Coin firm seeks bankruptcy protection By DAN BROWNING ,
| 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
"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.