http://toledoblade.com/apps/pbcs.dll/ar ... /511270357
European fund tied to Noe falters
Firm backed by rare-coin money supplied international stamp deal
By JOSHUA BOAK
BLADE STAFF WRITER
The Ohio investigation into Tom Noe's failed $50 million rare-coin funds is now drawing attention to a $1.4 billion rare-stamp investment group in Spain.
Federal and state investigators are scrutinizing the dealings of a former New Jersey company that Mr. Noe put more than $10.7 million of state money into.
The company, Escala, known until September as Greg Manning Auctions Inc., is the publicly traded arm of an international stamp venture.
Mr. Noe, who was indicted last month on three felony counts of laundering money into President Bush's re-election campaign, has been accused by Ohio Attorney General Jim Petro of stealing more than $4 million from the two rare-coin funds he set up and managed for the Ohio Bureau of Workers' Compensation.
The former coin dealer's relationship with Greg Manning Auctions is absent from the company's filings with the U.S. Securities and Exchange Commission and hidden from a public without access to the 500,000 pages of coin funds records. It involved loans, direct payments to a Greg Manning subsidiary, and the off-market purchase by Mr. Noe of company stock from a former lieutenant of Michael Milken, the junk bond king convicted for securities violations in 1990, according to those records.
More than Ohio's money is at stake.
The investigation's findings could damage the fortunes of 140,000 Spanish and Portuguese investors who have invested more than $1 billion in rare postage stamps kept in distant vaults.
The story begins four years ago, shortly after Mr. Noe received the second installment of $25 million from the state bureau established to help pay for the treatment of injured workers.
On Aug. 1, 2001, Mr. Noe lent Greg Manning $1.6 million from the state's rare-coin fund, Capital Coin Fund II.
On the same day he transferred $3 million from the coin fund to a subsidiary he established: the Spectrum Fund.
Correspondence released by the state indicates that Greg Manning agreed to send Mr. Noe $3.1 million worth of rare coins as collateral for the loan.
State investigators allege the financial transactions with Greg Manning are linked to other transactions Mr. Noe made with the state's rare-coin funds that were fraudulent.
On the same day Mr. Noe wrote checks to Greg Manning, he also wrote a $2 million check from the coin funds to his own company, Vintage Coins and Collectibles, to buy coins.
Mr. Petro alleges part of the $2 million actually repaid a $393,000 commercial loan owed by Mr. Noe that was unrelated to the coin funds and that Mr. Noe used more of the money to falsify a $786,000 profit distribution to the state from his first state coin fund, Capital Coin Fund Limited.
That profit distribution supports Mr. Petro's claim that Mr. Noe operated the coin funds as a "Ponzi scheme," paying out recently collected principal from new investors as returns to earlier investors.
Leonard Palaibis, a forensic accountant working for the attorney general, concluded in an affidavit that Mr. Noe deceptively labeled the $3.1 million in rare coins Greg Manning used as collateral as inventory of the coin funds to cover up the theft.
Stock sale
Mr. Noe also invested coin-fund money directly into Greg Manning, holding 4.5 percent of the company's shares at one point.
On Jan. 14, 2002, Mr. Noe purchased 500,000 shares in the company off-market and at a 36 percent discount, months before the announcement that Afinsa Bienes Tangibles, a privately held Spanish postage stamp investor, would acquire 70 percent of the U.S. auction company.
The stock - sold off in a series of trades over the next two years - yielded more than $2.73 million in profits for the coin funds.
A wire transfer record included in more than 40 boxes of coin-fund documents turned over to The Blade by state investigators identified the seller of the shares as Warren Trepp, once Michael Milken's chief trader at the Beverly Hills office of Drexel Burnham Lambert and a prominent Republican donor.
James B. Stewart's book Den of Thieves portrays Mr. Trepp as an aggressive trader who smoked four packs of cigarettes a day and stayed cool as federal investigators closed in.
"I'm not the kind of guy who could ever be a fink," he told his lawyer over dinner, according to the book.
Unlike his boss, Mr. Trepp fought and beat the SEC. He did not return calls seeking comment about his deal with Mr. Noe.
Before the June 17, 2002, announcement that Afinsa would buy Greg Manning Auctions, Mr. Noe purchased 85,000 shares in the company through Scott J. Savage, a Toledo-area financial adviser who runs SJS Investment Consulting. Mr. Savage also did not return calls seeking comment.
Mr. Noe sold most of the coin funds' holdings after the Afinsa buyout was completed in 2003, according to the coin fund general ledger.
Material relationship
All told, Mr. Noe lent more than $4.2 million to the collectibles auctioneer and placed $6.5 million in the Spectrum Fund, which was controlled by Greg Roberts, a member of Greg Manning's board of directors.
Cashed checks from the coin funds' records show that the Spectrum Fund shared the same bank account with Spectrum Numismatics, then a division of Greg Manning.
In mandatory filings with the SEC, the company only reported $4 million in loans from a "privately held capital fund."
Obligated to disclose only "material" information, it chose not to mention the Spectrum Fund or its association with Mr. Noe.
Last week, investors considered the relationship to be material.
After learning of the company's dealings with Mr. Noe in a Wall Street Journal article that credited The Blade for uncovering the state scandal and its connection to Escala, investors sold off company stock.
The share price dropped to $14.75, erasing about $107 million from a $430 million market capitalization.
Escala has declined interview requests from The Blade during the previous three months. It will hold a phone conference tomorrow morning to discuss its entanglement with Mr. Noe.
According to a Friday news release, Escala described itself as a "witness" in the federal and state investigations of Mr. Noe.
"Baloney," William Brandt said. "Their characterization of themselves as a witness is wrong."
Mr. Brandt is working with federal and state officials as his company, Development Specialists Inc., oversees the liquidation of the coin funds' assets.
Independent of Mr. Noe, Escala is the subject of an inquiry by the SEC, according to a Sept. 22, 2005, letter that denied a request for documents pertaining to the company.
"Staff responsible for the commission's investigation have confirmed that releasing the withheld information could reasonably be expected to interfere with an ongoing commission investigation," read the letter, which was sent to an investment firm.
It cites exemption 7(A) in the Freedom of Information Act. The exemption authorizes withholding any "records or information compiled for law enforcement purposes."
The letter offers no clues regarding the inquiry's cause or purpose.
Spanish watchdog
Afinsa is far from unique on the Iberian Peninsula. A corporation with a similar name and business model, Banfisa, went bankrupt three years ago.
Afterward, ADICAE, a Spanish consumer watchdog, lobbied the government to regulate collectibles investments and attempted to monitor Afinsa, among other collectibles brokers.
Unable to verify the company's inventory, ADICAE issued a report in 2002 with a shocking observation. Afinsa paid out nonexistent profits.
"If we reviewed the results of the last year, Afinsa's group of companies lost 6 million euros [$7.6 million]" it said. "These losses would eliminate the benefits that Afinsa recognizes in this year!!!"
Greg Manning's revenues and profits reversed course after the Afinsa acquisition was finalized in 2003, ending chronic losses in preceding years while Mr. Noe was buying its stock for the state's coin funds.
In fiscal 2005, Greg Manning, now Escala, reported sales of $240 million and a net profit of $38 million.
About 50 percent of Escala's revenue and 70 percent of its profits came from Afinsa, according to its SEC filings.
As part of the takeover, Greg Manning signed a 10-year agreement to sell $1 billion worth of antique postage stamps to Afinsa at a rate 10 percent higher than the stamps' purchase price.
Afinsa then resells the stamps it bought from Greg Manning to Spanish and Portuguese investors.
As of last year, 142,697 individuals have entrusted roughly $1.4 billion with Afinsa, according to corporate disclosures.
The company claims that the stamps wait untouched in vaults, as "clientes" receive annual payments between 6 and 8 percent on their investment.
After a certain period of years, Afinsa agrees to buy the stamps back, allegedly guaranteeing a profit without any risk.
Ken Lawrence, a former vice president of the American Philatelic Society, said the global market for high-quality stamps is not large enough to accommodate this arrangement, leading him to be suspicious of the investment's authenticity.
"It is inconceivable that [Escala] can harvest $100 million a year in stamps and provide them to Afinsa," he said. "There is no place in the world where anybody advertises to buy stamps on that scale."
Contact Joshua Boak at: jboak@theblade.com or 419-724-6728.
dudolo, ya que parecen que tienen buenos contactos a nivel internacional, no creo que arrastre en su caída a otras empresas consolodidas del grupo a tirar sus valores a la baja, antes harian una operacion de venta o traspaso integral a otra sociedad poderosa (a saber por quien controlada, seguro que por los mismos). Pero que el objeto filatelico de coleccionismo clasico, sufriera una bajada de precios por un problema financiero en el grupo, creo que sería una utopía. Los grandes grupos tienen mecanismos que evitan que el efecto vasos comunicantes alteren la vida de las empresas englobadas en ellos. 
