Professional Coin Grading Service

The Professional Coin Grading Service (PCGS) is a third party grading service for grading rare coins. It determines the condition and authenticity of each coin it grades to provide consumers with a rating on which to judge the coin, and encapsulates coins in sealed see-through plastic holders. Major numismatic organizations such as the American Numismatic Association (ANA) and auction companies generally recognize PCGS as one of the largest and most respected of the third party grading services, rivalled principally by competitor NGC, the Numismatic Guaranty Corporation of America. It was founded in 1986, and is located in Newport Beach, CA. It is a subsidiary of Collector's Universe, Inc. (NASDAQ:CLCT), a company that also operates a rare comic book certification service and a grader of paper money.

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An early PCGS slab.

PCGS was founded in response to perceived inconsistencies in the appraisal of rare coins. Though the American Numismatic Association had published by 1977 its standard grading rules using the 70 point Sheldon scale, individual interpretation of a particular coin's placement on this scale in terms of degree of perservation and condition was found to be highly subjective. Between any given prospective buyer and seller, a difference of opinion could in the case of particularly rare coins could represent differences on the order of hundreds, thousands, or tens of thousands of dollars. Several prominent coin dealers and numismatic professionals in 1986 decided to form the Professional Coin Grading Service as a way of providing an independent grade to aid in the transaction.

Influence

Though PCGS was not the first company to provide independent grades (photo-grading services and the ANA's own ANA Certification Service already provided coin grading but at the time) or even the first to introduce the hard plastic protective slab (a smaller company, ASA-Accugrade, claims a patent dated two years earlier), PCGS is credited by coin experts as founding the movement of formal professional third party coin grading.

PCGS introduced the "slabbing" revolution to professional numismatics, in which a coin is encapsulated with an accompanying tamper-resistant certification of its grade. This packaging transformed rare coins from subjectively appraised valuables to numerically valued commodities that could then be traded sight-unseen among coin dealer and outside investor networks. About a year after PCGS was founded, one of their founding members, John Albanese, left and started rival company NGC, and the two have since dominated the coin grading industry.

The introduction of objective grading attracted considerable new interest in rare coins by investors such as those from Wall Street firms. This lead to a dramatic rise in rare coin values from 1988 to 1989, followed by a collapse of what became an economic bubble in 1990. Since then, the average value of coins have stabilized and shown a slow and steady gain, though the market continues to exhibit fluctuations.

In 2002, the Professional Numismatic Guild surveyed members on the quality of the various certification services, with PCGS and NGC both scoring the highest in rank. Subsequent repeats of the survey have given similar results.

Population Report

PCGS maintains a census of all coins they have graded since their inception, revealing the incidence of each date, mint mark, and reported variety of particular coins, as well as prominent feature designations such as "prooflike" Morgan dollars or "full bands" found on the reverse of better-struck Mercury dimes. Access to this report is available to dealers and paid members of the PCGS Collectors Club, an annual membership service that allows non-dealer individuals to submit coins for grading. The report is updated continuously on their web site, though a printed version is published at regular intervals.

Analysis of this report and a similar one published by NGC has allowed numismatic professionals to estimate the rarity of specific coins, and over time these two data bases have revealed some coins once thought rare to be remarkably common, whereas others thought more common have shown to be likely few in number. The population reports are followed closely by numismatic professionals, but they also recognize that their numbers can be inflated through multiple submissions of the same coin, broken out of its holder and re-submitted with the hopes by the sender of receiving a higher grade, or deflated through reluctance to submit a common coin of little value for a service that costs more money than the coin is worth.

Controversies

In the May 26, 2003 edition of Coin World, the hobby newspaper had announced they had contracted investigators to conduct a year-long, comparative study of PCGS, ACCGS, NGC, Numismatic Guaranty Corporation and several other grading services, each know as a Third Party Grader (TPG). In their investigation, several of the same coins were sent to each grading service over the course of a year, each graded by all Third Party Graders sent to. In no case did the grading services agree on the grade of any given coin, and in some cases the difference in grading was seven points off. Coin World further reported that in one case ACCGS had graded a coin as "cleaned" and several grades lower than PCGS, which PCGS had not noted the same coin was "cleaned". PCGS had failed to note on their holders that thousands of shipwreck coins had not been cleaned, although the coins were in fact encrusted with sea debris and barnacles, and cleaned in acid baths. It is standard for professional dealers to note when coins have been cleaned or treated in acid baths, and not doing so can be considered unprofessional and unethical by some numismatists. Further, in U.S. Numismatics, it is standard to grade coins on a point-scale from 1 (poor) to 70 (perfect) and to note on the coin holder if a coin has been cleaned or poorly mishandled, or in some cases, to reject it for encapsulation.

In 1990 the FTC (Federal Trade Commission), which oversees business ethics and fraud, filed a civil action against PCGS alleging exaggerated advertising claims. PCGS did not admit wrongdoing, but agreed to submit its advertising for review for a period of five years. In a filing in Federal district court in Washington, the company agreed to include a statement in its newspaper and television advertising affirming that certification by PCGS does not guarantee protection.

In September 2004, members of the American Numismatic Association reported seeing counterfeit PCGS slabs at the Long Beach Coin Show. More were reported on eBay in the years following, but PCGS did not address the issue until March 27, 2008 with the following acknowledgments on the PCGS website:

"The counterfeit PCGS holders are well-executed, but with minor differences from a genuine holder. PCGS anticipates that authentic coins will eventually be placed into counterfeit PCGS holders in the future, perhaps with elevated grades and/or inappropriate designators.

The following list of coins and certificate numbers have been seen in fake PCGS holders:

• China (1916) Silver Dollar, Y-332, Cert #10712316 (valid)
• China (1923) Silver Dollar, K-677, Cert #11354470 (valid)
• China (1923) Silver Dollar, K-678, Cert #11285683 (valid)
• China (1923) Silver Dollar, Y-336.1, Cert #13835186 (valid)
• China Republic (1912) 20 Cents, Cert #21981173 (invalid)
• China (1916) Gold Dollar, Pn-44, Cert # 11072163 (invalid)
• China (1923) Gold Dollar, Tsao Kun, K-677, Cert #11354470 (invalid spec, valid cert�used above)
• US 1858-O Half Dollar, Cert #03884338 (valid)
• US 1800 Silver Dollar, Cert #03859118 (valid)
• US 1795 Silver Dollar, Off-Center Bust, Cert #22030856 (valid)
• Mexico 1761-MoMM 8 Reales, Cert #05763936 (valid)

"Valid" means that the correct information shows up under Cert Verification."

The above listing consists of only the counterfeits known or reported by PCGS as of March, 2008. Other PCGS counterfeit holders have been reported in eBay forums and more may be reported by other firms and individuals, since PCGS anticipates that authentic coins will eventually be placed into counterfeit PCGS holders, and counterfeit holders may multiply and improve over time. PCGS offers no reimbursement liability for the prices paid for coins in their counterfeit holders. PCGS has an online link to verify the Cert numbers, however, many buyers may not be computer users or may be unaware of their link. On January 7, 2008 Numismatic Guaranty Corporation (NGC) posted a notice on their website that high-quality counterfeits of their holders had been purchased on eBay : "Most frequently Trade Dollars and Bust Dollars are found, although Flowing Hair Dollars and foreign coins have also been seen. A range of grades is also represented." Caution is advised when purchasing coins in PCGS and Numismatic Guaranty Corporation (NGC) holders as the seller can disclaim liability due to the "third party" nature of the counterfeit holder. Additionally, it may be too late to request refunds from eBay sellers before Cert numbers can be verified as counterfeits. Many coins are posted on eBay "as is" and with no return privileges.

See also

• Coin collecting
• Currency

External links

• Professional Coin Grading Service
• New York Times Article on the 1990 FTC action