Defendants convicted of mail and wire fraud and money laundering involving a coin sales scheme appealed a decision by lower court. The appeal was denied.
Facts: This case (United States of America v. Michael Romano, et al – United States Court of Appeals, Second Circuit – July 27th, 2015) involves the testimony of three appraisal and valuation expert witnesses, specifically of coins.
Michael Romano and William Kearney were in the business of buying and selling rare coins. In the rare coin market, there are two companies that have a big market share of the coin grading market: Numismatic Guarantee Corporation (NGC) and Professional Coin Grading Service (PCGS). These companies are hired by coin dealers to provide certified gratings on coins so that buyers will be confident that the coins are worth the asking price.
Mr. Romano and Mr. Kearney would allegedly purchase coins with a low grading (or no grading at all) and sell them at a higher grading than what they were worth. Their salesmen testified that sales pitches included false information. They would tell the customer that they were getting a bargain on the coins because the company was acting as a wholesaler, or that they were liquidating the inventory of another dealer. In addition, Romano and Kearney would try to conceal their business practices from law enforcement and customers. They would rename the company and change locations and instructed their employees to shred invoices if it had the prior name on it.
In order to prove their case, the plaintiffs proffered three expert witnesses in numismatics, all of whom provided testimony on the grading systems of rare coins and examined numerous coins that were the subject of this case. The defendants filed a motion to exclude the testimony of two of the experts, Richard Montgomery and Anthony Swiatek. The District court denied this motion and the plaintiffs appeal to the Second Circuit.
Discussion: During the District Court case, the defendant’s maintain that the coin grading and valuation procedures are unreliable and subjective. In addition, they state that the testimony of the experts was based on unreliable methodology. The defense noted that the NGC web site states that there are sometimes discrepancies in the grading of rare coins of one or two points. In addition, they point out that there are differences in the descriptions by PCGS and ANA (American Numismatic Association) of an MN 64 grade coin. They also point to an article from 2003 discussing disparities in the grades put forth by different grading services. This points to the subjectiveness of the system, the defense noted.
Also, the defense stated that the experts did not know much about the business practices of the Romano Companies and the methods used by Swiatek in valuing the coins were based on personal experiences and, thus, not able to be replicated.
The appeals court took up these arguments as well and found that the district court did not abuse its discretion in admitting the expert witness testimony. While they had not had a similar case in front of them, they pointed to cases in other circuits that admitted expert witness testimony on the subject of rare coins. In addition, the court opined that the district court was correct to conclude that testimony from experts was enough to show that the grading of coins is an indicator of their worth.
Last, the plaintiff’s argument that that Swiatek’s testimony was untrustworthy also fails because he utilized multiple standard operations as well as his own experience to form the basis of his conclusions.
Held: The district court opinion admitting the expert testimony is upheld.