Coin firm seeks bankruptcy protection By DAN BROWNING ,
Star Tribune
| Updated: August 22, 2011 - 9:21 PM
International Rarities says it will repay
creditors if allowed to reorganize.
The downtown Minneapolis coin firm International
Rarities Corp. filed a last-minute petition for bankruptcy
protection as it headed for trial this week in Florida on
allegations that it bilked an elderly man out of more than
$335,000.
International Rarities, which is also under
investigation by the Minnesota attorney general's office
on allegations of consumer fraud, filed a Chapter 11 reorganization
petition in Minneapolis on Friday afternoon, listing assets
of $1,353,295 and liabilities exceeding $3 million.
That effectively stayed a federal lawsuit
brought by Dean Dellinger, 88, of Milton, Fla., who alleges
that the coin company cheated him on a series of gold and
silver trades. International Rarities disputes the allegations.
Joe Zarzaur, Dellinger's attorney, said
Monday that the coin firm's bankruptcy petition was "purely
a tactical thing, in my opinion, to weasel out of a trial
date."
Zarzaur noted that his client is not getting
any younger, and said he will ask the judge to allow the
lawsuit to go forward despite the bankruptcy petition. Fraud
is not dischargeable in a bankruptcy, Zarzaur said.
The bankruptcy petition also may stay a
lawsuit filed earlier this month by 74-year-old Barbara
Shannon, a retired nurse and widow in Ravenswood, W.Va.
Her lawsuit, filed in Jackson County Circuit Court, alleges
that International Rarities failed to supervise former salesman
Tory Hughes, and that he took her files when he left the
company and defrauded her in a series of trades. She's seeking
$235,000 in damages from International Rarities.
International Rarities' bankruptcy petition
lists 29 creditors from around the country who sent in just
over $1 million for coins but never got them. It also lists
more than 21 creditors with potential claims of nearly $900,000
from investments they made in International Rarities Holdings
Inc. of Las Vegas.
David Marion, who owns International Rarities,
set up the holding company in a failed plan to take the
coin business public and expand nationwide. Despite heightened
interest in precious metals as a hedge against inflation,
International Rarities' revenue declined. The bankruptcy
petition says the business brought in $24 million in 2009,
but just $15.7 million in 2010.
International Rarities issued a statement
Monday in response to a reporter's questions and said its
reorganization plan includes "100 percent payback to
customers of International Rarities Corporation and investors
in International Rarities Holdings."
"IRC is working with a well-established
turnaround team and looks forward to emerging from this
unfortunate event and making both customers and investors
100 percent whole," the statement said.
The company blamed the failure of its expansion
effort on "outside experts" Marion hired to help
manage and market the investment offering.
A Star Tribune investigation of Twin Cites
coin dealers this spring found that some firms hire salesmen
without regard to criminal backgrounds, in some cases including
coin fraud convictions.
International Rarities has a legacy of hiring
ex-cons. Court records and sources in the industry show
that over the years, its workers have included at least
two dozen people with criminal records that ranged from
serial drunken driving to drug crimes, fraud, forgery and
bank robbery.
The bankruptcy petition indicates that Marion
stepped down from his role as president and CEO in July,
along with his chief operating officer, Catherine Chambers.
Both are listed among the creditors with unspecific indemnification
claims. Marion also says he's owed $454,533 from a loan
he made to the company.
Stephen J. Hastings of Eden Prairie is listed
as president of the firm. The Internal Revenue Service filed
a tax lien against him in May for $257,458, and the state
of Minnesota filed one last October for $27,943. A spokesman
said Hastings' tax issues are related to another turnaround
effort he worked on, and that he is addressing them.