CITY HALL — Attorneys with City Hall’s Consumer Protection Unit said Tuesday they have filed criminal charges against Santa Monica-based Goldline International for allegedly using conservative spokespeople such as Fox News’ Glenn Beck in a “bait-and-switch” operation to sell overpriced gold coins.
The 19-count criminal complaint was filed Tuesday against Goldline, one of the nation’s largest precious metal dealers, and several key executives and salespeople.
The charges, all of which are misdemeanors and carry a maximum penalty each of one year in jail and fines of between $1,000 and $10,000, include grand theft by false pretense, false advertising, conspiracy and elder abuse involving transactions that took place over the last three years.
The defendants are expected to be arraigned at the Los Angeles Superior Court, Airport Courthouse on Jan. 4, 2012, said Adam Radinsky, head of the Consumer Protection Unit.
Representatives from Goldline did not respond to requests for comment.
The City Attorney’s Office and the Los Angeles County District Attorney’s Office opened a joint investigation into Goldline and another Santa Monica company, Superior Gold Group, in July 2010 after receiving complaints from more than 100 customers who said that they were lied to and misled in entering into their purchases of gold coins. Others said they received something different from what they ordered.
During their investigation, attorneys said they uncovered evidence to suggest salespeople for Goldline were trained to “get the money in” from customers on the promise of delivering gold bullion, with the intent to later switch the sale to far more overpriced coins.
The criminal complaint also claims salespeople received approximately 2,000 percent more commissions for sales of other overpriced coins than for sales of bullion, and that they were told to withhold certain pricing information from customers.
Goldline also allegedly engaged in false advertising by referring to European coins as “rare” while also stating that they could be “liquidated privately.” City attorneys said Goldline also offered gold bullion for sale in commercials and on its website but had no intention of doing so.
In launching the probe, investigators opened a new front in a long-running dispute over the way Goldline has turned the sale of gold into a massive retail operation that capitalizes on popular conservative figures like Beck who appeal to an audience that is naturally skeptical of the government and are uneasy about inflation and the state of American currency.
Gold was trading at $1,715 an ounce on Monday, locking in a 5.7 percent monthly gain after a decline of almost 11 percent in September when prices hit a record of $1,920.30.
The promotional strategy appears to have been beneficial both to Goldline, which boasts $500 million in sales, and to such conservative figures as Beck and former presidential hopefuls Fred Thompson and Mike Huckabee, all of whose broadcasts are peppered with Goldline advertisements.
Critics claimed Beck, whose former radio show was sponsored by Goldline, inflated fears about the dollar’s decline so that his listeners would purchase products from Goldline. But instead of buying pure gold, customers were pushed to buy gold coins that did not hold the same financial promise.
The Santa Monica City Attorney’s Office is continuing to investigate the case. Consumers who believe they have been defrauded by Goldline should contact the City Attorney’s Consumer Protection Unit at (310) 458-8336 or file a complaint online at gold.smconsumer.org.