Gold Rush: Soaring Prices, Unscrupulous Precious-Metals Dealers, Right-Wing Paranoia -- We've Been Down This Yellow-Brick Road Before

Like many gold sellers, Republic Monetary Exchange LLC focuses much of its advertising on conservatives.

While many businesses bend over backward to avoid offending people, the firm's chief executive, Jim Clark, wears his right-wing politics — literally — to basketball games.

Late in the afternoon one day in mid-June, Clark was eager to talk about how he got booted from a Phoenix Suns game on May 5 because of his anti-illegal-immigrant T-shirt.

The two-year-old company at 4040 East Camelback Road deals in gold, silver, and platinum; visitors and customers have to be buzzed through a security door. Clark, 57, is a native Arizonan and the firm's chief executive. He's dressed in a suit with a loose-fitting tie.

Looking out of place, dozens of orange T-shirts that read "Viva Los 1070" are stacked on a folding table near the front desk. Clark's been hawking them on the Internet.

"It wasn't planned," he begins. "We were sitting behind the Spurs bench."

He runs through the story: During a home game against San Antonio, Clark and a friend sat in front-row seats, each wearing shirts with the politically charged statement. The shirts both supported SB 1070, Arizona's new immigration law, and mocked the Suns' temporary switch to "Los Suns" jerseys in protest of the legislation.

Security guards asked the pair to take off their shirts or turn them inside out. They refused and were escorted out of US Airways Center. Clark, ever the salesman, persuaded a security manager to let them back in — with their message intact.

The incident was picked up by news outlets and bloggers nationwide, and Clark made sure to mention his business, creating plenty of free advertising for him.

The stunt worked so well that Clark began selling similar T-shirts on the Internet.

Clark was infamous from the latest incident. But he and his business associate, Sherman Unkefer, became something much worse after they ran gold and silver scams in the 1980s and 1990s, and failed to pay millions of dollars in restitution.

Court records detail the trails of tears of hundreds of victims. Though the cases are decades old, they remain fresh in the minds of the fleeced — and in civil court filings over the past few years.

Margaret Viall of Bakersfield, California, for example, is still trying to collect on a $3.5 million judgment against Clark and another of his associates, Gene Hutchins. The award stems from the financial meltdown of North American Coin and Currency Ltd., a large, Phoenix-based precious-metals firm that went belly-up in 1982.

In those days, gold prices were setting records and fueling imaginations, just as they are now. Silver wasn't doing badly, either. North American was one of the top dealers in the United States, moving an estimated $400 million in metal each year. But like the market itself in the early 1980s, the company crashed hard. Mismanagement and fraud drove North American Coin to file for a liquidation bankruptcy, and that's when its customers learned the hard truth.

People across the country had trusted the Phoenix firm to store their gold or silver safely, but it turned out that at least $16 million in metals had been either sold out from under them or never purchased at all.

Investors who acquired the company after it filed for Chapter 11 reorganization couldn't save it, and North American disappeared.

Unkefer, the company's president, was sentenced in 1988 to 10 years in prison and is still on the hook for $7.1 million in restitution.

Clark, North American's vice president, secretary, and treasurer until late 1981, escaped indictment (though not a $3.5 million court judgment) in that one.

But in 1993, Clark was prosecuted for selling unregistered securities at his own Phoenix firm, Sheffield Metals, and served eight months in prison. Many former Sheffield customers were disappointed by the light sentence; one victim wrote the court that Clark ought to be "hung from the nearest tree." He was banned from owning or operating a metals-trading firm until his probation ended in 2006.

By that time, court records show, he had paid back just $42,000 of his $1.5 million court-ordered restitution.

Sitting in a small conference room at his current business office, Clark tries to maintain a friendly countenance when the conversation turns to uncomfortable matters. Clark denies that Unkefer helped provide about a third of the start-up funds for the company two years ago. But he admits, somewhat sheepishly, that Unkefer's wife's trust provided the capital. He quickly adds that Unkefer "has no ownership in the company."

The distinction isn't clear, since Unkefer's wife, Sharon, died in August 2008, two months before the company was incorporated.

Sherman Unkefer's role in the company appears to have been hidden deliberately in corporate records.

Clark tells New Times that he wants to talk to his lawyer before going on with the interview and that maybe he'll meet with the paper at a later date.

"I don't want to create my own sense of bad publicity," he says. "This company, Republic, has a lot of integrity. I've had issues."

Clark's Phoenix lawyer and friend, anti-abortion activist John Jakubcyzk, calls back a few days later to say that Clark has changed his mind about giving a follow-up interview.

For the record, no evidence could be found that Republic Monetary Exchange or its principals are doing anything illegal now. Avoiding the payment of restitution through legal battles is within their rights, even expected.

Yet victims, who lost anywhere from a few thousand dollars to more than $100,000 apiece, are outraged that Clark and Unkefer are back in business.

Republic Monetary Exchange is one of hundreds of companies taking advantage of the world's new interest in one of the world's oldest forms of currency: gold. Though the company sells silver and platinum, gold is its main product.

And that shouldn't be surprising these days. In case you haven't noticed, the world has embarked on a massive gold-buying spree in the past few years, a trend that has sent the price of the metal skyrocketing.

Just four years ago, a troy ounce of gold could be had for about $500. But in 2006, the price suddenly shot up to more than $700.

An ounce went for about $850 on the day President Barack Obama took office — and now goes for about $400 more than that. Sometimes, gold can be a terrific investment — and this has been one of those times.

How long it will continue at this pace is debated fiercely on myriad Internet sites. Most gold sellers, naturally, claim the price will keep going up. With gold at another record high-dollar amount of about $1,266 last month, this optimism sounds all too familiar (remember the housing market?).

The value of gold also has been known to drop like, well, the rock that it is, and stay relatively low for years. Gold went for $850 in January 1980, but if you bought it then, you didn't see that price again for 28 years. (And $850 didn't go nearly as far in 2008 as it did back then).

Lately, bloggers who write about gold (often the same people selling the stuff) stress that the price may plunge this summer. But most people in the game seem to think that the dip, if it occurs, will be followed by more record highs.

You don't have to be an economist to see that the factors inflating the price of gold aren't likely to change anytime soon.

Few people believe the financial health of the United States and other major countries is stable, and gold demand typically rises in times of economic uncertainty. In particular, folks thinking about buying gold (or more gold) are worried about the debasement of the dollar — and perhaps rightly so.

It's not just the paranoid or wealthy senior citizens driving up the demand — countries like China, Russia, and Saudi Arabia are buying vast quantities of gold, too, for basically the same reasons.

In 2002, economist Ben Bernanke penned a famous speech in which he quipped, "Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press [or, today, its electronic equivalent], that allows it to produce as many U.S. dollars as it wishes at essentially no cost."

By printing more paper dollars, or even threatening to do so, he went on, the United States could devalue its dollar and spark inflation, which is when the dollar doesn't buy as many goods or services. In small doses, Bernanke argued, such a move would combat deflation, another economic problem that causes people to wait and see how low prices will go instead of spending their money.

Critics note that, in part because of this speech, gold prices began rising just after Bernanke became chair of the Federal Reserve in 2005. In late 2008, the government did authorize a major new "printing" of money. (It's more complex than the image of new bills rolling off the presses: Much of the new money exists only in the balance sheets of banks, until it's lent out).

The most pessimistic worry is that the dollar will keep losing value until it has none.

For folks with plenty of extra cash, buying gold is a hedge against economic calamity and inflation. It's something to invest in other than volatile stocks or the real estate market.

For the rest of us, metals may just be a hobby — buying gold or silver coins for fun, in hopes of making a few extra bucks. Of course, getting into that hobby is now more expensive than ever.

Record gold prices can frustrate people of limited means, who are suddenly paying a lot more for Valentine's Day presents and wedding rings. But there can be benefits, too, if you cash in unwanted jewelry with one of the gold-buying shops that have sprung up around the Valley.

Modern-day gold fever also has brought the possibility of shenanigans.

The gold-buying outlets — often just a couple of rooms, an inexpensive gold-testing kit, and a financial backer with a boatload of cash — could easily be taking in stolen goods. Unintentionally, or not.

The shops, which most cities license as secondhand dealers, are regulated by ordinances that are difficult to enforce. The city of Phoenix, which has licensed more than 600 secondhand dealers, deploys just five police officers to verify compliance with the 10-day waiting period that dealers must observe before sending the cashed-in jewelry to companies that melt it down.

Some aspects of the gold craze provide a sense of déjà vu — especially the fear-flavored, right-wing sales pitches. In the 1990s, it was fear of a "new world order." Now it's fear of a liberal president. And always, there's fear of economies imploding and the paper dollar's value falling to zero.

Because the customer base for gold is perceived to be right-wingers, it is hawked by the likes of conservative broadcasters Glenn Beck, Rush Limbaugh, and Gordon Liddy.

Republic Monetary Exchange, for example, advertises heavily on conservative stations KFYI (550 AM) and KKNT (960 AM), the latter of which sometimes dubs itself the "Republic Monetary Exchange Studios." Last year, Republic Monetary sponsored a motorcycle ride to benefit the families of fallen law officers.

On a macro level, no new cases like North American Coin have arisen, but warnings have sounded of boiler-room operations that use high-pressure tactics to overcharge customers. Goldline, the company endorsed by Glenn Beck, has faced such accusations — and one call to Goldline proves critics correct.

When New Times inquired about the price of gold with Goldline, a sales representative suggested buying Swiss 20 franc coins, which contain about one-fifth of an ounce of gold, for $404 apiece. On the same day, about a dozen gold dealers on Web sites such as www.austincoins.com, priced the same coins from $273 to $311.

Whatever a person's political stripe, it's wise to heed the words of experts: Potential gold buyers or sellers should shop around to get the best deal. Those planning a deeper plunge into the purchase of precious metals as an investment ought to become knowledgeable about the game.

Deal with the wrong characters, and you might end up struggling to recoup your losses 20 years from now, like the former customers of Clark and Unkefer.

No one knows why or when gold became humanity's favorite treasure.

Anthropologists cite its gorgeous, warm, shiny-yellow appearance and malleability as reasons that humans — long before civilization — considered it to have intrinsic value. And, of course, the rarity of gold helps make it special. If all the gold mined throughout history were melted down and fashioned into a giant cube, geologists say, it would measure just 66 feet on each side.

Gold's status as a basic, universally accepted form of money means nearly everyone would like to own a pile of it — at least long enough to sell it, anyway. It's a highly liquid commodity, able to be turned into cash faster than nearly anything else.

Greed for gold has destroyed friendships (as depicted in Treasure of the Sierra Madre), and empires (see the Spanish conquest of the Aztec empire).

Both gold and its little sister, silver, indeed have come in handy for people throughout history during times of economic calamity. When currencies fail, as they did during the French Revolution and post-World War I Germany, gold still spends like cash. Governments have a history of debasing their money — ancient Rome's debasement of silver coins is a famous example. When the Roman Empire was healthy, its coinage contained plenty of pure silver; near the end of the Empire, it contained mostly junk metals.

Consider this fact: No "fiat" currency (that is, money declared to be money by a government) has lasted forever. Mike Shedlock, who publishes the popular Global Economic Trend Analysis Web site, wrote in an extensive June 2007 article about money that "government-mandated fiat currency simply does not work in the long run. We have empirical evidence galore — every fiat currency in history has failed, except the present one, which has not failed yet."

Then again, it's also true that all governments in history have failed, except for existing ones. How can anyone prepare for a United States that even closely resembles Germany after WWI? And if such a catastrophe unfolds, will gold get you through? (In this Road Warrior-esque view of total financial collapse, conservatives like Glenn Beck suggest that you'll need guns to keep that gold).

Putting aside the world-gone-to-hell theory for buying gold, there's the more practical reason: making money.

The lead-up to the exorbitant gold prices of today began in 1971, when President Richard Nixon ended a 25-year-old system of trading in gold at the fixed price of $35 an ounce. Gold prices started going up big-time after that and peaked in the record-setting years of 1980 and 1981.

Demand for gold climbed steadily through the 1970s, following Nixon's move and an economic downturn called stagflation, a term used to describe a time of high inflation and unemployment. As gold entered a period of extreme fluctuation in the early 1980s, some people made a boodle — while those who got into the game too late got hosed.

Buyers in the first days of January 1980 could snatch up gold for about $550 to $650. Then, on January 21, the price spiked at $850 an ounce. Yet, by January 31, it had lost a quarter of that value and ended the year below $600.

For the next 25 years, gold prices ranged from about $300 to $450.

No doubt, those kinds of wild fluctuations make many Americans think twice about buying gold at today's price of roughly $1,200 per ounce.

Gold boosters note that the trends are different this time. Gold's big rise in 2006 hasn't descended to the $450 or so seen throughout much of the 1980s and 1990s.

A burning question for gold aficionados is whether the inflated price of gold constitutes a "bubble" similar to the real-estate market's bubble. And, if so, when will that bubble burst?

Despite the fact that the dollar price of gold never has been higher, some gold sellers and so-called experts predict it will keep rising — to double or even triple its current value. Peter Schiff, an economist who warned the public in 2006 of the then-looming recession, predicted this month that gold would be selling for $5,000 or $10,000 an ounce within five to 10 years. He suggests buying gold bullion, like American Eagle coins, and stock in gold-mining operations.

In fact, the price of gold is not as high as it's ever been, when adjusted for inflation. Experts estimate the real price of gold during the high of 1980 was $1,500 to $2,000, maybe more, measured in today's dollars.

Judging by sales of the American Eagle, as tallied by the U.S. Mint, the public's demand for gold is nearly as high as it was in 1986, when the price was much lower. Gold advocates claim that mainstream America hasn't yet caught on to the buying trend, and that it's possible even more people will jump on the gilded bandwagon.

The people often making these claims, gold dealers, plan to make money coming and going: When the market is hot and the price is high, they will make money by selling at a premium over the "spot price," the dollar amount assigned to gold at any given time.

When the market falls and people are desperate to sell before it dives even lower, dealers will rake in cash by buying metals back at less than the spot price.

If you want to buy gold as an investment, you can't do it through the U.S. Mint, which produces the most popular form of bullion, the one-ounce American Eagle. (If you have the cash, you can also buy Fort Knox-style bricks — but, again, not directly from the Mint).

When the Mint began its Eagle-selling program in 1986, officials decided not to set up shop as a government-run retail business, says the Mint's spokesman, Michael White. Instead, bullion is sold to just eight companies in the world, which then re-sell it to retail outlets.

The Mint does sell specially made, blemish-free "proof" coins, such as the American Buffalo, but with a high mark-up. A one-ounce Buffalo proof, for example, in late June was selling for $1,510, about $150 more than gold's spot price.

"We don't sell [proof coins] as an investment," White says. "We say it's a collector's version."

One of the eight companies in the world authorized to buy gold bullion from the U.S. Mint is an outfit in Bridgewater, Massachusetts, called Coins N Things. Though the company still does business with the mom-and-pop-shop name it started with in 1974, it convinced the Mint in January that it was one of the big boys. To join the Mint's exclusive club — which allows the eight companies to buy bullion at a lower wholesale rate than anyone else — Coins N Things had to prove it was capable of handling a huge amount of trade, Paul Thompson, the company's vice president, tells New Times.

Now the firm supplies many of the retail shops in the United States, Canada, Great Britain, and Germany. To avoid competing with its own customers, the shops, Coins N Things doesn't sell directly to the public.

What all this means is that would-be gold buyers have to deal with the retail outlets, which may sell the products for a reasonable premium over gold's spot price — or not.

"We certainly can't dictate to our customers what they sell it for," Thompson says. "However, it is such a competitive market . . . making two or three calls to different people, you should be able to avoid overpaying."

Perhaps the biggest pitfall for would-be buyers is getting talked into buying numismatic (a.k.a. collectible) coins, which are sold at a much higher premium than bullion.

Unscrupulous salespeople shooting for higher commissions often try to steer buyers toward collectibles with fear-based pitches — such as that smaller units of gold (coins like the Swiss 20 franc, for example) will be easier to barter in a post-Apocalyptic world. Another claim is that numismatic coins might be exempt from government confiscation, as they were in 1933 when President Franklin D. Roosevelt banned private ownership of gold bullion.

The Web sites of many gold dealers stress the "privacy" of collectible coin purchases. This is a not-so-sly hint that customers do not have to provide a Social Security number upon selling the coins, but they do upon selling bullion because of the capital-gains tax.

A quick look at Better Business Bureau ratings is always recommended. Monex, for instance, a national boiler-room, gold-selling operation, gets an "F" grade from the BBB.

Many companies, however, are trustworthy. The BBB gives local dealer Richard Smith and his 31-year-old company, Coin and Stamp Gallery at 4216 West Dunlap in Phoenix, an A-plus rating.

Smith met with New Times in a small office at the shop on a recent evening, after the day's business had died down. An off-duty Phoenix cop leaned against a wall next to one of the display counters containing gold and silver coins, eyeing potential customers warily. Coin Gallery's minimum order for gold bullion purchases is 10 ounces — costing more than $12,000 by June's prices.

"Yes, there's a lot of money to be made peddling gold," Smith says.

The problem for consumers is that the retail gold industry is "a vast, unregulated field," says Smith. "There are no special qualifications to get into the business. There are fewer certifications than for cutting poodles' hair. It really becomes a confidence game."

Though Smith, in his late 40s, peppers the conversation with phrases common to the industry — "some people think the dollar is going to toilet paper" — he also pooh-poohs the "end of the world" sales pitch. He's critical of outlets that pitch numismatic coins to would-be investors, noting that the only reason someone should buy them is an interest in history and coins and for their own sake. He's "absolutely" politically neutral, he stresses, because he knows customers come in both red and blue.

"I don't think we're at the mania stage yet," Smith says. "We're not seeing the broad-based selling we saw in the 1970s."

Like Thompson from Coins N Things, Smith wants to believe that day is coming.

Once you've got your hands on gold, you have to figure out where to put it. If you don't store it in your home (where it can be ripped off), you have to trust someone else to hold it for you. A bank safety-deposit box is one choice, but that might not be the safest place if banks lock their doors after any financial holocaust.

Some companies, like Monex, don't always provide customers with their gold right away — they'll store it somewhere for the buyers' convenience. Others promise to sock it away for you in an offshore account.

Don Stott, owner of Colorado Gold in Montrose, Colorado, advises strongly against having others hold your gold. As a former employee of North American Coin and Currency, he knows all too well what can happen.

Stott, 76, started with the Phoenix firm in 1977 during the last big heyday of gold. As he tells it, sales were so good that in February 1980 he took home a $16,000 commission check for one month's work. Yet that was the same month he left the company because of worries it was being mismanaged.

"It was taking longer and longer for people to get their gold," he tells New Times. "I said, 'This doesn't look good to me,' so I just walked out."

He's not sure what happened to about $16 million in gold and silver that customers did not receive when North American collapsed in 1982, a debacle he calls "the biggest scam in the history of Phoenix, just about." Stott has nothing good to say about North American's former principals.

"Sherman Unkefer — he could sell a used toothbrush," Stott sneers. "These guys have a terrible record."

No wonder, then, that Unkefer's name doesn't show up in Arizona Corporation Commission records about Republic Monetary Exchange LLC.

Records show the principal members of Republic include Jim Clark, another Clark company called Clark and Sons Vending, and a California limited partnership, Occidental Resources. The latter doesn't show up in a records search for California businesses.

John Jakubcyzk, Clark's attorney, says the Occidental company is probably the Unkefer link — but adds he's not the one to talk about that. He directs New Times to a man he says is Occidental's lawyer, San Diego attorney Grant Teeple.

New Times already had spoken to Teeple — he's Unkefer's lawyer, and he returned a phone call made to Unkefer's number. Like Clark, Teeple wondered what the upside would be for his client to talk to a reporter. But he stayed on the line long enough to say that Unkefer had no direct ownership of Republic Monetary, even though Unkefer's deceased wife's trust was part-owner.

The name Occidental Resources "doesn't ring a bell," Teeple says, adding that his firm handles lots of corporations as clients.

A former employee of Republic Monetary, Gene Miller, states in court records that Unkefer is Clark's "business partner" and describes how Unkefer took part in a 2009 business meeting to help negotiate a deal to retain Miller.

Clark and Jakubcyzk deny that Sherman Unkefer has any role in the business, other than coming in now and then to give pep talks to the sales crew. (Unkefer's granddaughter, Alexa Unkefer, also works at Republic Monetary as the company's office assistant.)

Jakubcyzk admits that Unkefer's deceased wife's trust played a big role in the company's start-up.

It's unknown whether the late Sharon Unkefer's trust was funded by Sherman Unkefer, or how her trust came to be used by Clark's new company. But Unkefer appears to be doing quite well for himself these days.

After his release from prison in 1998, Unkefer reportedly made a fortune selling prepaid legal services. Now "the Shermanator," as he's known, is into a multi-level marketing business called Xango Juice. He brags on his Web site, www.shermanunkefer.com, that he's earning a six-digit income — monthly.

Meanwhile, the Maricopa County Attorney's Office — representing a list of victims that's dozens of pages long — has been fighting as recently as this year to get the Shermanator to pay $7.1 million in restitution he's owed since 1988.

Unkefer's attorneys argue that the restitution order is no longer valid, though Superior Court Judge John Hannah Jr. ruled in September 2009 that it is.

A hearing on the matter is set for July 14 before the Arizona Court of Appeals.

Sam Walls of Cleburne, Texas, lost $195,573 to the business Clark liquidated in 1993, Sheffield Metals.

"It didn't wipe us out, but you don't like to lose that kind of money," Walls says.

He's thought about buying gold in the past year as prices have gone up, "but I don't know who to trust."

Dr. Enrique Scappatura, a Phoenix thoracic surgeon, bought 50 100-ounce tablets of silver from Sheffield Metals in 1992 with money he'd pulled out of his pension fund.

"They weighed a ton — I said, 'Leave it there,'" Scappatura says. "I trusted him."

Big mistake. He never saw the silver — or his money — when Sheffield went bankrupt. He recently learned that Clark is now the owner of Republic Monetary Exchange, he tells New Times, and plans to confront him "to see if he's got some piece of a conscience left."

Wisely, the good doctor doesn't just want the $25,000 back he paid for the silver — he wants the metal itself, which now goes for nearly four times what he paid.

Clark's lawyer, John Jakubcyzk, says Clark was contemplating giving some money back to Dr. Scappatura and another local victim but hadn't yet made up his mind.

Apparently, no similar offer is being considered for folks who lost big money on Sheffield, like Walls or the rest of the victims.

How much money Republic Monetary Exchange is pulling in for Clark could not be determined. Though the business' Web site mentions nine brokers employed by the company as commissioned salespeople, the business is also somewhat of a family affair: three of Clark's children work there.

Old newspaper articles and court records back up Clark's contention that he didn't profit from the scam. He was initially charged with 99 counts of fraud and other crimes, yet prosecutors let him plead no contest to just two charges of selling securities without a license.

Essentially, Clark mismanaged his company and wound up selling some of his customers' stored metal, or diverting the proceeds of purchases, to put down payments on loans to buy more precious metals. Had the gamble worked, no one would have been the wiser and Clark's business would have profited.

But when the price of silver rose suddenly, too many customers called them to sell their non-existent treasures, and Clark ran out of money to pay them. The company only had $1.2 million in assets (including just $340,000 in gold and silver) when it filed for bankruptcy, which was nearly $6 million less than it owed, court records state.

As noted, the court ordered Clark to pay $1.5 million in restitution for the Sheffield scam — and that was on top of the $3.5 million he was ordered to pay after 100,000 ounces of silver owned by Margaret Viall of California went missing in the North American Coin scandal a decade earlier.

Clark maintains he was the fall guy for the boiler-room bankers who helped bring in customers. Miller, the former Republic Monetary employee, says Clark mentioned the fate of his former victims from time to time.

"I had asked him specifically if he was paying these people back, and he didn't intend to," says Miller, who now helps run a gold-selling company owned by family members in Scottsdale, Desert Gold Exchange. "His attitude was, eff 'em."

Clark felt that after serving seven months in prison and being banned from the business for 10 years, he'd paid his debt to society, Miller says.

He and Desert Gold Exchange (started by his stepson and son-in-law) are now being sued by Republic Monetary Exchange for stealing company secrets, client lists, and about 10 ounces in gold.

But Miller, who denies the allegations, has a new code of ethics since getting busted himself in 2004 for mail fraud.

In the late 1990s, Miller ran a local business called Southwest International Trading Company, which dealt in collectible coins. Miller sold gold and silver coins with a guarantee to buy them back within one year at their original sales price. It was an effective come-on, but one that Miller couldn't sustain after another decline in the price of gold in 2000. To stay afloat, he lent money to some customers who sent him their purchased coins as collateral. But once he received them, Miller and his wife, Grace, sold the coins to pay bills.

After serving 18 months in a federal prison, Miller was ordered to pay back $425,000. Unlike Clark, he says he's made a significant dent in the restitution amount by sacrificing 25 percent of his earnings every month. He claims to have paid back $80,000 of the total.

Ironically, Republic Monetary's strategy in its lawsuit against Desert Gold is to shut down the company, which would end the Millers' main source of income even as Clark refuses to pay back his own victims.

The other side of the gold business, so to speak, is perhaps the most publicly visible one. Anyone driving around town in the past year or two can't help noticing the proliferation of "We Buy Gold" signs on storefronts and street corners.

Some entrepreneurs have added a gold-buying component to existing businesses, resulting in quirky trademark names like "We Buy Gold and Shoe Repair" (in Glendale) and "R&R Barbershop and Jewelry," at 536 East Dunlap Road in Phoenix.

"I have a partner who's a barber," says R&R's owner, Roman Aaron. "It's very dangerous to sit in a room by yourself. With one shop, I kill two birds — I pay less rent, and I have security."

The city of Phoenix, like other Valley municipalities, regulates the industry by making gold buyers obtain secondhand dealer licenses, which can then be yanked if serious irregularities are discovered. Phoenix had 627 such licenses on file as of mid-June, an increase from 2008, when there were 563.

Buyers must hold on to purchased items for 10 days and document all transactions of $100 or more within 24 hours, a less-stringent requirement than for pawnshops, which have to report everything. Any items with serial numbers also must be reported by gold buyers.

Despite the precautions, stolen items frequently end up sold to the buyers, says Phoenix police Sergeant Jeffrey Dick. Four detectives work in the "pawnshop detail" under Dick, going into pawnshops and gold-buying stores daily to make sure they're following the rules.

If a store takes in stolen jewelry, it could be difficult to recover before it's melted down, he says.

Although 48 secondhand dealers were written up for violations in the past 12 months (compared to 43 pawnshops), only two cases resulted in prosecutions.

In one of the two, Chol Kim, owner of D Jewelers at 16456 North 32nd Street, was accused of failing to report four transactions last April that involved gold coins burglarized from a home in Sierra Vista. Kim paid $21,440 for the coins over a three-day period without filling out the required transaction forms, a police report states.

Kim sold the coins to the Coin Gallery for an unknown profit, but then he apparently had a change of heart (or was tipped off to impending police action). Records state that Kim bought the coins back from the Coin Gallery in mid-May for $27,653 and gave them to the burglary victims. Kim's license was suspended for one week, and he was ordered to pay a fine. (Kim says he doesn't want to talk about it).

New Times visited a half-dozen gold-buying shops for this story, obtaining offers from $13 to $17 a gram for 14-carat gold (about 58 percent pure). At the time, the prices represented about 57 percent to 74 percent of the melt value.

Consumer advocates warn that some shops — or the hosts of gold-buying "parties" in private homes — may offer just pennies on the dollar for gold, especially if you're trying to sell something more complicated than a ring, or an object containing mixed metals.

Most of the people who come into "Sell Us Your Gold" on Indian School Road and Goldwater Boulevard in Scottsdale want to get rid of broken jewelry, says the store's youthful owner, Imraan Siddiqi. If someone brings in something really valuable, Siddiqi claims, he'll tell them to sell it on eBay.

The tiny store is little more than a place to stand and a counter with a scale and calculator to help conduct transactions.

Like at other shops, Siddiqi tests the quality of gold he buys by rubbing it on a rectangular brick called an "Arkansas stone" (typically made of novaculite). Drops of nitric acid are applied to the vague smear left behind. If the smear stays a gold color, it's gold.

The weirdest thing anyone has brought in? A dentist in scrubs once tried to sell Siddiqi several gold fillings still embedded in their teeth. Siddiqi asked the man to pry the gold out before accepting them.

"I don't want to play the role of the dentist," Siddiqi says, looking disgusted.

Once the gold is obtained, the next step for gold buyers is to cash it in by melting it down. Many Valley buyers take their stash to NTR Metals at 20830 North 25th Place in Phoenix. The company has 32 locations in the United States.

Compared to professional buyers, who deal with both the public and police inspectors, melters have a straightforward job, says David Williams, the company's regional managing partner. A buyer dumps off a load of jewelry or other items, which are soon turned into hot soup. A glass pipette gets inserted into the soup, and the mix is analyzed for the percentages of gold, silver, and other metals. NTR then cuts a check for 98 percent of the day's spot price for the weight of the metals.

"You don't get much better than that," Williams says firmly.

The whole process takes about 20 minutes. But as with the U.S. Mint, NTR prefers to operate as a wholesale business, which prevents the public from getting that same 98 percent.

For some gold-buying storeowners, though, this stage of the business can be frustrating. It's not just the customers of gold-buying shops who might get ripped off.

"The buck stops with NTR," says Williams. "In many cases, things aren't what they thought they were."

The "sad fact," he says, is that the mints, jewelers, and manufacturers of the world "have been screwing people for years — centuries."

Professional gold buyers sometimes insist that if a piece of jewelry is stamped "18-carat," for instance, that means it must be 18 carats.

"I say, 'I'm sorry, sir, I understand your concern, but somebody who made that piece of jewelry 40 years ago screwed you," Williams says.

Because of the high price of gold, people are melting down items that appear to be valuable — but difficult-to-sell — antiques.

"I've seen beautiful sets of sterling flatware, tea sets — real Americana," he says. "Nobody buys pocket watches anymore. The crap gets melted down."

If a financial meltdown occurs, or the price of gold keeps soaring upward, people may wish they had held on to their spare gold. For sure, the folks who bought gold a few years ago are happy they still own it.

Paul Thompson of Coins N Things remembers chatting with a customer in the late 1990s who had just cashed in his 401(k), sold his house, and put "every penny" into gold and silver.

"He was convinced that the world — the economy as we knew it — would be coming to an end," Thompson says. "I listened to him, but I was kind of hoping for me and my children's sake that he was wrong."

The collapse never came. But with gold at about $300 an ounce back then, "looking back now, he's done quite well."

Time will tell whether those buying gold now, at four times that price, will also do well — or face a personal financial crisis when the market crashes.

As hundreds who bought precious metals from Clark and Unkefer can attest, more than just market forces are at work in this industry. Even seemingly sound companies may be criminally managed, making the game even riskier.

As the ancient Romans would have said: Caveat emptor.

KEEP PHOENIX NEW TIMES FREE... Since we started Phoenix New Times, it has been defined as the free, independent voice of Phoenix, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.