MID-CITY — One of the nation’s largest gold dealers will have to strengthen its internal procedures and repay up to $4.5 million to customers who complained that the company engaged in unfair sales practices and provided inaccurate price information, the City Attorney’s Office announced Wednesday.
The settlement concludes a civil lawsuit filed Feb. 16 against Goldline International, Inc. and over a year and a half of investigation by the City Attorney’s Office.
Criminal charges filed in November 2011 were dropped as part of the settlement.
Goldline International is a 50-year-old company based in Santa Monica that supplies precious metals to collectors and investors in the United States.
According to its figures, the company has over 400 employees and has annual sales exceeding $500 million.
The City Attorney’s Office alleged that the company tricked its clients into buying gold coins with a marked up value, sometimes to the tune of 55 percent on top of the gold’s worth, and incentivized its employees to direct customers away from reasonably-priced gold bullion with large commissions.
As a part of the settlement, Goldline International does not admit any wrongdoing.
According to the decision, Goldline will have to disclose any price markups on its gold products, follow a strict script when discussing transactions with customers, give customers a prompt refund and set up a new phone line for refunds, liquidations and other customer service.
The settlement also requires that the company put $800,000 into a fund to pay for future claims.
Anthony Pacheco, of the law firm Proskauer Rose, was appointed to monitor the company’s progress for a minimum of three years.
Both sides of the lawsuit declared the decision a win.
Adam Radinsky, a deputy city attorney with the Consumer Affairs Division, said that the decision required Goldline International to “overhaul its business model,” something that would have been more difficult to achieve through a criminal case.
“Restitution is part of a criminal case, but this kind of sweeping injunction, typically, is not,” Radinsky said.
Goldline International CEO Scott Carter dismissed the city attorney’s representation of the case, saying that the company was an industry leader in its business practices.
“As a result of this settlement, we will enhance two disclosures that we already provided and provide more transparency,” Carter said. “We felt it was actually a positive thing.”
The $4.5 million payment represents the total invested by the 43 clients that testified for the case. If those people want their money back they can have it, but they have to return the gold they bought.
That accumulated gold would have been worth approximately $4 million to the company last week, Carter said, and the number of clients involved was a tiny fraction of the company’s total base.
The criminal case and ensuing lawsuit have taken their own toll on the company, however.
When charges were filed in November, Goldline International had an A+ rating from the Better Business Bureau, an organization that informs the public about the reputation of companies with which they do business.
The BBB rescinded the company’s accreditation. A hearing on reinstatement in the wake of the settlement is expected to take place Thursday, according to the BBB’s website.
Other customers that bought coins from Goldline International after Nov. 1, 2008 may be eligible for a portion of the $800,000 set aside as part of the settlement.
Those that qualify can apply for the difference between what their gold is worth and how much they paid for it when they made the purchase.
Goldline International customers who feel they might be affected must file a claim at gold.smconsumer.org by May 22, 2012.