Spanish authorities investigating an alleged pyramid scheme arrested nine people and raided the Madrid offices of a publicly traded company once entwined with former Toledo-area coin dealer Tom Noe and the Ohio Bureau of Workers' Compensation's rare coin funds.
The Escala Group disclosed yesterday that Spanish officials took documents from the company and Afinsa Bienes Tangibles, which controls about 70 percent of Escala's shares, as part of a fraud investigation into rare stamps.
With the state's money, Mr. Noe invested more than $10.7 million in Escala, which was known as Greg Manning Auctions until September. And in a secretive off-market stock purchase four years ago, Mr. Noe bought 500,000 shares in the company, then headquartered in New Jersey, at a 36 percent discount.
The stock deal proved to be a central source of profits for the troubled coin funds.
After Mr. Noe's purchase, Afinsa launched a friendly takeover of Escala, causing the shares to skyrocket from less than $2 to $32 at yesterday's opening bell.
As first reported by The Blade, Mr. Noe sold most of his holdings once the takeover was completed in 2003, making a total profit of $2.73 million.
He also gave Escala loans and $6.5 million to establish the Spectrum Fund, an unmentioned subsidiary in mandatory U.S. Securities and Exchange Commission filings that bought and sold rare coins.
Mr. Noe was later indicted on charges of stealing from the coin funds and separately on charges of laundering donations to President Bush's 2004 re-election campaign. A forensic auditor for the state has claimed that Mr. Noe attempted to use his transactions with Escala to cover up parts of the alleged theft.
Escala paid Ohio $7.5 million for the Spectrum Fund in March, helping to "neutralize" concerns about the company's management of the investment, said William Brandt, whose firm, Development Specialists Inc., has been liquidating the coin funds.
"We've been paid the entire sum of money, $7.5 million. So, we're fine," Mr. Brandt said.
Ohio appears to have escaped the fate of hundreds of thousands of Spanish and Portuguese investors, who bought more than $1.4 billion in rare postage stamps from Afinsa.
In an exclusive contract, Escala is the primary supplier of rare postage stamps for Afinsa's European investors, an agreement that jacked up Escala's profits and stock price.
The Spanish newspaper El Pais ran photos of angry rare stamp investors in Madrid, estimating that as many as 350,000 people have lost their savings.
Traded on NASDAQ, shares in Escala plummeted by 62 percent in trading yesterday, landing at $12.23, a price that would still have given Mr. Noe and the state of Ohio a substantial return for their 2002 stock purchase at $1.15 a share.
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