Newport Coin Dealer Placed in Receivership : Investment: The government is also investigating practices of an Irvine rare coin appraiser, the industry’s largest.

The Federal Trade Commission on Wednesday placed Hannes Tulving Rare Coin Investment, one of the nation’s biggest coin dealers, into receivership and is expected to file a civil complaint today charging the firm with overpricing.

In a separate case, sources said the FTC is investigating Professional Coin Grading Service in Irvine, the industry’s largest appraiser, for grading some coins at rates favorable to its preferred customers.

Newport Beach-based Hannes Tulving confirmed Wednesday it signed a consent decree allowing a receiver to take over the 14-year old firm. The receiver will run the firm and review the company’s books to determine its remaining assets.

Federal and state officials have been investigating the company for five months. Sources close to the investigation said Wednesday that the company is suspected of running a Ponzi scheme--artificially inflating its prices and transferring funds from new investors to longtime collectors cashing in portfolios.

Hannes Tulving Jr.--the company’s owner--denied the charges in an interview Wednesday and said he welcomed the receivership.

“It’s difficult, but it’s the best for everyone concerned,” Tulving said of the receivership. “I could have very easily just gone bankrupt, not cooperated, not worked with anyone, but I have something to prove. I know I’m innocent. I know I’ve tried to do the best I possibly could for my clients, and this is going to be the easiest way to prove it.”

Problems at Hannes Tulving began to surface in late March after a sharp fall in rare coin prices. The company has blamed the market’s mini-crash on the tremendous losses incurred by its customers since then. The firm cancelled its guarantee to buy back coins as well as its 60-day return privilege.

About 4,600 customers purchased more than $30 million in coins from Hannes Tulving last year. Now some of the company’s clients complain that their portfolios have fallen in value by as much as 75%. Some people have lost more than $100,000.

“I feel bad for everyone that has lost money, which includes my mother and father, my aunts and uncles,” said Tulving. “It’s a terrible situation.”

The FTC, the California Department of Corporations and the Newport Beach Police Department are all investigating Hannes Tulving.

The company promised clients an annual rate of return of more than 20%, year in and year out, despite the fact that the rare coin market was fluctuating wildly, often causing investors to lose big money.

“In 10 years, not one (Hannes Tulving) client has ever lost money or had a portfolio in anything but a profit position,” said a recent Hannes Tulving ad running in newspapers.

Asked Wednesday how the firm did it, Tulving said: “It was just a lot of luck.”

The FTC in its complaint expected to be filed in U.S. District Court in Los Angeles says it was something else. Tulving, the commission claims, set prices higher each year, thereby convincing long-term customers they were making big profits. The gains weren’t real, the FTC said, and the market crash short-circuited Tulving’s system.

Tulving customers often compared his prices to those in the Rare Coin Market Digest, a publication he sent them with monthly statements. What many didn’t know was that Rare Coin was not an independent pricing guide but a publication put out by Tulving himself under the name Cameo Enterprises.

“Looking back it might have been a mistake, but it was never done intentionally,” Tulving said.

Tulving was once the toast of the coin world. He was profiled in Coins magazine last October as an expert market insider and was given four pages to tout his success. “Hannes Tulving’s claims seem too good to be true, but so far he’s made them stick, “ was the magazine’s headline.

Meanwhile, the FTC is probing allegations that Professional Coin Grading Service--which has appraised $2.5 billion in coins nationwide since it was founded four years ago--graded some coins at rates favorable to its preferred customers.

“They were grading coins from certain companies at a higher grade than the exact same coins from companies not affiliated with them,” said a high-ranking FTC official in Washington. “There was an allegation of preferential treatment.”

PCGS is widely respected within the industry and its certifications are accepted nationwide by dealers looking for a standardized method of pricing coins. Its top executive, David Hall, has been a major national coin dealer and an author of several books on coin investing.

The company said in an Aug. 13 letter to dealers that it has agreed to sign a consent decree but called the FTC allegations “obviously untrue” and “bizarre.”

“We do not grade coins on the basis of ownership,” said Hall, chief executive officer of PCGS.

FTC senior attorney Pam Wood in Boston said Wednesday that the PCGS version of events was inaccurate. The commission, she said, has not accepted a consent decree from the company.

“No consent has been voted on or accepted by the commission contrary to the information in the (PCGS) letter,” Wood said.

She declined further comment but said more information would be made public within the next week. The commission has not filed a complaint against PCGS.

Some coin experts said privately Wednesday that if PCGS was biased in its grading, it would cast a shadow of doubt over the portfolios of many of the nation’s coin collectors.

“This is an absolute shock,” said Ira Goldberg, president of Superior Stamps & Coin Co. in Beverly Hills.

PCGS in its letter to dealers said it did not fight the FTC because it “didn’t want to spend the time or money that would be necessary for a two or three year battle.”

The letter said the investigation was a shock. “We see ourselves as good guys,” the letter said.

COIN INVESTORS COUNT THEIR LOSSES

HANNES TULVING: RARE COIN INVESTING

Customers of Hannes Tulving Rare Coin investments received monthly statements detailing the value of their portfolios. Here is a summary of the statements sent less than three months apart to two Orange County customers, showing losses in total value of 53% and 56%, respectively. The company had promised a 20% annual rate of return.