Professional Coin Grading Service - Controversies

Controversies

In the May 26, 2003 edition of Coin World, the hobby newspaper had announced they had contracted investigators to conduct a year-long, comparative study of PCGS, ACCGS, NGC (Numismatic Guaranty Corporation) and several other grading services, each known as a Third Party Grader (TPG). In their investigation, several of the same coins were sent to each grading service over the course of a year, each graded by all Third Party Graders sent to. Their findings: In no case did the grading services agree on the grade of the many coins sent in, and in some cases the difference in grading was seven points off on the standard Sheldon coin grading scale of 1 to 70. The Coin World article cited several cases, such as a case where ACCGS had correctly noted that a coin had been cleaned while the other services had overlooked this aspect. ACCGS graded the coin several points lower than PCGS, while PCGS had not noted the same coin was cleaned although it clearly had been, evidenced by wire brushing. This was neither the first nor last time PCGS had failed to note when coins had been cleaned. In June 1998, PCGS had failed to note on their holders that thousands of shipwreck coins had been cleaned, although the coins slabbed by PCGS had been encrusted with sea debris and barnacles, and subsequently cleaned in acid baths prior to grading by PCGS.

It is standard for professional numismatic dealers to note when coins have been cleaned or treated in acid baths. Not doing is often considered unprofessional and unethical by most professional numismatists, according to Coin World's May, 2003 articles. Further, in U.S. Numismatics, it is standard to grade coins on a point-scale from 1 (poor) to 70 (perfect) and to note on the coin holder if a coin has been cleaned or poorly mishandled, or in many cases, to reject it for encapsulation or "slabbing" if the coins have been cleaned harshly.

In 1990 the Federal Trade Commission filed a civil action against PCGS alleging exaggerated advertising claims. PCGS came to a settlement with the SEC in which it did not admit wrongdoing but agreed to submit its advertising for review for five years and to include a statement in its advertising saying, "the rare coin market is a highly speculative, unregulated market and certification by P.C.G.S. does not guarantee protection against the normal risks associated with volatile markets."

In September 2004, members of the American Numismatic Association reported seeing counterfeit PCGS slabs at the Long Beach Coin Show. More were reported on eBay in the years following, but PCGS did not address the issue until March 27, 2008 with the following acknowledgments on the PCGS website:

"The counterfeit PCGS holders are well-executed, but with minor differences from a genuine holder. PCGS anticipates that authentic coins will eventually be placed into counterfeit PCGS holders in the future, perhaps with elevated grades and/or inappropriate designators.

The following list of coins and certificate numbers have been seen in fake PCGS holders:

• China (1916) Silver Dollar, Y-332, Cert #10712316 (valid)
• China (1923) Silver Dollar, K-677, Cert #11354470 (valid)
• China (1923) Silver Dollar, K-678, Cert #11285683 (valid)
• China (1923) Silver Dollar, Y-336.1, Cert #13835186 (valid)
• China Republic (1912) 20 Cents, Cert #21981173 (invalid)
• China (1916) Gold Dollar, Pn-44, Cert # 11072163 (invalid)
• China (1923) Gold Dollar, Tsao Kun, K-677, Cert #11354470 (invalid spec, valid cert�used above)
• US 1858-O Half Dollar, Cert #03884338 (valid)
• US 1800 Silver Dollar, Cert #03859118 (valid)
• US 1795 Silver Dollar, Off-Center Bust, Cert #22030856 (valid)
• Mexico 1761-MoMM 8 Reales, Cert #05763936 (valid)

"Valid" means that the correct information shows up under Cert Verification."

The above listing consists of only the counterfeits known or reported by PCGS as of March, 2008. Other PCGS counterfeit holders have been reported in eBay forums and more may be reported by other firms and individuals, since PCGS anticipates that authentic coins will eventually be placed into counterfeit PCGS holders, and counterfeit holders may multiply and improve over time. PCGS offers no reimbursement liability for the prices paid for coins in their counterfeit holders. PCGS has an online link to verify the Cert numbers. On January 7, 2008 Numismatic Guaranty Corporation (NGC) posted a notice on their website that high-quality counterfeits of their holders had been purchased on eBay : "Most frequently Trade Dollars and Bust Dollars are found, although Flowing Hair Dollars and foreign coins have also been seen. A range of grades is also represented." Caution is advised when purchasing coins in PCGS and Numismatic Guaranty Corporation (NGC) holders as the seller can disclaim liability due to the "third party" nature of the counterfeit holder.