Leon Worden




A Question of Legitimacy
Legislation would revoke government claims to privately held 19th-century patterns, 1913 Liberty Head nickels and other rarities with shady pasts.

By Leon Worden
COINage magazine • Vol. 42, No. 7
July 2006

UPDATE

    The House Committee on Financial Services' Subcommittee on Domestic and International Monetary Policy, Trade and Technology held a hearing July 19, 2006, titled "Coin and Currency Issues Facing Congress: Can We Still Afford Money?" The hearing addressed HR 5077 by Rep. Frank Lucas, R-Okla., and general numismatic topics.
    Follow the links below (locally hosted) for prepared statements on HR 5077 by the following individuals:

David A. Lebryk, Acting Director, U.S. Mint (.pdf)

Brent D. Glass, Director, National Museum of American History, Smithsonian Institution (.pdf)

Q. David Bowers, Numismatic Director, American Numismatic Rarities, LLC (.pdf)

Christopher Cipoletti, Executive Director, American Numismatic Association (.pdf)

Fred Weinberg, Vice Chairman, Industry Council for Tangible Assets (.pdf)

Beth Deisher, Editor, Coin World Magazine (.pdf)

T
he 1804 silver dollar. The 1913 Liberty Head nickel. The 1933 "double eagle" $20 gold coin and its 1907 Ultra High Relief predecessor. The 1943 bronze Lincoln cent. The 1885 Trade dollar.
    They are, in order, six of the 10 greatest coins in American history, as voted by the members of the Professional Numismatists Guild (PNG). All have commanded stellar prices on the open market. And all, by virtue of either their clandestine manufacture or their mysterious release from the U.S. Mint, have run the risk at one time or another of confiscation by the Secret Service.
    Ask around. Is a 1913 Liberty Head nickel a "legal" coin? No, most professionals admit. It was made in the dark of night by persons unknown, after the Mint director gave explicit instructions to "do nothing" about 1913 nickels until the new Buffalo design was ready. Thus it could be seized at any time. Right?
    Wrong! "No documentation exists to show it was made at the United States Mint," and therefore the Treasury will take no action to seize it, Mint spokesman Michael White told COINage. He said itís the "same situation" with the 1885 Trade dollar, 1907 UHR $20 and 1943 bronze cent.
    What about the "Toven specimen" of the 1974 aluminum cent? Is it legal? Yes, many say. In 1973, when the price of copper in a "penny" approached 1 cent, the Mint distributed the cheaper prototype to members of Congress to gauge their reaction. After the hearings, a congressional guard named Toven found one on the floor. He tried to return it to the member of Congress who dropped it. The lawmaker didnít want it. Toven kept it. Late last year a grading firm encapsulated it. No problem. Right?
    Wrong! "We never issued any of them, so we regard those pieces as property of the government," White said in April. "Nobody could lawfully circulate them, sell them, buy or hold them. Itís our position (that) they are subject to recovery."
    The late Mr. Tovenís heirs can live in fear of a knock on the door.
    At least, thatís the 2006 interpretation of what is and is not subject to seizure. Not too many years ago, the Mint said that "any piece not officially struck and issued," including any 1913 Liberty Head nickel, was U.S. government property.
    The Mint never took steps to seize 1913 Liberties. But its decision last year to "keep" ten 1933 double eagles that were submitted to it for authentication has left many people wondering whether the Mint will get more aggressive and try to reclaim the rest of its lost loot.
    "If courts uphold the latest seizure (of the 10 double eagles), it would put in jeopardy private ownership of virtually all pattern pieces and valuable, world-famous rare U.S. coins," PNG attorney Armen R. Vartian said in a statement following last yearís seizure.
    Frank Lucas wants to take away that uncertainty. He wants the government to let bygones be bygones and let the owners of the really early rarities keep them.
    Lucas is no pipe-dreaming coin dealer. A six-term congressman from Oklahoma, Rep. Frank Lucas is the No. 7 Republican on the 69-member House Committee on Financial Services, which oversees the U.S. Mint.
    On April 4 he introduced H.R. 5077, the Numismatic Rarities Certainty Act of 2006. The bill would allow, once and for all, the private ownership of "any coin, medal or numismatic item made or issued by the United States government before Jan. 1, 1933" — i.e., everything predating the 1933 double eagle.
    "I have been a collector at heart since I was 9 years old and have read in (COINage) and other publications down through the years about all the mysteries of U.S. coin collecting, from the wonders of the 1913 nickel to the alleged 1964 Peace dollars to the restrikes of the 1804 (dollars)," said Lucas, 46. "When the stories broke about the ten 1933 double eagles, that really brought to mind to me Ö that there was a huge amount of uncertainty. There are pieces that have been publicly traded in some cases for a century-plus. You couldnít say with certainty just exactly what their legal status was."
    "Right now, if you do nothing," he said, "everybody (who has) invested in some cases millions and millions in what I consider to be their personal property could be in danger and subject to seizure by the government," he said. "If you have the right Treasury (secretary) or the right Mint director, they literally could declare war and go after all of these pieces, dating back for a century, if they wanted to be fanatical about it. I am trying to make sure that doesnít happen."
    Lucas isnít worried for himself. He doesnít have any of the great rarities. He said he has "a very small collection" of type coins, "nothing particularly outstanding." He started collecting as a youngster when his grandfather showed him some coins heíd brought back from the Great War. "That inspired the imagination of a kid," he said.
Rep. Frank Lucas
Rep. Frank Lucas, R-Okla., introduced HR 5077, which would clear title to all U.S. coins issued prior to Jan. 1, 1933.
    What disposition is he imagining for 1933 double eagles and later coins? Instead of "seize and destroy," letís learn from them, Lucas says. His bill instructs the government to keep and display an appropriate number of specimens, as determined by the Treasury Secretary, and to sell any "excess" to collectors and deposit the proceeds "in an endowment fund for the National Numismatic Collection at the Smithsonian Institution."
    "One of the great tragedies of American numismatic history," Lucas said, "was when they took [gold coins that were recalled in 1933] and dropped them in the melting pot. A huge amount of our legacy was destroyed."
    Why the Jan. 1, 1933, cut-off?
    "Because from my perspective," Lucas said, "I have to craft a bill that is good policy, yet is politically doable. The [Treasury Department], as far as I can determine, has [not recently] made an effort to seize anything pre-1933. I was attempting to create a clear line there."
    "There are some whoíd say, letís just protect everything. Letís grandfather everything from this moment back. I donít think the Mint and the Treasury Department would ever support legislation that would do that."
    For one thing, it might tempt unscrupulous Mint employees to create overnight rarities.
    "[I am] trying to create a bill that would protect the older material, yet a bill that would generate, hopefully, the support of the Mint and the Treasury to help get it through the process. Because after all," he said, "if you create the most idealistic bill, and if Treasury says to the Financial Services Committee in the House and the Banking Committee in the Senate, ëWe believe this is unacceptable, this is bad policy,í then no legislation will move."
    White, the Mint spokesman, said the agency does not comment to the press on pending legislation.

SOLVING A PROBLEM
    Hobby leaders are rallying behind Lucasí effort.
    "We support [Lucasí] legislative initiative and agree with his approach to clarify the legal status of the important numismatic collectibles," said Christopher Cipoletti, executive director of the American Numismatic Association. "His efforts to protect the interests of numismatists who have acquired rare coins legally should be applauded."
    "We also support Rep. Lucasí efforts to make our national rarities and numismatic treasures available and accessible to collectors, both now and for generations to come," Cipoletti said.
    "I think the general idea to formally legalize the pre-1933 coinage is a good idea," said PNG President Jeff Garrett. "In the past, the decision about what is legal or what should be subject to confiscation has been left to the opinion of Mint officials. This can be inconsistent, as new officials come and go."
    "Some of the language in the Lucas bill will probably need change or refinement to deal with legal issues," he said.
    One problem with the language, said Vartian, the PNG attorney, is the use of the word, "issued," in relation to post-1932 coins. The bill reads, "[A]ny coin, medal or numismatic item that was struck or made by the United States government after Dec. 31, 1932, was never issued by the United States government, and comes into the possession of the United States government Ö shall be transferred to the Secretary of the TreasuryÖ"
    "[The bill] solves a problem, but it solves the wrong problem," Vartian said. "The problem is that the government is taking the position that because something wasnít issued, that means it must have been stolen, and itís stolen government property."
    Not every great rarity was "issued for circulation." Many pattern coins of the 1800s, for instance, were sold to the public for a price (like modern proof sets) but were never officially money (unlike modern proof sets). Today those patterns fall into the category of "no documentation exists."
    "If they legally left the Mint, then theyíre legal to own," Vartian opined. "[Just] because theyíre not money, that doesnít mean theyíre not legal to own as pieces of metal. Thatís all the distinction in the world to a numismatist."
    "[The bill] is trying to do a good thing," Vartian said. "If I were drafting it, Iíd like to see the government disclaiming any right, title or interest that it might have had in any of these coins" — all of them. "And if somebody steals something this week, they should be prosecuted."
    Lucas isnít looking to get hung up on the word, "issued."
    "The legalistic language of [the bill] was suggested by the financial services committee staff," Lucas said. "They drafted the particular language. The presentation that was made to me — Iím not an attorney — seemed logical."
    Lucas said he is open to sensible revisions when the bill goes through hearings, which he has requested for June or July, with hopes of passage by the end of 2006.
    "Iím receptive to making changes to the bill that would enhance the mission of preserving our history (and) providing legal certainty," he said.
    Some observers fear that by saying anything not "issued" that "comes into the possession" of the Treasury is government property, the bill could have the unintended consequence of outlawing post-1932 rarities whose legality has not yet been settled in court — such as 1933 double eagles.
    "This is what the billís verbiage does," said former ANA President David Ganz, an attorney and COINage contributing editor.
    Lucas said that is absolutely not his intent.
    "The goal of the bill is not to take away any of the present rights that a collector or the holder of a coin might have," Lucas said. "My perspective has always been that if you could prove [a coin] had been acquired in whatever fashion was legitimate, then the items would fall outside of the statute" — be it a 1933 double eagle or a 1964 Peace dollar.
    Ganz is particularly familiar with the bill because he drafted a similar proposal 30 years ago. Published in the Cleveland State Law Review, his proposed legislation — actually a recommended overhaul of all coinage laws — called for "an artificial cut-off point for ownership [of] Dec. 31, 1932," with the addition that "those of subsequent date which have been purchased at public auction could also be permissibly owned." Everything else "could be seized but not destroyed, and the product placed in either the Smithsonian national collection or that of a numismatic society."
    While the language is strikingly similar, Lucas didnít learn of Ganzís draft before submitting his bill to Congress.
    "Once I saw a copy of his piece, I was quite impressed. It dovetails rather nicely," Lucas said. "I guess certain kinds of analytical minds work alike."
    Ganz doesnít question the originality of Lucasí idea. But the congressional staff members who actually wrote Lucasí bill would have stumbled upon Ganzís version in the process.
    When you draft a bill, "you look to see if there is a treatise or law review article on the subject," Ganz said. "You donít reinvent the wheel."
    "There is only one law review article in the annotations" to the current law, Ganz said — his.

BURDEN OF PROOF
    Three decades later, Ganz would make some changes.
    "A 1933 date made sense in 1977," he said. "Think how ridiculous 1932 will look in 2051."
    Instead, he suggests, "Set the line of demarcation as a floating period. Twenty-five or 50 or 75 years is as good a bright line as any. If a numismatic item is in private hands that long, it deserves to be liberated without excessive cost, expense or bother."
    A moving timeline might appease government fears of illicit overnight rarities, as well.
    "Set whatever specific exceptions are appropriate," Ganz suggests. "If the Mint cannot accept that a 1933 $20 gold piece Ö is legal to own, or [if] a 1974 aluminum cent is illegal, then specify it, and let it be litigated," he said. "There should be no automatic assumption that coins or other items produced after 1933 or any other year are government property. For the government to prevail in a civil seizure, it should [have to] affirmatively show, beyond reasonable doubt, that the item was stolen from the United States."
    "The burden of proving that something long in commerce, like a 1913 Liberty nickel, lawfully left the Mint is all but impossible," Ganz said. It should suffice, he said, to demonstrate that the coin had appeared in a highly publicized auction and the Treasury made no effort to seize it.
    PNG attorney Vartian also questions the assumption that 1933 double eagles were stolen. "I think [everyone can] accept the fact that no one can prove what happened in 1933 anymore. Weíre beyond any legitimate evidentiary things. There is no witness. There is no document. Thereís nothing."
    "If they want to keep the 1933 [double eagle] separate," then do it, Vartian said. But "I donít think thatís principled," he said.
    Asked whether there is evidence that 1933 double eagles were stolen, Michael White of the Mint said yes, and cited Judge Marion S. Boydís ruling in United States of America v. L.G. Barnard.
    L.G. Barnard was a Memphis, Tenn., collector whom the government sued when he refused to hand over his 1933 double eagle to the Secret Service in the mid-1940s.
    White quoted from Boydís 1947 ruling: "Since this gold piece was stolen or, through fraudulent breach of trust, taken from the Philadelphia Mint, the defendant, as the purchaser, took [it] subject to the defects in its title, and this is true, even though the property was acquired in good faith, for a valuable consideration and without notice of any infirmity of title. He cannot maintain ownership in such property against one who has been deprived of it by theft or other illegal act. Ö It follows that title to the coin in litigation is in the plaintiff, United States of America, and plaintiff is entitled to its restoration."
    "The coin here involved was not, at any time, money or currency, but was a chattel, or an article of virtu" belonging to the government, Boyd ruled. Boyd believed that in the case of Barnardís coin, someone "substituted a similar coin for it before the coins were reduced to bullion."
    In the early 1950s, Barnardís double eagle and eight others were destroyed and sent as a blob of metal to Fort Knox, where they joined most of their 445,500 brethren that had met the same fate in 1937.
    Half a century later, certain legal eagles would discover a possible — and yet unproved — way for double eagles to have left the Mint legally in 1933 without being "issued for circulation."

DOUBLE LEGAL
    The existing 1933 double eagles "are as legal as they can possibly be," said Jasper "Jay" Parrino, a dealer of high-end collectibles in Kansas City, Mo. "They traded in the ë40s openly. Ö Iíve never felt the coin was illegal, period."
    No one knows better than Jay Parrino how aggressive the Treasury Department can be about seizing 1933 double eagles. In 1996, Parrino was arrested in a Secret Service sting at the Waldorf-Astoria Hotel when he tried to buy a 1933 $20 from British coin dealer Stephen C. Fenton, also nabbed.
    Parrino, now 60, "really would" like to see Lucasí legislation pass, to bring closure for people who own pre-1933 coins. He thinks it will pass easily, because seizing coins is more trouble for the government than itís worth. Of course, heíd like to see Lucasí bill broadened to cover all Mint-made rarities.
    "Unless itís a counterfeit coin made outside the Mint, to me, it should be legal," Parrino said. "This whole thing is silly. None of the (1800s) patterns were ever ëissued,í yet they trade every day, and have for years."
    "What they do is, they shoot the arrow into the side of the barn and then they draw the target around it."
    Parrino and Fenton were in the crosshairs in 1996. The government filed criminal charges against them in February 1996 but dropped them in April and a filed a civil forfeiture action. After five years of haggling, the government agreed in 2001 to "monetize" the coin as legal tender and to split the eventual $6.6 million proceeds down the middle with Fenton. (Including buyerís fee, the coin sold for $7.59 million at auction July 30, 2002.)
    Although the settlement agreement between the Mint and Fenton stated no reason for the governmentís capitulation, it is widely believed that the discovery of a U.S. government-issued export license allowing a 1933 double eagle to travel to Egypt in 1944 constituted a tacit acknowledgement of the coinís legality.
    It should be noted that the Fenton coin has never been proved to be the same coin owned by Egyptís King Farouk. (The Egyptian government believes it is the rightful owner of Faroukís coin, which disappeared in 1954. In 2002, Egypt tried and failed to recover the so-called "Fenton-Farouk" coin. After all, Egypt never issued an export license for Faroukís coin to return to the United States.)
    Parrino believes the 1944 export license excuse "is just a way for them to save face." It gave the U.S. government a pretext for backing down from its hard-line position on ownership.
    The truth, Parrino says — and the reason the government dropped the charges against him — is that the defense attorneys discovered what Parrino called "proof positive" that some 1933 double eagles "were sold over the counter at the customer service window" of the Philadelphia Mint.
    Parrino was referring to the "exchange" provisions that had been in place since the first U.S. coins were made in 1793. For 140 years, until April 5, 1933, when President Franklin D. Roosevelt banned the private possession of gold coin, it was possible to walk up to the cashierís window at the U.S. Mint and exchange gold bullion for coins.
    The first 1933 double eagles were recorded on the Mintís books on March 15 — three weeks earlier — as reported by COINage contributing editor Robert W. Julian, a numismatic researcher who worked as a consultant to Fentonís attorney in 1996.
    No 1933 double eagle was "issued" into the Federal Reserve system. Were a couple of dozen legally "exchanged" over the counter?
    However they got out, they werenít considered illegal at first. They traded openly in the late 1930s and early ë40s. They were advertised in numismatic journals. As Julian has noted, the Mint director read those journals and occasionally responded to articles she read. A 1933 $20 was displayed at the ANAís 1938 convention. The Mint director was an honorary ANA member.
    Not until 1944 was there a problem with the coins. In that year, Stackís of New York City advertised a "rare" 1933 $20 for sale at auction. A curious news reporter wanted to know just how rare it was. His question landed on the desk of the assistant Mint director who searched the records and found, lo and behold, none had been issued. Thus, the bureaucrat concluded, they must have escaped illicitly.
    The judge in 1947 agreed. The judge in the 1996 case made no ruling. Fenton settled out of court.
    Another decision could come. The same attorney who represented Fenton is representing Joan Switt Langbord, the Philadelphia woman whose 10 coins the Mint recently decided to keep.
    Unlike 1996, today the U.S. government isnít filing a forfeiture action. It doesnít think it needs to. It believes it owns the coins, it has them locked up at Fort Knox, and itís simply keeping them. Langbord will have to sue to get them back.
    Whatever happens, the gentleman from Oklahoma is prepared to accept the courtís decision.
    "In particular issues where there are still legal questions, I want the process to work its way through," Lucas said. "I donít intend to take any rights from anyone, nor do I intend to create rights that they didnít have before [with post-1932 coins]."
    "The courts will decide," Lucas said, "and the way the legislative process works, maybe even before the legislation is on President Bushís desk."


©2006, MILLER MAGAZINES INC./LEON WORDEN. RIGHTS RESERVED.
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