(Jim Halperin's annotated guide to the December 27, 2004 article about him)
2005 Collectors Guide
Jim Halperin is the leading rare coin dealer in America--and the most controversial guy in the business.1
Footnotes to the Forbes article
(the complete article appears below the footnotes)
1 In many ways, this article is flattering, so I hate to complain too much. I don't even mind being labeled as controversial. But this is simply not the sort of statement that normally heralds a piece of objective journalism. In fact the entire article seems to be wrought with the sort of lurid sensationalism that suggests just the opposite.
2 The $15, $60 and $5 million dollar figures did not come from me. The $300 million figure for 2004 is accurate; the others are not.
3 Many coin dealers have told me that Heritage Auction Galleries is the only auctioneer they trust with their maximum bids. I remain friends with virtually every numismatist I have worked with over the years: hundreds of the most ethical and well-regarded professionals in our field. Throughout my entire "controversial" life I've remained close with my parents and siblings, had one wife (since 1984), one business partner (since 1982), and the same best friend, Marc Emory, who has worked with me since 1975 and now runs Heritage's European operations, since 1979. At the exact time most of the controversy described in the article was being publicized in Coin World, I was elected and served as Governor of the American Numismatic Association from 1989 to 1991, and received accolades from all of the other elected officials from my term. Heritage has been entrusted with coins from 25,000+ consignors from 1982 to 2004, every one of whom we paid in full and on time. I have never welched on a debt, even when I could have done so legally, never broken a contract or gone back on my word, and have never intentionally cheated anyone. While the business I launched when I was 13 was somewhat deceptive and certainly foolish, that was neither intentional nor malicious. According to Forbes, I'm America's leading rare coin dealer. Yet by far the most recent controversy Forbes can find involving me was a civil arbitration between two coin companies, which had occurred 7 years earlier, and been amicably settled to the satisfaction of both parties. Meanwhile our two companies continue to do tens of millions of dollars in business with each other every year. Not really my idea of controversial.
4 The only contact I ever had with postal inspectors was almost 40 years ago, when I was barely a teenager, and no one would even know about it today if not for the fact that I've talked about it freely to friends, colleagues, and even the news media.
5 In America, anyone can sue anyone else for anything. As a percentage of the business we have done, Heritage has been party to relatively few lawsuits, especially considering that we were always on the forefront of innovation, and innovation seems to attract lawyers. Heritage's "brushes" with the FTC all concern sales we made to dealers anywhere from 15 to 22 years ago, when we were primarily wholesalers. Those sales were all made at fair-market wholesale prices. Like all other wholesalers, we sold coins to dealers willing to pay our asking prices, and did not consider it our job to monitor or to exercise control over those dealers' markups and/or representations, nor were we ever in a position to do so. Unfortunately, as the largest coin wholesaler at the time, our volume of sales made us more visible, and we settled with the FTC in order to avoid expensive litigation. On balance I'm glad the FTC came in, cracked down on some of the practices in the industry and weeded out some of the bad apples, allowing us to alter our business model profitably, and serve a much larger and faster growing clientele.
6 That is not what I said. Long after the interview, a Forbes' fact-checker essentially asked me if I was willing to say I was a scoundrel as a teenager, and I foolishly answered, "I guess at 13 I was." It's a minor distinction, but shows the slant of the article.
7 Not that it matters much, but the sales network I advertised at age 13 was anything but "nonexistent". I delivered exactly what was promised (advertising in publications with a specific circulation), though in retrospect, most participants who bought ads from me for between $4 and $20 probably expected to get more orders than they actually received. I ran the business for 18 months without a single complaint lodged to any authority as far as I know (any participant who requested a refund got one immediately), and only after a sack of outgoing mail was inadvertently left in my parents' basement did the postal inspectors receive complaints. My father counseled me to agree to shut down the business and send out refunds, wise advice I reluctantly and tearfully heeded. I opened my stamp and coin shop as a summer project the following year using the only asset I had left, a prepaid lease on a store in nearby Cochituate, Massachusetts.
88 Misjudgment of people, not my discerning eye, is what has gotten me into hot water on occasion. More often than not, however, trusting people who seem trustworthy has worked well for me, so I have no plans to change that aspect of my behavior.
9 Forbes knew, but did not consider it relevant to mention, that I was suing NERCG and Dana Willis at the time. The lawsuit was partially responsible for bringing Willis's misdeeds to the attention of the FTC.
10 Actually, the Purchase and Sale Agreement was part of the lawsuit, which Willis settled with me several months prior to the bankruptcy. The settlement money I received had to be returned to the bankruptcy estate as a preference since it had been paid to me less than a year before the filing. Forbes could have easily accessed the case documents and read the purchase and sale agreement. But I assume it makes more interesting reading to say that I "claimed" something, rather than simply to check, then confirm it to be true.
11 NCI was the first private grading service, and established many of the principles that allowed NGC and PCGS to eventually reshape the coin business for the better.
12 NCI going out of business had nothing to do with the FTC. PCGS and NGC came out with better products, and after PCGS appeared, some unscrupulous telemarketers began selling NCI coins at PCGS prices. Heritage never sold any coins at above fair market, nor did we encourage such behavior in any way.
13 NCI graded according to published standards. The NCI Grading Guide text I wrote in 1984 was the precursor to How to Grade U.S. Coins, which even Forbes says is a classic). PCGS adopted virtually identical standards, but at first interpreted those standards more stringently than NCI did. Today NGC and PCGS grading is virtually identical to, and in many cases slightly more liberal than, the way NCI graded most coins throughout its existence during the 1980s.
14 This is perhaps the most egregious and misleading phrase in the Forbes article. Anyone reading it would think that Heritage owned or controlled CRCG. In fact, Heritage merely gave CRCG a credit line! The theory the FTC used was that by providing a credit line to CRGC we were "aiding and abetting" their activities. Interestingly, the immediately preceding Commissioner of the FTC wrote an open letter admonishing his successors for propagating such an overzealous enforcement theory (click here for the entire text of the letter).
15 This amount was roughly equal to our profits, plus interest, on about $5 million in wholesale sales to CRCG. We were told it was a fraction of what it would have cost us to litigate, so we decided to pay it and move on. There was never any admission of culpability, or we would not have settled.
16 Not true. NCI published a full disclosure statement on every certificate from the very first coin we certified.
17 Personally, I would have preferred — and still would prefer — regulation by the FTC, but our industry was and is too small for that, and I doubt it was ever seriously considered.
18 Misleading wording here (presumably unintentional, but sloppy nonetheless). NGC's oversight policy was strict, starting on the day they launched in 1987, and no grader hired by NGC has been allowed to deal while grading.
19 In fact, NGC and PCGS have saved coin buyers hundreds of millions of dollars by reducing fraud and forcing the industry to tighten its margins. There are, of course, a few dealers and collectors who wish NGC and PCGS didn't exist, but the vast majority have benefited from their product. The situation is similar to other market-changing companies like eBay and Wal-Mart, albeit on a much smaller scale.
20 Another interesting word choice, as if it were somehow sinister for me to invest in legitimate companies.
21 Yes, I "admit" that. With pride. As I said, these companies have saved consumers hundreds of millions of dollars.
22 Entirely non-voting stock. We have no control whatsoever over NGC grading, hiring, or company policy. Neither we nor NGC have ever made any attempt to hide our investment from anyone. We get the same treatment from NGC as any other significant submitter, and we submit our coins through the same anonymous process as everyone else.
23 Please note that Forbes is normally in favor of capitalism. :) (Sorry, I couldn't resist.)
24 Not easy at all, though not impossible.
25 The word "trick" implies deceit, yet grading arbitrage, or the so-called "crack-out game," is not a State Secret. In fact, I have written extensively and given numerous interviews, including for one of Scott Travers' books, explaining how collectors can look for potential grading arbitrage candidates just like most dealers do. As far as I know, Heritage is also the only auction company that maintains a free, fully searchable Past Auction Archive, with photography. Obviously, with hundreds of thousands of past coin sales, and message boards on the PCGS and NGC sites, it is no great challenge to find coins from past auctions that have subsequently been upgraded and reconsigned, even if such items comprise a very small percentage of the total. If Heritage were trying to do anything sneaky, why would we provide all the evidence in such an easy-to-research form? Coin dealers and expert collectors routinely conserve and resubmit high-end slabbed coins (a small but very visible and sought-after percentage of the graded universe), and the free market system being what it is, could there ever have been any doubt that would occur? Because experts compete hard for high-end slabs, auctions are, in fact, an ideal vehicle for collectors who don't know how to identify high-end coins (or comics) to nonetheless realize most of the potential of their upgrades. Again, no secret. In fact, it's one of the major advantages to consigning to a Heritage Auction Galleries auction.
26 Most buyers are also potential sellers. If they auction through Heritage, we will gladly advise them when we think some of their coins are worth resubmitting. And even if none are resubmitted, the dealers who come to the auction will often pay much higher prices for coins they view as potential upgrades. I often pay premiums myself, and actually lose money on about 10% of the coins I buy. That is simply the nature of the coin market, and the reason most intelligent sellers of high-quality coins have them graded by NGC or PCGS, then sell them via public auction.
27 I wonder what Forbes' point is here. I obtained for my client more than double the amount of money a competitor had offered him for his coins. It must be difficult to make that seem controversial, yet somehow they managed to.
28 I hope a discerning reader would be curious as to how many of these competitors Forbes spoke to, and what their agendas might have been.
29 During the period in question Heritage sold Blanchard over $200 million worth of coins. We often bought coins specifically for Blanchard's account and, on average, sold everything at 7% over wholesale per the specific terms of the contract. There was never any stipulation that we couldn't sell coins they rejected for lower prices elsewhere. The panel disgorged the 7% mark-up on a technicality. We prevailed on almost every other claim (there were dozens of them) in that very complex arbitration.
30 The $23 million figure included about $9 million in arbitration costs and statutory interest.
31 PCGS made a mistake, as all of us do from time to time, and I believe they did exactly the right thing in order to correct it.
32 Again, note the word-choice. Not "states" or "says" or "offers", but rather a verb selected to suggest that I might be lying.
33 Technically speaking, the Gaines family has not consigned to us directly, though many of the Mad comics and magazines we auction were originally purchased from the Gaines files. Not a major distinction, but I thought I should correct this misstatement for the record.
34 I'm not sure what this means, but it probably sounds bad to some people. In fact, since I buy a lot more than I sell, higher prices actually cost me money. But I'm proud that Heritage has added liquidity to this market.
35 As far as I know, no major auctioneer forbids employees to bid. Our employees have no advantage over other bidders, are not allowed to access any information unavailable to our other bidders, and must pay the same Buyer's Premium as everyone else. Our job as auctioneers is to create a fair and equitable marketplace, not to keep prices artificially low by excluding legitimate buyers.
36 A "shill" is someone who is bidding without the intent to purchase, merely to drive up the prices artificially. That is the opposite of what we do at Heritage, and is contradicted by the very next sentence in the article.
What, Him Worry?
Jim Halperin sells coins, but he doesn't collect them. His heart belongs to Mad magazine, which he has collected off and on since he was a 9-year-old. The holy grail is the original cover art for the 1952 inaugural issue. (America wouldn't meet the gap-toothed mascot, Alfred E. Neuman, for another two years.) "Unfortunately it's owned by Steven Spielberg, and I doubt he'll need to sell it any time soon," says Halperin, who claims32 he'd be willing to pay $100,000 for it. So he must content himself with a complete mint collection of every issue. Many he bought from the personal files of Mad publisher William Gaines. Halperin's copy of number one has been graded a 9.8 out of 10; he says it's worth $50,000.
Heritage began auctioning comic books in 2001. Since then Halperin has sold thousands of Mad magazines, some duplicates from his private stock, others consigned to the company by the Gaines family33. Such sales have the advantage of letting Halperin raise a little pocket change for new acquisitions--he also owns hundreds of pieces of original art as well, like classic panels of "Spy Vs. Spy," as well as works by non-Mad legends like Robert Crumb, Frank Frazetta and superhero artist Jack Kirby. And it helps establish a price baseline for Mad magazine.34 One way to make sure those babies keep rising in price: Halperin allows Heritage employees--himself included--to bid on items it auctions off.35 What seller wouldn't appreciate having a shill36 right there on the premises? Especially one with deep pockets.
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