This past summer a story of events involving a particular coin - two coin dealers, Dennis Tarrant and James Garcia of Jade Coin, PCGS and David Hall the company's president - began unfolding.

In a nutshell - Jade Coin purchased the coin pictured to the right for a client of theirs. Apparently the client was interested in obtaining coins with the Norweb pedigree, which the coin obviously has and which has been certified by PCGS. At first the client was quite happy. But then the client went searching through the Norweb catalog and was unable to find or confirm that this particular coin was plated in the catalog thus confirming its pedigree. The client then returned the coin to Jade Coin. Mr. Tarrant and Mr. Garcia conducted research on their own and they also were unable to find this coin listed in the catalog. Jade Coin refunded their client his money and began to seek out satisfaction from PCGS.

Now it is generally understood throughout the numismatic community that PCGS has a standing policy - a guarantee - that if they misgrade or misattribute a coin that they will buy the coin back from the owner at market value or refund to the owner the difference in value. There have been many cases where PCGS has done just this. Below is a comment - direct quote - from David Hall on this subject.

"If we regrade a coin in guarantee submission lower than the submitted grade we give the submitter the option of either selling us the coin at current market value or receiving a check for the difference in the market value between the new and old grade. We define market value as current wholesale value, i.e. what a dealer would ask another dealer for the coin. It's basically replacement value."

It appears based on this quote that PCGS fully intends to stand behind their company's guarantee.

Now it is well known that all of the grading companies make what are known as "mechanical errors" from time to time. Most seasoned collectors have seen examples of this - I own a few myself - and don't make a big deal out of it. An example of a mechanical error would be a 1921 Morgan Dollar mislabeled as a 1921 Peace Dollar. Or perhaps an MS coin mislabeled as PF. These are computer errors or typos made while the data for the slab label is being entered into the computer before they are printed out. This type of slabbing error is not guaranteed in a financial sense. But the grading company will stand behind their word and correct these mechanical errors. Below is a quote from David Hall on this subject.

"A mechanical error is an obvious error. Examples: a clearly mint state frosty surface coin in a proof holder, a 1936 dated coin in a holder that said 1935, a Boone commem in a Texas commem holder, a flat as a pancake band dime in a FB holder, etc. The obvious mechanical error can sometimes be a grade. For example, in 1986 we had a dispute with a dealer because he purchased a MS65 1893-O dollar. The problem was the coin was a bag marked to death MS60 that no one in his right mind would ever consider even MS63 let alone MS65. The guiding concept with mechanical errors is common sense. David"

So - other than mechanical errors - one would think that a grading company like PCGS would be quite careful and be quite sure of what it is they place on their slab labels. Otherwise they will have to stand behind their guarantee and pay for their mistakes. Rather obviously they have no desire to do that unless they have to. But just how careful are they ? Here is what David Hall has to say -

"We do not have a finalizer and therefore no one person who can arbitrarily change a coin's grade. I believe you are confusing us with some other service(s) in that regard."

"At PCGS we do have a verifier. He looks at the grade of the coin after it is in the holder as a second quality check. If he disagrees with the grade, he must show the coin to a second grader. The grade can only be changed if the second grader agrees with the verifier. In other words, two graders must agree on the grade of a coin before it leaves PCGS. No one person, not even me, has the authority to change a grade based on his opinion alone."

"The person who verifies most of the PCGS coins is PCGS Director of Grading Ron Howard."

So at least two graders at PCGS must agree on the grade of a coin after slabbing and before it leaves PCGS. And if at the final step the PCGS verifier has doubts he must get another grader to agree with him before an assigned grade can be changed. And with expensive coins - even more care is apparently taken. For as David Hall was recently asked if PCGS had a bias when it comes to grading expensive coins - this was his answer.

"I do not believe we have a bias based on value. We want to give great coins the benefit of the doubt wherever possible."

"We do however take care with the expensive coins. We have a "Double verification" system where coins over a certain value (depends on series) are examined by both a verifier and a double verifier. We do this to insure our submitters get the very best opinion from us and we also want to double check the expensive coins to lower the possibility of us making an expensive mistake."

That's all well and good - but you might ask - what about a pedigreed coin? How does PCGS deal with those? And below is David Hall's answer -

"The most important pedigrees for coins are...
Eliasberg
Eliasberg
Eliasberg!!!!"

"Actually, the important pedigrees fall into two categories. The great comprehensive collections... i.e. Eliasberg, Norweb, Garrett, etc... and the great specialized collections... i.e. Bass, Naftzger, Jack Lee, etc."

"The market place places a premium on the truly great pedigrees, like the collections we recognize in the PCGS Set Registry Hall of Fame."

And when asked how PCGS confirms the provenance of a pedigreed coin, Mr. Hall had this to say -

"There are only four instances when we can pedigree a coin as far as I'm concerned.

1. The coin is from a famous, "name" auction and it is pictured in the catalog and the coin clearly matches the photo.
2. The coin is from a famous, "name" auction and it is in a sealed auction company flip (holder). This doesn't happen much anymore as most auctions have certified coins.
3. The coin is from a collection or set that is in the PCGS Set Registry and the owner of the set sends the entire set in for pedigree to his collection.
4. The coin is from a famous "find" or hoard and we have specific information that the coins being pedigreed are the actual discovery coins. An example would be the gold coins from the SS Central America shipwreck."

Now in the current coin market, a great many buyers apparently attribute a substantial value premium to coins with certain pedigrees. As we have seen in the quote above, even Mr. Hall agrees with this - "The market place places a premium on the truly great pedigrees ... "

So what does PCGS do if a coin that is deserving of a pedigree noted on the slab label does not get one ? Well something like that happened not to long ago. The following is a question that was asked by a Coin Universe Forum member - docday2003 - and answered by David Hall.

Question - docday2003
"Hi, I have a coin which was certified by ICCS as having come from the Norweb collection. I recently submitted it to PCGS for cross grading, and it came back without the Norweb designation. What should I do now? Thanks."

Answer - homerunhall (David Hall)
"Send the coin back to PCGS with all the pertinent information and we'll correct our mistake."

Now with the above information being understood, one would think that Jade Coin would have no problem with PCGS honoring their guarantee and that Jade Coin would be financially compensated if a mistake was indeed made. After all - by David Hall's own words there are very few means by which the provenance of a coin can be confirmed thus making it deserving of a pedigree notation on the slab label. And Mr. Hall has further stated that the coin market does indeed attach a premium to the value of certain pedigreed coins. But what happened as the Jade Coin story continued is a bit perplexing to say the least.

On Aug. 4th, Mr. Tarrant met with David Hall personally at the ANA show and discussed with him the problem of the coin having an invalid or incorrect pedigree notation on the slab label. Mr. Hall agreed to accept the coin for submission to PCGS for what is known as a Presidential Review. This procedure is little different from PCGS's standard upgrade review with one exception - you are supposed to receive a note of explanation from Mr. Hall describing what happened and why during the review.

Sometimes coins that are submitted for Presidential Review are returned to their owners with an upgrade. Sometimes they are just returned in the original slab. When asked why this happens - Mr. Hall explained -

"Coins are not cracked out for Presidential review. The graders review the coins in the holder, then I write a personal comment to you on each coin that does not go up, giving you whatever insight I might have into the grader's reasoning."

But, when PCGS returned the coin in question to Jade Coin - this is what they received -

According to Mr. Tarrant & Mr. Garcia there was no note from David Hall. There was no explanation of any kind. They just received their coin back in a new slab - that did not have the Norweb pedigree notation on the slab label. Mr. Garcia claims that Mr. Tarrant has called PCGS & David Hall numerous times asking for an explanation. In a later telephone discussion Mr. Tarrant had with Mr. Hall, Mr. Tarrant reports that Mr. Hall stated that PCGS does not guarantee pedigrees and his ( Mr. Hall's ) attorney suggested that Jade Coin's issue is not with PCGS but with the company that Jade Coin bought the coin from in the first place.

This causes me to ask a question - if Mr. Hall, in his own words, states that "The market place places a premium on the truly great pedigrees ... " - and PCGS slabs a coin and places a pedigree notation on the label - then how in the world can they refuse to guarantee the pedigree they put there ?

So what do we make of this story ? What are collectors to believe concerning the practices and guarantees of PCGS ? Are we the collecting community to continue with our confidence in the abilities of this company ? There were after all 93 - 1793 Hibernia halfpennies in the Norweb collection. Thirteen of these coins were described as MS and plated in the catalog. This coin was not one of them. But PCGS certainly slabbed it as such.

Mr. Hall has repeatedly stated that there are two sides to every story. I agree with this completely. I even wrote to Mr. Hall - twice - telling him about this article and asking him, in the interest of fairness, to tell his side of the story. He replied to me once. But all he wanted to know was who I was and why I was writing this article. He made no attempt to tell his side of the story. Others, who have heard of this incident via the on-line coin forums have written to Mr. Hall expressing their displeasure. Mr. Hall's reply was only to say there are two sides to the story.

It seems that Mr. Tarrant & Mr. Garcia are concerned with the financial loss - approximately $1,500 - they have suffered as well as the fact that their reputations as dealers have suffered as well. But they report that they have not received any financial compensation. Perhaps they deserve to be compensated - perhaps not. The information and the quotes above seem to indicate that they do. This is not something that you or I can decide - but it certainly seems that PCGS has decided it.

But what concerns me even more than PCGS's handling of this situation is the fact that the coin was slabbed and pedigreed in the first place when it obviously did not deserve it. There are those who have seen this coin that are utterly convinced that the coin is not even MS. And rather obviously it was not considered to be MS when it was part of the Norweb collection.

Even worse is that this is not the only example of this type of thing happening. We have recently seen what has been referred to as a Schlag Jefferson Die Trial that has been slabbed and graded by PCGS as MS62. Even a casual collector would question the grade - even if it deserved to be graded - let alone the attribution. There is no supporting evidence or documentation to confirm that this is indeed a die trial or even that Felix Schlag designed it.

There is also another coin - a 1662 Oak Tree twopence that has been graded by PCGS as AU55 with the pedigree notation on the slab as being from the Garrett collection. This coin is currently listed on the American Numismatic Rarities web site and up for auction on Dec. 1st. ANR however - possibly because of the incident described above - has done their homework and noted in the auction listing that the pedigree assigned to the coin by PCGS is in error and that the coin was not a part of the Garrett collection. So it does make one wonder about the accuracy of PCGS when it comes to assigning pedigree notations on their slab labels. It also makes one wonder how many more of these PCGS slabbed coins with inaccurate pedigree notations on the slab label are out there.

Collectors have long questioned the accuracy of the grading companies in regard to the grade of a coin. PCGS is not alone in that. But there has always been a great deal of trust placed in the grading companies by the numismatic community in regard to the authenticity and correct attribution of the coins in their slabs. And if we must now find ourselves doubting even this - well then it is indeed a sad day for collectors.

Post Script - There is additional information that I have just been made aware of regarding this incident. But because of time constraints and deadlines this illuminating information will be discussed in a later issue.

Well that's it folks - until next time ;-}

Doug