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What Forbes Didn't Tell You.

(Jim Halperin's annotated guide to the December 27, 2004 article about him)

Forbes Magazine
2005 Collectors Guide
Top Drawer

Christopher Helman

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.

One American Center
Suite 2760
600 Congress Avenue
Austin, Texas 78701
(512) 474.1971
July 12, 1989

To whom it may concern:

As a former Commissioner at the Federal Trade Commission (FTC), I have closely followed the Commission's enforcement activities and, in particular, its review of Heritage Capital Corporation (HCC). During my tenure as Commissioner (1982-85), I shared with my fellow commissioners the responsibility for the enforcement of many consumer protection laws. I also wrote several majority opinions articulating the appropriate standards for finding liability in deception law. Currently I am head of an independent economic consulting firm and I continue to follow and comment on the economics and legal consequences of regulatory actions for select clients and members of the larger business public.

In my opinion the FTC in its complaint against HCC has embarked on a radical and ultimately untenable expansion of the proper legal standard for establishing liability under Section 5 of the Federal Trade Commission Act. If the FTC's new standard is embraced in the courts (which I am confident will not be the case), it would unduly burden legitimate wholesale business suppliers. In effect, it would force them to police their downstream dealer customers for fear that they might be charged with liability in the future for their customers' business conduct.

Background HCC operates Heritage Rare Coin Galleries ("Heritage"), which is a widely respected auctioneer, retailer and wholesale supplier of rare coins. HCC also operates an independent affiliate, NCI, which provides commercial coin grading and authentication services.

HCC's founders, Steve Ivy and Jim Halperin, have between them 47 years of experience in the rare coin business and are recognized experts on the subject of coin grading and values. It is noteworthy that although the FTC extensively investigated Heritage and its business practices as did I at the company's request, it apparently reached the same conclusions as I did after my own investigation--that Heritage operates its business with a high degree of integrity and is, in fact, an industry leader in providing useful information about coins to all of its customers.

One of HCC's wholesale customers, however, has been charged with deception by the FTC. That customer, Certified Rare Coin Galleries (CRCG), has sold rare coins for investment purposes via telemarketing since late 1984. Over its lifespan, CRCG accounted for less than one percent (1 %) of Heritage's business. The FTC has charged CRCG with engaging in deception by selling coins to unsuspecting customers at prices far in excess of their resale value.

The FTC alleges that as part of its scheme, CRCG exploited the differences among the various established coin grading services, leading consumers to believe that the CRCG coins--which were graded along NCI's standard--would command prices commensurate with the same grade assigned under other more conservative grading standards.

The Extent of HCC's Involvement CRCG's founder, Elliot Krasnow, had recently been a regional sales director for F.C.I., a well respected, publicly held coin firm located on Long Island since the early 1970s. Based in part on Krasnow's reputation as a good salesperson, HCC entered into a supply agreement in early 1985, in which HCC agreed to provide uncertified coins to Krasnow's company as well as to loan them money, an arrangement not uncommon in any business.

HCC, as a supplier of coins and as a creditor, was totally uninvolved with the operations or management of Krasnow's operations. In fact, Krasnow's contract with HCC specifically precluded any authority of HCC over Krasnow or CRCG.

NCI started business in 1984 as an affiliate of HCC and quickly became the largest and most popular private grading service at that time. NCI differentiated itself from the other services in two ways: (1) adherence to a "real world" or "commercial" grading standard, and (2) consistency.

With respect to the first point, NCI's grading sought to reflect their opinion of what grade a raw coin would most likely receive from a selling dealer in the commercial marketplace. That NCI's grading standard did reflect a truer and more accurate representation of a coin's market value has been clearly demonstrated by a comprehensive study of auction prices realized over the years 1984-1986. The study confirmed that the value of NCI-graded coins closely paralleled the prices realized by similarly graded coins at auction. It should also be noted that numerous rare coin experts who have consulted with the FTC have confirmed the validity of NCI's grading standard.

With respect to the second point, NCI sought to offer an alternative to the prevailing grading standard, ANACS (American Numismatic Association Certification Service), which had become unreliable and inconsistent. During 1985 and 1986 there had been a gradual tightening of grading standards, which had at least in part been created by an artificial run-up in prices. The ever changing grading standards were generally known and, in fact, recognized in the November 28, 1986 issue of The Coin Dealer Newsletter (CDN).

Rather than validate the somewhat artificial run-up in prices, NCI chose to maintain its consistent standards, in part because several years earlier ANACS had come under strong criticism for changing their standards. Maintaining consistency, however, created another problem because reported prices kept rising so that the CDN prices and their implied grading standards became increasingly disparate with NCI's standards and values.

NCI recognized the potential or problems and took several steps to mitigate any potential...abuse, including: (1) putting a clear and concise disclosure on the NCI certificate; (2) writing the CDN twice, advising them to prominently publish the fact that the values for coins graded by different grading services were different and, in some cases, vast. This advice was taken and the CDN put the disclosure prominently on the front page; and (3) writing all of its customers advising them of the differences and imploring retailers not to misrepresent the value of NCI coins.

Although Heritage does not sell coins certified by NCI, CRCG in fact unilaterally guaranteed that all of their coins would conform to NCI grading standards. In late 1986, HCC sent a letter to CRCG (as well as to all of its other customers) asking them not to misrepresent the value of NCI coins by reference to the bid prices published in the CDN.

Now, over two years later, the FTC has come forth with evidence that CRCG did in fact misrepresent the value of coins graded by the NCI standard. In addition they have alleged that HCC had at least some knowledge of CRCG's activities, as evidenced by HCC's 1986 letter to CRCG! (emphasis added)

The FTC's Argument Neither HCC nor NCI deceived any retail customers. Quite to the contrary, my examination of HCC's and NCI's sales materials has found them to provide a model of informative disclosure for consumers with little knowledge of coin markets. In spite of this, the FTC has fashioned an argument that since HCC wholesale customer CRCG may have misrepresented the value of NCI-graded coins, HCC should be charged with "secondary" liability for CRCG's actions. There is no direct evidence of intent to deceive on HCC's part, and the FTC's action against HCC involves only a single retailer, CRCG.

To my knowledge, this is the first example of this expansion of authority in the history of the FTC. By so charging HCC, the FTC has embarked on a highly controversial interpretation of the appropriate standard for establishing liability in the area of consumer deception. By so broadly expanding the law, the FTC has put virtually all wholesale business suppliers on notice that they can now be held liable for violations that occur further down the distribution chain, even if there is no showing that the suppliers exhibited any intent to commit or to take part in consumer deception.

Summary In conclusion, the FTC's review of HCC's business practices uncovered no tangible evidence of deception or intent on HCC's part. Rather, the Commission's staff has fashioned the novel argument that since HCC may have known (or should have known) some facts from which HCC could infer that CRCG was deceiving its customers, HCC is itself culpable for CRCG's deception. In my opinion there is no way a company such as HCC could have anticipated such a drastic change in position on the part of the FTC. Furthermore, I believe HCC's actions were entirely consistent with ethical behavior.

In my judgment, the FTC's investigation would, if tested at trial, fail to support its charges against HCC. I do, however, understand and appreciate the business considerations that led to HCC's settlement with the FTC.

Very truly yours,
George W. Douglas

Forbes Magazine
2005 Collectors Guide
Top Drawer

Christopher Helman

Jim Halperin is the leading rare coin dealer in America--and the most controversial guy in the business.1

James Halperin is probably the most successful professional numismatist of all time." So says his Web page. And there's some truth to this self-assessment by the co-owner of Heritage Auction Galleries in Dallas, the world's largest rare coin auction house. From $15 million a decade ago, Heritage is on track to sell $300 million worth of coins, comics, sports cards and other collectibles this year, pocketing an estimated $60 million in commissions and netting some $5 million.2 Halperin has been in the forefront of this business for much longer, establishing new benchmarks for coin grading, sewing up the rights to auctions at leading shows, pioneering sales over the Internet and making headlines unloading the collections of celebrities (like Nicolas Cage's comic books).

Halperin, 52, is also probably the most controversial professional numismatist of all time.3 He has had brushes with postal inspectors4, the Federal Trade Commission and coin dealers who have sued him for, among other things, sticking them with inflated prices.5 But then this is a profession that attracts controversy. With an estimated 130,000 U.S. collectors trading $5 billion worth of coins a year, the opportunity for mischief is considerable. A coin's value is exquisitely sensitive to how well it's preserved, and grading is highly subjective.

Coins are rated on a scale of 1 to 70. A heavily worn coin, judged merely "good" under the grading system used until a few decades ago, would bear a rating today of 4. In that condition an 1890 Morgan silver dollar with no mint mark is worth not much more than its weight in silver, maybe $11. The same coin in Mint State 64 sells for $150. A slightly more lustrous 65 is so rare it goes for $2,500 or more. Is a given shiny silver dollar a 64 or a 65? Two experts could have different opinions on that.

Halperin didn't get to where he is by playing nice. "I was definitely a scoundrel at 13,"6 he says, recalling the mail-order advertising business he started from his parents' home in Boston. He took out ads in magazines looking for people who would pay to join his nonexistent7 sales network. Soon postal inspectors showed up at the Halperin house. They worked out a deal: In exchange for dropping the charges, he had to return $100,000 in ill-gotten cash.

While a Harvard freshman in 1971, Halperin formed New England Rare Coin Galleries. In a decade he turned it into one of the nation's biggest rare coin galleries. Halperin had the gift of a photographic memory for coins, which meant that at a glance he could determine the quality of a coin, as well as its scarcity and value in relation to other examples. His How to Grade U.S. Coins (Ivy Press, 1986) is a classic.

His discerning eye has helped him come out on the winning side of most deals--and gotten him into hot water.8 He sold his dealership in 1982 to an associate, Dana Willis, and decamped to warmer and richer Dallas, where he joined forces with friend and major competitor R. Steve Ivy to found Heritage Rare Coins. But the New England firm went bankrupt in 1987 after the FTC charged Willis with fraud for misrepresenting coins he had sold at outrageous prices.9 Willis had paid Halperin $1 million or so in consulting fees while the dirty dealing was taking place. Though Halperin had to return some of the money, he claims he wasn't involved in any bad deeds and that the money he got from Willis was part of the terms of the sale.10

He was dead center of his next misadventure after launching a coin grading agency, Numismatic Certification Institute11, in 1984. It, too, went out of business12, after the FTC found that Halperin was giving inflated grades13 to coins and marketing them through a Heritage-backed14 outfit called Certified Rare Coin Galleries. Using television ads to draw in victims, they sold high-grade silver and gold U.S. coins for more than twice what they would have fetched in more-reputable retail channels. Heritage agreed in 1989 to pay $1.2 million in restitution.15 The FTC also insisted that the company include a document with every NCI-assessed coin stating that it had been graded according to loose standards16. Halperin shuttered NCI, but insists most of the grades he gave then would hold up on regrading today. Meanwhile, in 1986 a new grading agency, Professional Coin Grading Service, sprang up. Purporting to be more trustworthy and reliable than Halperin's service, it instead compounded the problem by also allowing dealers to grade coins--while claiming their methods had near-perfect reliability. Such claims drew the attention of the FTC, resulting in a spate of actions in the late 1980s cracking down on grading frauds. That threatened to lead to federal regulation of the coin business.17 Since then PCGS and the other main agency, Numismatic Guaranty Corp.,18 tightened their oversight of the process: Dealers couldn't be graders, and graders couldn't know the owner of the coins submitted. (Fees are on a sliding scale, starting at $25, depending on the value of the coin.)19

Still, Halperin has found a way to exploit20 the system. In lieu of running his own grading agency, he has invested in them and, by his own admission21, has made millions in capital gains over the years (the agencies process perhaps 60,000 coins a month). He and Ivy each own close to 12.5% of NGC22, and Heritage recently bought a music memorabilia auction business from Collector's Universe, the publicly traded company that owns PCGS and similar grading services for baseball cards and postage stamps.23

Coins graded by outfits like NGC can easily24 be regraded--upward--in a trick25 favored by Halperin and others called "the crack-out game." After an agency rates a coin, it seals it in a thin plastic case called a slab, which displays both sides of the coin, its grade, a bar code, serial number and an anticounterfeit hologram. Once sealed, the slab can't be opened without destroying it.

Now, many coins are on the cusp between two grades and, ergo, between two significantly different prices. A 1944 half-dollar from the San Francisco mint that's been certified 64 will only fetch $80 at auction, but a 65 could get $700. So a dealer can crack out the 64 and resubmit it as a raw coin to the agency that he thinks is most likely to give it the boost.

Halperin says he does this with 15% of the thousands of coins Heritage buys each year. Much of the time, he gets what he's looking for. That's good for the seller of the coin. But the buyer has no way of knowing that his 65 used to be a 64.26

A year ago Scott Travers, a New York dealer and author of coin price guides, was approached by a family with a collection left to them by an uncle. They had taken the coins to 70-year-old New York dealer Stack's, which, according to the executor, said they could get $109,000 for the haul. Travers suggested taking them to Halperin, who by selectively cracking out and resubmitting coins, prepared the set for auction on the Heritage website. The hoard fetched $260,000.27

Slab-cracking gets you only so far. Halperin and Ivy had decided the best way to expand the wholesaling business was to plunge into auctions. For years the big old-line dealers and auctioneers like Stack's and Bowers & Merena organized and staged the coin world's biggest auctions, like the one at the American Numismatic Association annual meeting, where high-profile items went on the block. Going price for the rights to stage such auctions back then was on the order of $150,000, which the auctioneer made back on commissions many times over. "We knew we could do it better," says Halperin. When Heritage started paying $300,000 for the auction rights, "competitors had daggers in their eyes," says David Ganz, a lawyer and former president of the American Numismatic Association.28

Two of them tried to get even--in court. In 1998 Stack's and A-Mark Auction Galleries of Beverly Hills sued the ANA alleging misrepresentation and fraud based on the group's relationship with Heritage. The plaintiffs, who lost out to Halperin on auction rights, complained they had no idea the ANA would also grant Heritage exclusive rights to its mailing lists, referrals and endorsements--or they would have bid higher. (The case was dismissed before trial in 2001.)

Heritage was itself the subject of a 1997 complaint by New Orleans dealer Blanchard & Co. The dispute stemmed from a $2.5million loan from Heritage, made in 1992, stipulating that Blanchard had to buy two-thirds of its coin inventory from Heritage at prices Heritage claimed were fair market. Blanchard sued Heritage after learning the firm had sold similar coins to other wholesalers at prices far below what Blanchard had paid.29 An arbitration panel ordered Heritage to pay Blanchard $23 million30; Blanchard settled for less. Halperin says the companies continue to do millions of dollars in business a year.

Such entanglements were mere speed bumps to Heritage along the road to greater market share. In this sport, prices realized trump everything. "All it takes to get a good auction result is two interested buyers," says Ganz, who in 1995 consigned his own 40-year collection to the Dallas firm. "But Heritage gets on the phone to dealers and collectors and really markets the sale." Heritage employs a 20-person marketing group to back its Web operations. They buy up advertising on Google and other search engines against any coin-related search terms like "rare coin" and "silver dollar." The firm maintains a database of tens of thousands of coin, comic and memorabilia collectors, many of whom enter their want lists on the Heritage website. When interesting items come up for auction, Heritage shoots out targeted e-mails, matching them to collector preferences.

Heritage does $5 million in sales per year at Ebay, but it's only one of dozens of prominent rare coin vendors there. "We're seeing the decentralization of the collectibles market," says Steve Ivy. "It's diffusing our own power."

Stow your handkerchiefs. Heritage still manages to thrive, thanks to its skills in marketing and selling the most highly sought after coins. And a new trend is helping. A few years ago the grading agencies set up websites where collectors can enter in the serial numbers on the slab of coins they've had graded. The sites rank collectors' sets by the quality of the coins, so that all the world can see who's got the best-certified set of, say, buffalo nickels. With more than 20,000 sets registered so far, the competition has grown insanely fierce, with profitable implications for Heritage.

In 2003 several collectors were vying to build the best set of Lincoln pennies on the PCGS registry. Victory came down to a single 1963 penny, the only one known to have received the highest possible rating of proof 70 Deep Cameo. Even in high mint grades an uncertified coin like that goes for less than $10. But when this specimen came up for auction at Heritage, the total price was $39,100 (including commissions). Why pay so much? Soon after landing the 1963 penny, the collector consigned his entire penny set--now certified as the best in the world--to Heritage for auction where it brought $110,000. But on reexamination the coin showed a tiny carbon spot that had formed since grading, greatly diminishing its value. To save face, PCGS bought the coin and retired it. No liability for Heritage, though. For its part in selling the notorious penny and then the whole set, the firm pocketed around $20,000 in commissions.31

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.