Real Deal: The Case of the Scrap Scam

BY KATE PETERSON

Gold buying – actually, gold, silver, platinum, diamonds, gemstones, and even the occasional “no-clue-what-it-is” buying – had paid off handsomely for Glenn Schwartz and his store, Falls Diamonds and Fine Jewelry store, over the past eight years. When times were toughest, his ability to keep scrap metal flowing to his refiner, and interesting used jewelry to his dealer friends was often all he had standing between himself and bounced payroll checks.

Glenn saw the trend approaching shortly before the whole idea of buying off the street became popular, and made some smart decisions, both in terms of marketing and operations. He knew that as more and more businesses in his Midwest city got into the game, customers could get easily confused and would look to the store they believed to be most knowledgeable and trustworthy when it came time to sell. He also recognized that sellers were also buyers, and made it a firm policy that every transaction would be handled with the utmost respect, and with an eye toward cultivating the client for the long term.

In recent years, the volume of buys at Falls had slowed, much like it had throughout the industry. Glenn was delighted to see though that his sales were growing at a comfortable pace, and that the quality of the transactions was improving as well. Falls was becoming one of the “go-to” places in town for clients looking to evaluate and liquidate estate jewelry, and for women looking to update their jewelry wardrobes.

In early February, Glenn ran one of his highly effective “turn the jewelry you have into the jewelry you want” campaigns in local media, offering a bonus on the amount normally paid for old jewelry when the customer used the proceeds from the sale toward a new piece from the store. The day the ad broke, Glenn stepped out of his office to see Angie Marado, one of his most senior salespeople, working with a woman he did not know by name, but recognized as a member of his church. Angie was working through a substantial pile of old jewelry – mostly scrap – sorting pieces according to metal type, evaluating them and pricing them for the customer. The customer was happy with the offer Angie made, and as Glenn’s ad suggested, she used the proceeds from her sale to buy herself a new watch.

Later that afternoon, Glenn looked in his repair box and saw a job envelope with Angie’s name on it. Inside the envelope was an unusual looking silver bracelet, with instructions to size it down from 8” to 6 ¾.” Curious, Glenn went out to ask Angie about the bracelet and where she got it.

Angie told him that it was part of the lot she took in from the customer earlier in the day. She said that she’d initially put the bracelet in the “no value pile,” since it didn’t appear to be marked, but then she tested it again after the customer left and determined that it was, in fact, silver.

Glenn was appalled that Angie saw nothing wrong with her action, and that she had no intention of either correcting her mistake with the customer or paying for the bracelet. After regaining his composure, he pulled out a copy of Falls’ clearly detailed policy for customer buys, and reviewed it with Angie line by line. Angie told Glenn that while she knew he had written a policy for buys, she had not actually seen it before that day. She apologized, assuring Glenn that she had never done anything like that before, and promised that it would not happen again. Still, Glenn couldn’t help but point out to Angie that he would have serious concerns about her judgment and ethics going forward.

As Glenn was driving home that night, he thought about the fact that Angie had been with the store for over 13 years, and wrote $750,000 in volume last year. He wondered whether she was an honest employee who just made a bad judgment call or whether he had a far bigger problem than he’d realized.