GOLD COIN PUSHER: Director Jones Beats Dead Horse Again & Forces Vote

At the POHOA Regular Board Meeting on May 9, 2023, Director Jones somehow managed to get his favorite topic onto the agenda again. The agenda was misleading as it referred to “CD/Money Market”, but when President Ballweber proceeded with New Business after the approval of the agenda, Director Jones immediately began pushing for POHOA to put its reserves into precious metals, and in particular, gold coins.

He opened with an acknowledgement that he’s been pushing us to move our reserves into gold coins since November (and again in December at the Annual Meeting, and again in January at the Regular Board Meeting, and yet again at the March Regular Board Meeting – making this the 5th time he’s managed to make this an agenda item). He said out loud he wanted to “continue his proposal”. This time, however, he couched his advocacy as a “sound way to set up any investment portfolio”.

He then suggested that had POHOA followed his advice back then, we would have realized a 15% gain annualized to 30%. He then jumped to a rationalization that the Chinese have now tied their currency to gold without the use of exchanges.

But, once again, Director Jones, who has now since signed the Conflict of Interest Policy for POHOA Directors, started discussing how business at “the shop” (where he works) is “astronomical”. He said that customers who are “fairly wealthy” or “know financial history” are putting their money into precious metals. But, then we learned that Director Jones advocacy occurred on May 8, a day prior to the meeting – where he now acknowledges that he was “unsuccessful” in convincing them of going along with his plans.

But, this is where it gets procedurally curious: Director Jones asked President Ballweber whether he should make his attempt a motion for a vote. Again, the agenda item was for “CD/Money Market”, but somehow after a discussion in private the day before the meeting where Director Jones was apparently rebuffed, he managed to push this topic in front of all other topics and get a vote on this. This is a stark contrast to meetings in 2022 when Director Mowery attempted to get a vote on several topics (compliance with HB22-1137, mowing the backlots, etc), but was told by President Ballweber that no discussion could occur nor could any votes be taken because these items were not on the agenda. This is a clear break from a consistent approach to what occurs at Board Meetings. If anything, the agenda should have been amended to include this last-minute item from Director Jones, an obvious procedural or Robert’s Rules error.

Director Ballweber proceeded to ask about what 5-10% (what Director Jones was advocating) calculated to. The response from Director Jones, the Treasurer, was striking. He claimed that POHOA has $100,000, and therefore “up to 10%” would calculate to approximately $10,000.

The problem with this calculation is that Director Jones is presuming that the total sum of all monies POHOA has are available as an “investment portfolio”, which is disturbing. If we review the latest annual financial document from POHOA, the numbers are considerably different.

According to the POHOA Balance Sheet, the total Assets of POHOA are $79,203.42, which is considerably less than $100,000. And, while Director Jones envisions himself as a financial portfolio wizard, he ignores the fact that the Association had an income of approximately $54k, and a claim of $16k in “income” (although POHOA is a Non-Profit Corporation). Yet, in spite of that appearance of excess funds, when we observe the Balance Sheet, we see that the Net Cash Increase for 2022 was only $7,158.26.

In other words, POHOA began 2022 with Cash Reserves of $70,226.12, and ended the year with $77,384.38. Again, this does not mean Director Jones, who is the Treasurer, has $100,000 in his “investment portfolio”, unless, of course, he’s rounding up to the nearest 6-figure number to then begin applying his 5-10% of “our funds” to his calculation of $10,000. In reality, $10k is more like 13% of our Cash Reserves.

But, then he fine-tuned his investment advice to 3 one-ounce gold coins, which he estimated to be purchased for “a little less than $6600”. I found that curious, so after the meeting I looked up the price of gold on May 9, which was $2,042.90 per ounce.

By that math, the purchase would be more like $6129, not $6600. But, Director Jones doesn’t just work at a coin shop, he answers the phone at The Corner Coin & Jewelry on East Mulberry in Fort Collins. If you take the time to call his competitors, they explain that if they get a gold coin in the shop, it usually sells back out within an hour or so. So, regardless of the price the rest of us would look up online, the price is actually quite variable – and often at the whim of a small shop-owner.

When I contacted some of the other shops in the area, I found that some said that you would pay a 5-7% premium on gold coins, while others might charge a flat fee – if the purchase was significantly larger. In general, fees ranged between $125-300 per transaction. This means that if POHOA were to purchase gold coins, in order to realize the 15% return Director Jones is promising, it would have to be above and beyond the cost of purchasing.

But Director Jones, in his sales pitch prior to a Board vote, claimed that “in the last few years, on average, it’s been 10% a year”. But, that’s not actually the case. If we go back 3 years, the spot price of gold is simply at the same peak. And, we can go back 10 years, and basically, the price of gold has simply gone up and down, hitting this ceiling nearly $2,000 per ounce several times. It’s not a perpetual rise, and it most certainly is not 10% annually for any extended period. This statement may seem somewhat innocuous, but when we examine the Colorado Commodity Act, it may very well lead into a situation where we have a Treasurer acting as a Financial Advisor masquerading as an unlicensed Commodity trader who may not be entirely exempt from regulations described in the law!

But wait, there’s more! When dealing in such “investment” vehicles, there is sometimes also a “cost” when you need to liquidate the “investment”. And, this is where it might be a good idea to look at reviews. Well, the shop Director Jones works at has some feedback that is concerning.

So, presuming our Treasurer is not going to go pay a premium at some other store and somehow give us a “deal” while “investing” in gold coins from his store (which calls into question the plain written language of our Conflicts of Interest Policy), there’s a legitimate question about who we are then doing business with. And, given multiple reviews noting a problem with this shop and diversity, combined with Director Jones openly courting Qanon and sources that literally attack diversity (as noted here), we have to be careful about this “investment”, and whether someone else at POHOA (particularly anyone who is not an “old white male”) in the future may have to go deal with this shop in order to get our “profits” out of this “investment”.

So, how do we collect our “profits” or “returns”?

We have to go haggle with a shop employee or owner, and the price is literally (particularly with gold), a matter of what they have in inventory, and the overall trend in price. When it’s going up, they’ll pay a premium. When it’s going down, they will tell you your investment isn’t quite as valuable as you think it is. Not quite the promise of big numbers like 15-30% returns (annually, no less), that Director Jones is trying to sell us 5 meetings in a row.

Director Tunna spoke next, and acknowledged “strong opposition” at the Annual Meeting in December, and therefore said he would not vote against such a clearly stated opinion of nearly all in attendance at the meeting.

Director Jones response: He acknowledged that several homeowners spoke up, but he labeled it as “indicative of the propaganda the U.S. Government puts out”. Director Jones, who advocates on behalf of Qanon, which is an anti-government movement at the heart of the January 6th Insurrection for which many people are going to jail, then went a step further. “People who are not wealthy . . . there is a reason they are not wealthy.” You see, the “poors” just aren’t as smart.

We weren’t done yet. Director Jones said that these poor people who don’t know “financial history” (and he knows “financial history better than anyone I’ve ever met” – in his own words!) are just too stupid to invest in gold. If you are not as smart as him, well, that’s on you and the reason why you are poor! No wonder people leave such Reviews on sites like Google!

But, then Director Jones pushes his advocacy over the proverbial Rubicon, and posits the interpretation that the Treasurer’s job is to act as a Financial Advisor to the Association as though our money is an Investment Portfolio (including money that isn’t Reserves, but literally part of the Annual Budget!). He claimed that had POHOA invested all its money in 2004 (which would have been the Developer’s seed money, but anyways) the way he is advising now (gold coins), that $6000 would be worth $30,000 today!

So, I contacted the Colorado State Securities Division to find out whether or not giving financial advice in this manner was something that was regulated in Colorado. I spoke with the Deputy Director who informed me that they have seen this pattern before – where Directors at HOAs who are tuned into far-right wing news sources and conspiracy theory sources (such as Qanon) are advising people to buy precious metals. The problem is, precious metals are not considered Securities, which are regulated. This, in effect, is a loophole that invites the potential of fraud and mismanagement – because there is no licensing, and therefore no training. And, perhaps few, if any boundaries.

The next rabbit-hole on this journey, according to this office, is the Colorado Commodity Code, which is CRS Title 11 Article 53 Sections 101 through 111. Section 102 defines gold coins as a commodity that falls under this jurisdiction as:

“(4) “Commodity” means, except as otherwise specified by the commissioner by rule, regulation, or order, any agricultural, grain, or livestock product or by-product, any metal or mineral (including a precious metal as defined in subsection (13) of this section), any gem or gemstone (whether characterized as precious, semi-precious, or otherwise), any foreign currency, and all other goods, articles, products, or items of any kind. The term “commodity” shall not include:

(a) A numismatic coin whose fair market value is at least fifteen percent higher than the value of the metal it contains;“

Subsection 13 referenced above says:

“(13) “Precious metal” means the following in either coin, bullion, or other form: (b) Gold;“

Paragraph 5 appears to indicate that the transaction Director Jones is attempting to push us into is covered by this area of Colorado Statutes:

(5) “Commodity contract” means any account, agreement, or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract, or otherwise. A commodity contract shall not include any contract or agreement which requires, and under which the purchaser receives, within twenty-eight calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement.

So, the part of the transaction not disclosed in Director Jones proposal is not just the physical delivery, but also the storage of these gold coins he wants us to use for an investment purpose. And, this is where those of us who aren’t “wealthy” and don’t have deep knowledge of “financial history” have to start asking basic questions. As it turns out, in most cases, the “investor” generally does not take physical possession of said coins. Instead, they get a piece of paper stating that they own coins stored in a secure vault, not tremendously different than old-school banks.

In Colorado, under the Colorado Commodity Act, however, this apparently loophole isn’t entirely unregulated. In fact, there’s some rather strict requirements in Section 105:

“(2) For the purposes of paragraph (b) of subsection (1) of this section, a “qualified seller” is a person who:

(a) Is a seller of precious metals and has a tangible net worth of at least five million dollars (or has an affiliate who has unconditionally guaranteed the obligations and liabilities of the seller, and the affiliate has a tangible net worth of at least five million dollars);

(b) Has stored precious metals with one or more depositories on behalf of customers for at least the previous three years;

(c) Prior to any offer, and annually thereafter, files with the commissioner a sworn notice of intent to act as a qualified seller under paragraph (b) of subsection (1) of this section, containing:

(I) The seller’s name and address, names of its directors, officers, controlling shareholders, partners, principals, and other controlling persons;

(II) The address of its principal place of business, state and date of incorporation or organization, and the name and address of the seller’s registered agent in this state;

(III) A statement that the seller (or a person affiliated with the seller who has unconditionally guaranteed the obligations and liabilities of the seller) has a tangible net worth of at least five million dollars;

(IV) The name and address of the depository or depositories that the seller intends to use, and the name and address of each and every depository where the seller has stored precious metals on behalf of customers for the previous three years;

(V) Financial statements for the seller (or the person affiliated with the seller who has guaranteed the obligations and liabilities of the seller) for the past three years, including balance sheet and income statements which have been audited by an independent certified public accountant, together with the accountant’s report;

(VI) A statement describing the details of all civil, criminal, or administrative proceedings currently pending or adversely resolved against the seller or its directors, officers, controlling shareholders, partners, principals, or other controlling persons during the past ten years including:

(A) Civil litigation and administrative proceedings involving securities or commodities law violations, or fraud;

(B) Criminal proceedings;

(C) Denials, suspensions, or revocations of securities or commodities licenses or registrations;

(D) Suspensions or expulsions from membership in, or association with, self-regulatory organizations registered under the “Securities Exchange Act of 1934” or the commodity exchange act; or

(E) A statement that there were no such proceedings;

(d) Notifies the commissioner within fifteen days of any material changes in the information provided in the notice of intent; and

(e) Annually furnishes to each purchaser for whom the seller is then storing precious metals, and to the commissioner, a report by an independent certified public accountant of the accountant’s examination of the seller’s precious metals storage program.“

Now, it would be one thing if Director Jones was recommending this “investment” from a company meeting these requirements. But, he’s not. He’s saying that he is the expert, he’s an expert because he works at this shop next to the 7-11 in Old Town, and he’s just gonna take our money and buy these coins (above the spot price, with someone getting the proceeds – maybe him), and then “delivery” is left completely undefined – which is a key requirement of the law! See Paragraph 2(c) above!

If the intent is for Director Jones to take physical possession on our behalf, we are literally not meeting the storage requirements in the law. And, while the shop on Remington may qualify legitimately, Director Jones did not come to the meeting with evidence or documentation, and certainly didn’t seem knowledgable on this subject prior to making a motion that we take such actions. He was asking the Board to take a leap of faith that all these legal requirements are met, and if not – then what?

But what may have crossed the line in this situation is the fact that you cannot make false statements while “selling” such investments. And, when Director Jones claims that in recent years (plural), the rate of return has been 10% annually, the case could be made that it is factually untrue.

It doesn’t take a “wealthy” person who knows “financial history” to see that no such perpetual upward trend exists, or that gains of 10% annually may have only occurred as a result for a short period (2019-2020) due to the unusual circumstance of a Pandemic and crazy election cycle. Those predicting doom and gloom preyed upon scared investors, and if you had access to precious metals, it was the time to make bank and profit from the situation. Note that Director Jones, in all of his advocacy, relies upon the complete collapse of all banks (not just a few), the US Currency (if not all currencies), and some giant collapse of our society. He’s selling panic, not sound investment advice. And, if there are false statements and he’s not physically delivering these coins in 28 days, he may not qualify for the exemption he relies upon to avoid compliance with the rest of laws in CRS 11-53-101 et. al.

The good news is that after Director Tunna raised the issue of the will of the homeowners, Director Flanary actually pointed out that had the money been invested in a CD or Money Market Account, which is traditionally far safer and insured by the FDIC (which Director Jones has openly ridiculed at prior meetings), would likely have appreciated in a similar manner. In fact, Director Jones admitted that it probably would have appreciated at a rate of approximately 400% since 2004 vs. the 500% he claimed if we had put it all in Gold.

So, why operate outside the boundaries of normal financial safety and risk-management for incrementally more money over decades?

Director Tunna then made the astute observation that we are an HOA, not an Investment House, to which Director Jones, who is our Treasurer, attempted to justify his proposed motion by claiming that as Treasurer, it is his “responsibility to grow our assets”. That’s an odd perception of fiduciary duty, when his description of “assets” includes the bank accounts used for the day-to-day business of the association, not just the reserves which are supposed to be kept separate and distinct in different accounts.

The problem with Director Jones’ theory about the duties of the Treasurer is that no such thing is described in the Bylaws, which is obliged to follow.

Specifically, this section gives no such duty, responsibility, or authority for an OFFICER (Treasurer is an Officer position, not a rank of a Director) to act as a financial consultant, to use association funds to invest in commodities (or securities), or to engage in the behavior that is an apparent conflict of interest seeing as he is frequently intermingling his experience at the coin shop where he works.

While it is a good thing that Director Flanary voted against this measure along with Director Tunna, it is one of the first times we had seen a break in the voting alliance. And, the reasons stated by Director Flanary are merely political – he heard many people opposed to the concept of buying gold coins. But, at no time did anyone bother to look up the regulations, requirements, or even challenge the appropriateness of Director Jones advocating such an “investment” when he himself may personally profit or have a personal interest in the transaction (making a profit for his employer).

When I discussed this with the Deputy Director at the Colorado Securities Division, he said there were a huge number of red flags here – for which his office was likely not able to take any action. But, he said that we should probably seek legal advice if we continue to see this behavior from our Directors.

I think it is well past time for us to put this to rest with a legal review (we get a free 1/2 hour each month with Moeller Graf) of at least the basic concept, and that we also have the HOA Attorney review what has occurred as it relates to our Conflict of Interest Policy.

Whether homeowners will be apathetic or take interest is to be seen, but given the fact that literally not one single homeowner besides former Director Gloria Jones (spouse of Director Clay Jones) physically attended the meeting (I attended remotely via cell phone), it appears that we do not have homeowners who are willing or able to defend against us making such mistake that may include legal consequences and costs. Not to mention financial loss if the “investment” reduces in value or disappears.

The best I can do, particularly when I was forced to resign under threat of being banned for 3 years, is document and make such information available to the community. Well, that and advocate that homeowners discuss this with Directors Tunna and Flanary, who are the only firewall against such reckless financial decisions.