City, Goldline Strike $4.5 Million Settlement

Criminal charges were dropped against Goldline International, Inc.—one of the nation’s largest gold coin dealers—accused by the city of Santa Monica of running a bait and switch operation.

In exchange, Santa Monica-based Goldline will refund as much as $4.5 million to former customers under a settlement agreement approved Wednesday in Los Angeles Superior Court.

The settlement of the city's consumer protection lawsuit also includes a five-year injunction that says Goldline must change some of its sales practices, including not attempting to sell customers higher-priced coins once they have already paid for bullion.

"This is a great outcome for our customers and for the company," Goldline CEO Scott Carter said in a statement.

At the city's request, Goldline will also set aside $800,000 for any additional customers who have concerns about their purchases.

In November, the Santa Monica City Attorney’s Office filed a 19-count criminal complaint against Goldline, accusing it of running a bait and switch operation in which customers, seeking to invest in gold bullion, were switched to highly overpriced coins by using “false and misleading claims.”

Among other allegations, the city said Goldline customers typically paid upwards of 55 percent more than the actual value of the overpriced coins, but Goldline’s salespeople allegedly concealed the markup even when customers asked about it.

The new injunction also forces Goldline to disclose its actual price markups, in recorded calls before each transaction. It also says the company can't tell customers that the government can confiscate gold bullion.

According to Goldline, a 20-month investigation by city prosecutors found "only 43 customers" who were unhappy with their purchases.

“To address those rare instances where a client was dissatisfied with a purchase, the company [has] agreed to allow these customers to return their precious metals for a refund if they so desire,” Goldline executives said in a statement.

The company—endorsed by media personalities such as Glenn Beck Sean Hannity and Laura Ingraham—also agreed to pay $50,000 to cover fees and reimburse the costs of the investigation into Goldline and and subsequent prosecution.

Updated at 9:35 a.m. Feb. 23, 2012 with additional information from a statement by the City Attorney's Office.