Standing up to a legal challenge

Ben Popken and Meg Marco of The Consumerist blog haven't let a lawsuit stop them from investigating Cash4Gold.com, a Florida company that promoted its scrap-gold-buying business in a Super Bowl ad featuring rapper MC Hammer. Their report says:

We believe citizens, consumers, and employees should be able to exercise their free-speech rights online – and journalists should be able to report on those efforts – without fear of intimidation.

Today’s Tip: Make sure your story can withstand legal challenge by triple-checking your facts, and have contentious stories reviewed by your lawyer before publication.

Ben and Meg report that they talked with numerous sources including former employees, customers, the Better Business Bureau, the Pompano Beach fire department and the U.S. Postal Service. They also researched Web sites, legal documents, complaints to the Florida Attorney General and public records, providing links to much of what they found. They also detail their unsuccessful efforts to get an interview with the company’s CEO.

In addition, The Consumerist, which is a scion of the publisher of Consumer Reports, indicates it did original research using “Consumer Reports’ ‘mystery shoppers’ – the nationwide team of anonymous consumers who help buy the gear that our parent company tests. The mystery shoppers sent 24 identical gold pendants and chains to Cash4Gold and some of its national competitors. The necklaces were purchased for $175 each. We calculated their 'melt value' – meaning how much the raw gold was worth – as about $70 each, based on the market price for gold when the necklaces were received by the companies.”

What were the results?

Cash4Gold sent back checks ranging from $7.60 to $12.72 (or 11% to 18% of melt value), the lowest amounts of any firm. But others weren't far behind: GoldKit offered $7.81 to $20.59, and GoldPaq, $8.22 to $13.11. Each of those deals was worse than what our mystery shoppers could get at local jewelers and pawn shops, which offered anywhere from $25 to $50. The results reinforce advice we've offered before, which is that consumers should not use these highly marketed services because the payments they offer are too low.