp. Smires. (Tr. I, 55)

In April 1984, Inspector Woodard received a complaint from Jerry Bamberger, Dallas, TX, transmitting a copy of an ad from the Dallas Morning News of May 31, l984, offering coins for sale by U. S. Coin Reserve. In the upper left corner of the ad in large type is the legend "Just found and released for public sale Uncirculated..." Mr. Bamberger was dissatisfied with the quality of coins he had purchased from Respondents after reading the ad. Inspector Woodard, using the ad he received from Mr. Bamberger, instituted a test purchase of 2 coins by his order of June 29, l984. On July 6, not having received the coins he had ordered, Inspector Woodard, accom panied by Inspector W. J. Heikes, also of the Houston Division, went to Beaumont to visit Respondent's place of business. After some difficulty in finding the location of the business, the Inspectors went into a room outfitted like an office in which Richard and Milton Verret were, or had been, working on a mat, or mats, for advertising copy. The Inspectors explained the purpose of their visit and said that they wanted to buy 2 Morgan dollars as advertised in the Dallas newspaper. After some discussion, the sale and purchase were agreed upon. Despite the fact that he had been requested by Inspector Woodard not to do so, Milton Verret sorted through some coins in a safe and selected two coins and handed them to the Inspectors. (Tr. I, 55-61; CX-166, 167) On August 9, l984, Inspector Woodard received the 2 Morgan silver dollars ordered on June 29. (CX-168)

Inspector Woodard reassigned the investigation regarding Respon dents to Inspector J. D. Butler, of Houston, on October 2, l984. Inspector Butler prepared a declaration concerning his investi gation, which was submitted due to his inability to attend the hearing. (CX-173; Tr. I, 67)

In the manner just related, fourteen coins were obtained directly from Respondents either by mail order, by telephone order, or by direct purchase in person at Respondents' place of business in Beaumont, TX.

Hurtis A. Burleson is a resident of Gulf Breeze, Florida. In July 1984 he saw a USCR advertisement for silver dollars in the Pensacola News Journal. (CX-174) He responded to the advertise ment by telephone on or about August 3, l984, using his Master Charge for payment. On September 2, l984, he received five silver dollars mailed at Beaumont, Texas. The coins appeared to him to be scratched and worn and cleaned or polished. He did not think they were uncirculated as advertised. After showing the coins to a coin dealer, he returned them and requested a refund. He subsequently corresponded with consumer agencies and was contacted by Postal Inspector Butler of Houston. (Tr. I, 71-2, 74)

Mr. Burleson said that one of the inducements to him to order coins from USCR was a listing of silver dollar dates in the adver tisement. Knowing that some silver dollars of those dates would be worth more than the purchase price if in uncirculated condition, he ordered hoping to get one such coin. (Tr. I, 73)

Francis B. Frere, Assistant Director for Marketing, United States Mint, Washington, D.C. was called by the Complainant to testify. Mr. Frere has been employed at "the Mint", as it is popu larly known, for 28 years, and he is familiar with its history and its functions. The Mint is responsible (l) for the production of coins for the United States Government and (2) for the safeguarding of the nation's gold and silver assets. It is the only Government agency that produces coins, which then are issued to the Federal Reserve Banks for distribution to the commercial banking sector. No private concerns distribute coins for the Mint or for the Treasury

Department, except that in the case of Olympic coinage, distribution is accomplished under contractual arrangements with four domestic bulk dealers and one foreign dealer. No distribution of coins for the Mint or for the Government of the United States is performed by "U. S. Coin Reserve", or "Verret Enterprises, Inc." (Tr. I, 170-1)

The foregoing testimony, which is uncontroverted, establishes that Respondents' representations (1) U. S. Coin Reserve distri butes currency on behalf of the United States Government; (2) the offer for sale of Silver Dollars by U. S. Coin Reserve has been directed or authorized by the United States Government or an agency thereof; and (3) the sale of Silver Dollars by U. S. Coin Reserve is a release of silver by or on behalf of the United States Government are false.

Nelson Whitman, President of Capitol Coin and Stamp Co., Inc., 1101 Connecticut Avenue, N.W., Washington, DC, was called by Com plainant to testify. Mr. Whitman is a professional numismatist who does appraisals for banks and estates. After working in Kaufman's department store in Pittsburgh, PA for a year and a half prior to June 1962, he became the manager of the coin department at Woodward & Lothrop department store in Washington, DC. In May 1979, he opened his own business in which he still is engaged. He belongs to ANA and other professional organizations, and he has been a contri butor to the book "Modern World Coins", 13 Ed., by Yeoman and Friedburg. He has spoken to school groups and coin clubs, as well as having been interviewed on television and radio, and he has appeared as an expert witness in another matter before the Postal Service. (Tr. I, 99-100; CX-191)

In the course of his testimony Mr. Whitman was asked to look through invoices representing purchases of silver dollars by Respondents from two suppliers, Houston Precious Metals, Houston, TX and Silver Towne, Winchester, IN. (CX-73-165) He was asked to identify any invoices indicating the purchase by Respondents of uncirculated coins. On looking through the exhibits Mr. Whitman said he found only 3 invoices (CX, 117, 142 and 158) representing a totality of only 1008 uncirculated coins having been sold to Respondents in the period from March into November l984, whereas in that same period the other invoices indicate the purchase of liter ally thousands of lower grade dollars by Respondents from these same sources. (Tr. I, 165-6) Mr. Whitman stated that the price of silver dollars has not risen greatly in the recent past, (Tr. 1, 125) and the issues of CX-190 in evidence are in agreement.

According to Mr. Whitman's uncontroverted statement, the peak price of silver was reached in l981 at $50 an ounce. Because the price of silver declined, the price of silver dollars also declined. There has, in fact, been no rapid rise in the price of silver dollars of the type exemplified by CX-1A through 10A. If the coins were "uncirculated" the market would be rising, but because they are not up to that grade, there is not a strong market for them. There has not been, he said, a demand for silver dollars of the quality of CX-1A through 10A to cause the prices to skyrocket. (Tr. I, 116-117, 124-125)

Mr. Whitman, without having previously seen the fourteen coins mentioned above, was asked to assign grades to these coins. Mr. Whitman's responses are presented later herein in tabular form.

Mr. Whitman stated that the coins he had examined during his testimony, and other coins of like denomination and physical condition, are "not at all" difficult to find. (Tr. I, 115, 124) In view of this statement, such coins can not reasonably be regarded as rare. Depending on the price one would be willing to pay for them, it would not be difficult to assemble 10,000 or 20,000 Morgan dollars in the same condition as CX-1A through 10A. (Tr. I, 116) Congressionally ordered meltdowns did not cause a shortage of silver dollars. (Tr. I, 124)

Kenneth Bressett, Director of Educational Programs of the Ameri can Numismatic Association, Denver, CO, was Complainant's next witness. In his career with ANA, Mr. Bressett has been Director of the Museum, and Director of Certification Services (ANACS). The latter Service is one provided by ANA for members and non-members whereby a group of four, selected at random from a staff of experts, examines coins and gives an opinion as to the authenticity or grade of the coins. The staff consists of from six to eight professional numismatists, called authenticators.

In l959, Mr. Bressett joined Whitman Publishing Company and edited numismatic publications for 20 years. From 1979 to 1981 he was with a professional coin company and sold coins as a coin dealer, after which he was employed by ANA. While he was with the publishing company, he was engaged in publishing books for coin collectors, and he participated in the design, production and marketing of various collector supplies, coin albums, holders and related items. He also edited, wrote, or co-authored several books for coin collectors during that period. One such book which he edited, and still does edit, is R. S. Yeoman's The Guidebook of U. S. Coins, the largest selling coin book in the world. It lists facts about all United States Coins and it gives the details that collectors need to know in order to be informed about these coins, such as the mintage figures, when issues were made, relative scarcity of issues and values. It is an annual publication, now in its 36th edition. (Tr. II, 7-11)

On December 19, l984, Mr. Bressett testified by deposition in a related case and his deposition was received in evidence in this proceeding. (CX-32) In that deposition he stated that at one time, possibly l979, the value of silver bullion fluctuated wildly, going as high as $48, $49 or possibly $50 an ounce. For the two or three years before the date of his deposition, however, it had been down, with the high being around $10. (CX-32, pp. 47-48)

According to Mr. Bressett coins of the types represented by CX-1A through 10A are not particularly "rare in numismatic terms," but, to the contrary, " t hey're commonly available." (CX-32, p. 43)

Finally, Mr. Bressett stated that prior to his being called upon to give his deposition, he had never heard of Verret Enterprises. (CX-32, p. 93)

"Grading", in the numismatic sense, indicates the state of preservation of a coin. It provides a means of communication so that one person may convey to another the appearance of a coin in abbreviated form rather than describing it thoroughly and saying that some of the higher detail is worn away. One collector can simply say that the coin is in "very fine" condition and another collector will understand what the grade of the coin is.

The book Official A.N.A. Grading Standards for United States Coins represents the efforts of about 50 prominent numismatists, coin dealers, and collectors. They supplied the information, help, suggestions, and some written chapters, and Mr. Bressett coordinated all of those efforts and put the information into a single book which was first published in l977. He is listed on the title page as one of the people who compiled, arranged and edited the book. (CX-192) Although this book is designated by the ANA as containing its official standards, other systems of grading coins are recognized. (Tr. II, 12-13)

Mr. Bressett was asked to state whether CX-166 and 167 are uncirculated or circulated, and to assign a grade to them. He replied that he was being asked to give the requested testimony under the most difficult of conditions because of the light reflec tion caused by the plastic covers of the coins. He said "It's very difficult to see them." He thought he could see evidence of wear on each of them, and "perhaps they're both 'about uncirculated' in the range of 50. One, I think, has been cleaned, and I'm sorry but I can't see much more than that through the plastic." (Tr. II, 28, 29) Mr. Whitman also commented on the poor lighting conditions. (Tr. I, 110)

In response to a question Mr. Bressett defined a "slider" as "a coin that is so borderline between one condition and another that it's very difficult to determine just which grade it is." The fact that the coin is borderline could be due to a number of factors, including the detail or the mint lustre, for example. (Tr. II, 58-59)

Jack Hendlmyer, owner and operator of Houston Precious Metals, Houston, Texas, was the first witness called by Respondent. In his business Mr. Hendlmyer buys and sells silver coins, numismatics, scrap bullion, new jewelry and other related products. He does appraisals for banks and for individuals, but appraisals are so subjective that one cannot guarantee that someone else will, for example, give the same grade to coins that he has given. In his grading of coins, he uses the Sheldon system which is the one most widely used and recognized by coin dealers, and it is the basis of the standards used by the ANA. He has been in the coin business for about 10 years and with Houston Precious metals since l978. (Tr. II, 71-75) He commented that the ANA Certification System (ANACS) tended to give a lower grade to coins that have been cleaned than might have been given had the coins not been cleaned. He agreed with Mr. Whitman's testimony (Tr. I, 104) that if ten persons were asked to grade a coin, the variance in the grade among those 10 people might be at least five points. He cited a larger discrepancy that occurred during the testimony of the previous day, a discrep ancy of ten or 12 points. (Tr. II, 76)

In the Spring of 1984 Verret Enterprises bought from Mr. Hendlmyer limited quantities of lower grade silver dollars that graded extra fine or very fine, and in the early Summer of that year they bought larger quantities of extra fine to almost uncirculated coins. During the Summer and Fall they bought almost uncirculated (AU) to uncirculated (UNC) coins.

Mr. Hendlmyer's grading of the fourteen coins obtained as stated above will be shown later in this decision.

Other coins were received in evidence on motion of Respondents. (RX-2, 5, 6, 7, 12; Tr. I, 158) Since they were in Respondents' possession, these other coins obviously had not been sold by Respon dent, and this fact make the relevance of the discussion of them dubious. It would appear that they were discussed at length by Richard Verret for one, or perhaps both of the following purposes: (l) to argue that a new grading system which he espoused is prefer able to the ANA system; or (2) to illustrate his point, with which there appeared to be little, if any disagreement, that when a coin, which Mr. Verret called a "slider", is approximately halfway between two grades in the upper narrower categories reasonable people can differ as to the grade that should be given the coin, and neither person involved, nor any expert, can say with absolute certainty into which category it falls or give a reason therefor that satis fies everyone. It was pointed out above in the Prefatory Comment that in CX-192 it is recognized that even experts could have "slight differences of opinion" in such matters. (Emphasis in CX-192)(Tr. I, 156, 157)

Respondents' last witness, and the hearing's last witness was Richard Wayne Verret, Vice President of Verret Enterprises, the parent company of U. S. Coin Reserve. (Tr. II, 124, 17l) Most of Mr. Verret's direct testimony addressed two main points.

The first idea that Mr. Verret pressed was the inadequacy of the ANA system of grading coins. (Tr. II, 125 - intermittently through 158) He discussed mint preservation, bag marks, and the big gap said to exist between the choice almost circulated (AU 55) and the uncirculated (MS 60) grades. Another area, which he called "the gray area," exists all the way between select uncirculated (MS 63) and the choice uncirculated (MS 65) grades. Some of the coins produced in 1880, for example, were noticeably scratched in transportation, but they were not circulated. (Tr. II, 129-131)

In his opinion, Mr. Verret's fundamental criticism of the current ANA grading system is that consideration is given only to the degree of preservation of mint state, and that the quality of production, strike, and lustre are not considered. He said that a man named Alan Hager has designed a system which does give weight to those factors. Hence, he says that grading by the Hager system is a more accurate measure of a coin's value. (Tr. II, 135)

Without deciding the question of the relative merits of the Hager system as described by the witness, as opposed to the ANA system as described by the witness, it is apparent that in describ ing the ANA grading system Mr. Verret has omitted certain of the criteria employed by the proponents and users of latter system. The following is a partial listing of some features relative to the pro duction, strike and lustre of coins said by Mr. Verret not to be presently considered in the ANA system, but which, in fact, are stressed in the introduction to the Official A.N.A. Grading Standards for United States Coins: striking, surface of the planchet, the presence of heavy toning (CX-192, p. 8, lst par.); (1) characteristics of the die used to strike the coin, (2) irregulari- ties and characteristics of the planchet or blank on which the coin was struck, and (3) damages, marks, wear, etc. acquired by the coin after it was struck. (CX-192, p. 9, 3rd par.) All of these matters are considered in detail under separate headings on pages 9 and 10 of the Introduction; a discussion of striking and die weaknesses follows on pages 11-13; and finally, there are sections devoted to "Cleaning Coins" and to the "Handling and Storage of Coins." (CX-192, Introduction pp. 14-15) All of the foregoing subjects may be said to be directly related to the "production, strike or lustre" of coins.

Regardless of whether Mr. Verret's protestations against the ANA grading system have any validity, they are lacking in sufficient evidential foundation. His claim of the superiority of the Hager system finds its chief support in the record in his own testimony. The credibility accorded to his testimony must be tempered by (l) the obvious interest which he has in the outcome of this proceed ing and (2) the revealing nature of his later testimony, now to be considered.

Another point emphasized in Mr. Verret's testimony is his repeated assertion that his method of doing business is to concen trate on buying and selling coins that are in the "gray" areas, about which "no expert anywhere can say with a hundred percent surety that this coin that's in the middle, I know for sure that it's been circulated." (Tr. II, 156-157)

In the next quotations, Mr. Verret speaks for himself in describing his business methods:

"THE WITNESS: Okay, now the next thing I'd like to say is this as it relates to the Coin Dealer Newsletter which is exhibit 190. We look in there and there's a price for each individual grade and I was going to say earlier what do we do with all the coins that fall in between those grades? That's the subject of my business. Verret Enterprises, what my speciality is is going and seeking and buying all the coins that fall into the middle okay.

"Now what we find is that the average price for the common dates, uncirculated MS 60 coin in the gray sheet is approximately 38 to 42 dollars, okay. Now those coins represent, and I've seen dealers sell them, they could always represent almost completely fully struck lustrous coins; coins that were produced well from the factory in addition to having been preserved well.

"Now the next lower grade is AU and that's only around 20 dollars. We figured that out."

* * *

"So we're going to get 20 to 30 dollars for the average common date coins. Now, are there coins that exist that are worth 30 dollars? Absolutely.

"There are tens of thousands of them that fall in between the categories that are better than just an AU. *** In other words the coin dealer either won't pay 40 dollars, or he may not want to pay 40 dollars for it not because it's not well preserved; not because it's not MS 60, but simply it wasn't produced well and it doesn't have the eye appeal.

"So what happens to that coin? It's not worth 40 dollars and he has to drop to the next lower grade because he sells it and buys it for a lower price, which is technically AU but the coin will still be in a full state of mint preservation." (Tr. II, 142, 143)

* * *

"So there are many boarderline sic cases of coins that will not, are hard to grade as an MS 60 and they won't bring in MS 60 money but they're still in their full state of MS preservation. And what my business was when I graded and bought all these coins and sold them was to pick all these borderline cases out; the inbetweeners; the ones that still have the mint state preservation and still grade out but they're not as well produced and they don't bring the full money. And we bought them anywhere from 20 to 30 dollars each and we sold them for around 35 dollars each, which is less than the wholesale price for an MS 60 coin anyway." (Tr. II, 145)

* * *

"A. Okay. Well we started out advertising them just as fine coins. We hardly ever bought any fine grade. They were usually a grade or two better than that, and at that time we would take them and clean them up. And usually those lower grade of coin are real dirty and greasy when they come in.

"Customers do not want that. My customers, the average person who usually hasn't had that much to do with coins and they want to see a nice cleaned up coin, even though they know it has wear on it. It's obvious that the coin has wear.

"As a matter of fact this whole cleaning thing can be looked at in reverse because if a coin is dirty and toned you can hide defects. You can hide problems." (Tr. II, 146)

* * *

"Q. Explain why you do clean coins?

"A. Well just for, generally speaking just as one of the coins we had as an example earlier it's just like washing a car. If it's dirty and ugly you just can't even see what it looks like and it's just not pleasing to look at.

"The second reason is that our particular customer is an average person who is not attuned and doesn't necessarily know how to appreciate the fineries of a tarnished coin that's a hundred years old. It takes a special appreciation.

It's like learning how to eat specialized food, or learning how to appreciate symphony orchestras.

"The average person can't walk up and understand why this ugly brown spot is beautiful, okay. So we sell to the average customer and we like to have, our customers will send the coins back to us if we send them with toning on them." (Tr. II, 152)

Against the foregoing background, it is now the time to look at the judgment of experts as to the quality of the products furnished by the Respondents to their customers. The following chart is a tabulation of the grades of ANACS and the named persons who are experienced in appraising and grading coins.

COMP.'S ANACS HENDLMYER WHITMAN FADEN COLAVITA

EXHIBIT GRADE GRADE GRADE ^8/ GRADE ^10/ GRADE ^11/

1st ^4/ 2nd ^5/ Langhorne, Trenton,

PA NJ

1A AU 50/50 MS 60 55/60 AU 55

2A AU 50/50 AU 55 to

MS 60 AU 50

3A EF 40/40 AU 55 to

MS 60 55/55 AU 50

4A AU 50/50 AU 55 to

MS 60 55/60 AU 55

5A AU 50/50 MS 60 AU 55

6A EF 40/40 VF(Tr. II, 93)

EF(Tr. II, 94) EF 40 EF 40 EF 40

7A EF 40/40 EF EF 40 EF 40 EF 40

8A EF 40/40 VF EF 40 EF 40 EF 40

9A EF 40/40 EF EF40 EF 40 EF 40

10A EF 40/40 VF EF 40 EF 40 EF 40

4/ Tr. II, 89, 93, 94 8/ Tr. I, 107-109

5/ Tr. II, 99 9/ Tr. I, 110-111

10/ CX-33 11/ CX-34

COMP.'S ANACS HENDLMYER WHITMAN FADEN COLAVITA

EXHIBIT GRADE GRADE GRADE ^8/ GRADE ^10/ GRADE ^11/

BRESSETT ^6/ HENDLMYER ^7/ WHITMAN ^9/

166 AU 50 AU 55 AU 55

167 AU 50 AU 55-MS 60 AU 55

a EF & Cleaned EF EF

168 b EF & Cleaned AU 50 or 55 AU

Respondents admitted in the Answer to the Complaint that by means of advertisements appearing in publications of general circulation they represent that the silver dollars sold by them are in uncirculated condition.

Richard Verret found places of vulnerability in the upper areas of coin grading systems in which there is uncertainty into which categories coins should be ranked. In addition, he studied the market. He found that the lure of buying coins appeals to differ ent kinds of people - the skilled numismatist and the experienced collector as well as the unsophisticated, the sentimental, and the speculative buyer who, if the inducement is sufficient, is persuaded to invest.

Richard Verret stated quite frankly that what his business was when he "bought and graded all these coins and sold them was to pick all these borderline cases out; the in-betweeners***." (Tr. II, 145) He went to all this trouble for a number of obvious reasons,

6/ Tr. II, 28, 29

7/ Tr. II, 95

9/ Tr. I, 110-111

one of which he said was the difficulty if not the impossibility, even for experts, to state positively into which grade a "slider" should be placed. (Tr. I, 156-7) Another reason for Mr. Verret's chosen area of interest was his knowledge that "our particular customer is an average person who is not attuned and doesn't neces sarily know how to appreciate the fineries of a tarnished coin that's a hundred years old." (Tr. II, 152) Knowing these things, Respondents mounted large-scale advertising campaigns utilizing broad claims about unanticipated discoveries of previously uncircu lated coins. To create a sense of urgency on the part of the buyer, the coins are described as "scarce" and "rare" and the buyer is also advised that "We can only guarantee this price for one week due to the volatility of the precious metals market." (App's. A and B, L. H. col., pars. 3 and 5)

The tabulated grading of the coins which were part of the evi dence was remarkable more for the similarity, rather than for the disparity of the grades. With respect to CX-1A through CX-5A, the relationship of the Whitman grades to the ANACS grades for the obverse, or face, sides of the coins was as follows: 5 points higher on 3 coins; 10 points higher on 1 coin and the same as ANACS on the fifth coin. The differentials were the same for the reverse sides of the coins as has just been stated for the obverse. Mr. Hendlmyer, on his first grading of the same 5 coins, rated CX-1A and CX-5A at MS-60, and CX-2A, 3A and 4A at 55 to 60. He examined these coins a second time, this time using a jewelers 7-power loupe and he lowered CX-1A to 55/60, CX-3A to 55/55, and CX-4A to 55/60.

For CX-6A through 10A, the grades assigned to all the coins were identical - with three exceptions. Mr. Hendlmyer gave CX-6A two grades - VF (Tr. II, 93) and EF (Tr. II, 94), and he gave CX-8A and CX-10 the grade VF. Aside from these 3 exceptions, every other grade for these 5 exhibits by 5 independent classifiers was EF, EF 40/40, or EF 40, which would appear to be the same grade differently stated.

The grades assigned to CX-166 and 167 were so close together that for present purposes the differences may be disregarded. This statement is particularly true in view of the following language of the fourth paragraph on page 19 of CX-192: "Even more to the point is the illustration of AU 55 (Choice AU) and MS 60 (Typical Uncircu lated). If a coin is very, very close to MS 60 but is not quite MS 60, then it must be described as AU 55, for a coin which is very, very close to Uncirculated is not uncirculated. So it is with the other grade descriptions as well."

There is a wide discrepancy between the grades given to what on the tabulation has been designated as CX-168b by Mr. Bressett, on the one hand, and by Messrs. Hendlmyer and Whitman, on the other hand. It is very likely that this discrepancy may be accounted for by what Mr. Bressett called the "most difficult of conditions" because of the available lighting and the fact that the coins were encased in plastic which reflected the light. (Tr. II, 28).

1. a. Respondent Richard W. Verret is an individual whose address is 2480 Overbrook Street, Beaumont, TX 77703-2828. Respon dent Milton Verret is an individual whose address is 925 Shakespeare Street, Beaumont, TX 77706-5340. Respondent Verret Enterprises, Inc. is a corporation organized and doing business under the laws of the State of Texas at 450 Bowie Street, Beaumont, TX 77701-3004. Respondents Richard W. Verret and Milton Verret conduct and control the activities of Respondent Verret Enterprises, Inc. Respondents seek the remittance of money or property through the mails to U. S. Coin Reserve, Post Office Box 148, Houston, TX 77701-0148, Post Office #13587, Denver, Colorado 80201-3587, Post Office Box 7736, Beaumont, TX 77706-7736 (Ans. par. 2) and to Post Office Box 2832, Beaumont, TX 77704-2832.

b. Richard Verret was born in Beaumont, TX, where he went to grade and high schools. After graduating high school, he attended college for about two years. Of the next ten years, he spent about three years in college and during the remaining seven years he worked intermittently with his brother, Milton, in Verret Enterprises, Incorporated. Interspersed in the last seven years were periods of school attendance in which he studied precious metals, rare coins, precious gems, buying and selling at both wholesale and retail. He has worked for Verret Enterprise, Inc., the parent corporation of U. S. Coin Reserve, for the past ten years. (Tr. II, 121) Richard Verret is now Vice President of Verret Enterprises, Inc., where for the six months preceding the hearing his principal duty was to keep up with the shipping and grading of coins. His brother buys the coins, and when they arrive Richard does the grading and sorting. (Tr. II, 124) In addition, Richard Verret knows the advertising schedule used by Respondents and, by knowing the date of an adver tisement, he can state the amount of the prices of various coins advertised by Respondents. (Tr. II, 146, 172) No one except an officer, or someone having responsibility for, and an active part and interest in the operation of a company could be so intimately acquainted with its practices and functions as Richard Verret's testimony reveals him to be. He participates in the operation of the business of the Respondents and he is properly named as Respondent in this case.

2. Respondents make the representations set forth in paragraph 4 of the Complaint. The representations set forth in paragraph 4 of the Complaint will be separately stated, and each will be followed by language quoted from Appendix A upon which the alleged represen tation may be based. It is noted, however, that some representa tions could be predicated on more language of the advertisement than just the portions which are quoted.

(a) U. S. Coin Reserve distributes currency on behalf of the United States Government;

(b) The offer for sale of Silver Dollars by U. S. Coin Reserve has been directed or authorized by the United States Government or an agency thereof;

(p) The sale of Silver Dollars by U. S. Coin Reserve is a release of silver by or on behalf of the United States Government;

"UNITED STATES COIN RESERVE

"U. S. Coin Reserve a distributor of Government Currency is officially announcing as of November 8, l984, the release of its famous collection of 20,100 high grade uncirculated U. S. Government Silver Dollars."

(App. A, Col. 1, par. 1, sub- cap. and part of text)

(c) The market price of Silver Dollars has recently risen dramatically;

"Just Released From the Press

UNITED STATES GOV'T.

SILVER DOLLAR

PRICES SOAR]"

(App. A, large caption at top of ad)

"Due to the market surge and tremendous demand from the American Public the Board of Governors of the U. S. Coin Reserve has been forced to authorize the release of its last current stockpiles of silver dollars."

(App. A, col. 1, par. 1)

(d) The Silver Dollars sold by U. S. Coin Reserve are in uncirculated condition;

"UNITED STATES COIN RESERVE

"U. S. Coin Reserve a distributor of Government Currency is officially announcing as of November 8, l984, the release of its famous collection of 20,000 high grade uncirculated U. S. Government Silver Dollars."

( App. A, Col. 1, par. 1, subcap. and part of text)

"The nationally known Verret Rare Coin Analysts have accurately estimated that under 1 million MS 63-65 uncirculated specimens have survived most of which are not for sale but are being held by large investors until they are worth at least $5,000 each."

(App. A, col. 1, par. 3)

(Answer, p. 4(d))

(e) The Silver Dollars sold by U. S. Coin Reserve have a normal market value of $150 to $285;

(f) The representations alleged to be made in subparagraphs (d) and (e) were arrived at in accordance with standard of the American Numismatic Association;

"Our staff of experts have strictly graded these coins as MS 63-65 gems and a lifetime member of the American Numismatic Association has appraised them at our full market value of $150 to $285 each."

(App. A, col. 1, par. 1)

(g) There have recently been volatile fluctuations in the precious metals market price of silver;

"Orders received later may not be honored due to volatile fluctuations in precious metals market, and checks may be returned uncashed."

(App. A, col. 1, par. 1)

(h) Silver Dollars in the condition of those sold by U. S. Coin Reserve are almost impossible to find;

"Once thought to be plentiful 50 years ago investors are now scrambling to get their hands on the nearly impossible to find Gem United States Government Silver Dollars."

(App. A, col. 1, par. 2)

(k) The Silver Dollars sold by U. S. Coin Reserve are rare; (Answer, par. 4(k)

(n) The group of Silver Dollars sold by U. S. Coin Reserve is the last group of its size of Silver Dollars in that condition;

"LAST KNOWN

GOV'T SILVER RELEASED

"Through our national coin net works and our association with the American Numismatic Assoc. the U. S. Coin Reserve a division of Verret Enterprises, a private corporation, has taken a major audit of the silver dollar supply of the entire United States. The results indicate that this famous hoard of 20,000 Gems is the last known public collection of its size and quality available. NO other comparable collection is for sale anywhere in the United States. *** BUT the highly collectible Government Silver Dollars have a limited finite and realistically ever decreasing supply."

(App. A, col. 1, par 4, subcap and part of text)

(1) Meltdowns of Silver Dollars ordered by Congress created a shortage of the Silver Dollars sold by U. S. Coin Reserve;

"CONGRESS MELTDOWNS

CREATE SHORTAGE

"These beautiful pieces of American History were created by the millions at the United States Mint over a century ago. Although when one studies U. S. History it becomes obvious why these treasured relics are so difficult to locate. In 1918 during WWI Congress authorized the melting down of 350,000,000 (350 million) silver dollars, after this regrettable event the value and scarcity of these coins increased dramatically."

(App. A, col. 1, par. 3, subcap and part of text)

(o) There is great demand for Silver Dollars in the condition of those sold by U. S. Coin Reserve, which demand is causing the market value of such Silver Dollars to skyrocket;

"Just Released From the Press

UNITED STATES GOV'T

SILVER DOLLAR

PRICES SOAR]"

(App. A, large caption at top of ad)

"This means that out of control demand is swallowing up the remaining supply causing silver dollar prices to skyrocket."

(App. A, col. 1, par. 4)

(i) A Silver Dollar minted in l891 at the New Orleans Mint (1891-0) in the condition of the Silver Dollars sold by U. S. Coin Reserve has a market value of $150;

(j) The price at which U. S. Coin Reserve is selling its Silver Dollars is unusually low for those particular coins sold in their actual condition;

"Our staff of experts have strictly graded these coins as MS 64-65 gems and a lifetime member of the American Numismatic Association has appraised them at our full market value of $150 to $285 each. Since this collection must be sold out completely in only one week we are offering these coins at less than one half of our full market value. Only $84.90 each]"

"It is a proven fact that smart investors have been secretly hoarding these coins for the last 10 years. They are sitting on a silver mine which they will not sell and already have at least 1000% overall appreciation] This is just the "Tip of the Iceberg" in terms of what is to come, for example, the 1891-0 is now worth about $150 and is