Aluminum Cents Look Legal to Own|
February 03, 2014
Heritage is offering a 1974-D aluminum cent for sale at public auction to be held at the Central States convention this spring, and though the Mint has in the past (1993) claimed that the coin is government property never released into circulation, the factual, documented arguments have a better chance of prevailing.
Questions about the 1974 aluminum cent (which would also apply to its 1975 aluminum cent counterpart) initially came just after the King Farouk specimen of the 1933 $20 gold piece became legal to own.
At the time, the Mint, and the Department of Justice, made it plain that while the Farouk piece is now legal to own, all other 1933 double eagles aren’t. Inevitably, the government’s theories collide with the desire of collectors to acquire rare coins. Legal arguments abound as to potential results.
To consider the crucial issue of why it is probably legal to own an aluminum cent requires an examination into the origin of the coin, its history, and the marshaling of these details to form an opinion. Back in the fall of 1996, I made a formal inquiry under the Freedom of Information Act to the Department of the Treasury for information regarding 1974 and 1975 aluminum cents. (There were aluminum cents minted with the 1974 date, as well as the 1975 date). Some 27 pages of documents, many previously unknown, surfaced.
These included documents from the files of the Office of the Executive Secretariat of the U.S. Mint, as well as office of the Mint historian. The Operations, Policy and Management divisions of the Mint, as well as the Security office of Mint headquarters were also consulted.
In July, 1990, Dr. George E. Hunter, assistant director of the Mint for process and quality control, wrote to an individual (whose name and address was blocked out under FOIA guidelines to insure privacy) that there were 11 of the 1974 aluminum cents that “are still outstanding. The Mint cannot pay a reward for their return: we regard them as our property, illegally issued into circulation.”
Dr. Hunter went on: “we appeal to your sense of justice in returning them to their rightful owner, the U.S. government.” The Mint offered to authenticate the coins, but he added, “if they are illegal, they will be turned over to the U.S. Secret Service for appropriate action.”
Brenda Gatling, the public information officer of the Mint, explained their origins a generation after their creation, in a letter dated Sept. 16, 1993. “In 1973, because of an abnormally sharp increase in the price of copper, the Mint began a study of the possible replacement of copper in the one-cent piece with a lower cost material. As a result, legislation was transmitted to Congress in December of 1973, proposing to grant the Secretary of the Treasury stand by [sic] authority to adopt an aluminum alloy for the one cent piece...”
The House and Senate Banking committees asserted jurisdiction, and “To assist the Committee in their consideration of the proposed legislation, the Department furnished a total of 14 experimental aluminum one-cent pieces dated 1974 to various members and staff of the committees,” Gatling wrote.
“By having the actual samples before them, the Committees were thus able to evaluate the acceptability of aluminum pennies as part of our coinage system,” which they ultimately rejected. A decade later, the zinc cent plated with copper was born out of the same pricing problem that forecast an aluminum solution in 1973.
Gatling concluded the 1993 letter by stating that “While the Committee had a legitimate interest in holding these experimental pieces, most of the aluminum one cent pieces were returned to the Mint and melted in accordance with established procedures.”
She then offered the opinion that “Those still outstanding remain the property of the U.S. government, and may not be circulated, sold, or held in collections.” They were subject, she claimed, to immediate confiscation.
If the “facts” were accurate, that might be the case. But, the FOIA inquiry, once it is examined at greater length, reveals much more –– right down to the names of the congressmen and aides who received specimens –– and show that the Mint appears in fact to have given up control over the specimens and put them out into the public domain.
Dr. Alan J. Goldman prepared a memo that records events of Oct. 18, 1973. Goldman, Mint Director Mary T. Brooks, and deputy director Frank H. MacDonald “presented Deputy [Treasury] Secretary [William E.] Simon with proposed legislation for an aluminum alloy one cent piece. Mr. Simon was given two 1974 one-cent pattern pieces which were struck in aluminum alloy 3033.”
“He retained the coins in order to discuss the matter with Secretary of the Treasury Schultz who must make the final decision, within the Treasury Department, in the submission of legislation to Congress,” Goldman wrote.
Existence of the aluminum cents, conceived in July 1973, and produced in the fall of 1973, was a closely guarded secret. The coins all bore the 1974 date because it was deemed probable that Congress would swiftly approve, and aluminum cents would enter the general circulation pool in the first half of 1974. The patterns or trial strikes, as it were, would thus be indistinguishable.
On Feb. 25, 1974, resident auditor, J.A. (“Jim”) Morgan wrote to the chief of the Mint’s Internal Audit Staff, William Humbert: “these coins must be considered experimental, and as such, must be accounted for by the internal Audit staff.”
Significantly, he noted, “Accounting for coin struck in the Pressroom, even under optimum conditions, is impossible. Counters on the coin presses are inaccurate, and there are too many areas where coins can be lost, either in the machinery itself or the surrounding areas.”
This turns out to be a significant legal admission, because it demonstrates that the Mint never had a handle on the number of coins produced, the number of coins destroyed, or even the number of coins that might have left the Philadelphia Mint.
Morgan then goes on to say that he “concluded that production of a large number of aluminum pennies in the Pressroom would make it probable that some aluminum coins would leave the Mint either by accident, or intent.”
Goldman was consulted, and “agrees [that] accounting for all of these coins would be impossible.” The production run itself was slated to run for “40 straight hours” and it was suggested that a five person committee split the time with representatives from the office of production, office of technology, and internal audit.
Auditor Humbert then wrote to Deputy Mint Director Frank MacDonald on March 8, 1974, that he shared Morgan’s concern “about not being able to fully account for these coins” and made specific references to what must have been oral reports about “various possibilities such as blanks getting hung up in the equipment and later coming out with regular coins, experimental coins being lost under the equipment, etc.”
Because of the proposed “two-day round-the-clock basis,” he suggested production take place on a weekend and that at least two members per shift be provided. In addition to George Ambrose, Alan Goldman, Sperling, Morgan and M. Shreeve, he thought Gus Albino would make a good addition.
Between October 17, 1973, and March 29, 1974, a total of 1,441,039 aluminum coins were minted, according to Humbert’s report to MacDonald dated June 2, 1974. Destruction of “all but 59 of these coins was completed on April 2, 1974.”
Receipts for 36 of the coins were charged to MacDonald, 21 to Dr. Goldman and two to Seymour Rosenbaum “on a receipt obtained by Office of Technology staff.”
Humbert next reports that production again began on April 12 and between then and May 30, an additional 130,128 coins were struck. Some were immediately rolled out or otherwise destroyed, because “During the period April 12- June 4, 1974, 130,061 of these coins were destroyed. The balance of 67 coins has been retained by the Office of Technology.”
Of these, “65 [are] in the safe at the Philadelphia Mint and two are charged to Dr. Goldman. Of these, three charged to Goldman’s office were not accounted for, and five from the Office of Technology safe were also missing. A total of 118 were accounted for, five in the land of the missing.
“The records show that 12 persons have possession of 22 of the coins that are charged to you,” Humbert wrote to MacDonald. “I recommend that a recovery effort be made to avoid possible future questions concerning their disposition.
“Dr. Goldman claims that you and he gave three coins that are missing from his office to Mr. Simon for Secretary Schultz. No explanation has been given for five coins that are missing from the Office of Technology safe at the Mint.” The Oct. 23, 1973, memo shows, however, that only two examples were given to Deputy Secretary William E. Simon.
Significantly, a June 19, 1974, memo showing “disposition of aluminum pennies charged to F.H. MacDonald,” receipted from the director’s office, showed 14 on hand, and 22 in the possession of others. They included: (1) Senator William Hathaway, D-Maine. (1 coin), chair of the Ad Hoc Senate Minting & Coinage subcommittee; (2 and 3) Sen. Robert Taft, R-Ohio, ranking minority member of the coinage subcommittee (2 coins); (4 and 5) Jim Clawson , deputy assistant secretary of the Treasury (2 coins), (6) Senator Joseph Biden, D-Del., who in 2014 is vice president of the United States.
(The other member of the coinage subcommittee, 2 coins); (7 & 8) Mint Director Mary T. Brooks; (9-15) Rep. Wright Patman “House Banking and Urban Affairs Committee,” (16 & 17) Rep. Tom Steed, D-Okla., chair of the House Appropriations Committee; (18) Frank Rhea; (19) Betty Higby, Superintendent of the Denver Mint, (20) Seymour Rosenbaum, given to Nick Theodore of the Philadelphia Mint (verified by Jim Morgan on June 19, 1974), and (21) the Mint lab, one coin.
In addition, (22-24) Bill Simon received three examples.
Even this doesn’t account for all of the coins, however. (25) Charles B. (“Chuck”) Holstein, a staff member of the House Banking committee carried an example around in his wallet and finally donated it to the Smithsonian collection. (26) Orman Fink, a longtime GOP staffer, also had one.
While this was taking place, another event was going on on Capitol Hill – a hearing held March 27, 1974, in which the aluminum cent played a key part.
By July 5, 1974, (27-31) Humbert again sent a memo to MacDonald, this time concerning the five missing aluminum cents from the Office of Technology. “Mr. Shreeve made another search for the coins and found that four of them were mixed in with a bag of blanks in the Office of Technology safe in Philadelphia.”
That would seemingly leave one unaccounted for, but Humbert then reported that (32-34) “three additional coins were subsequently found lodged in the coin press when it was dismantled for servicing. These are now in the possession of Mr. Driscoll, Philadelphia Security Officer.”
By March 12, 1975, MacDonald wrote to Deputy Assistant Secretary Clawson in a typewritten memo bearing his signed initials (FHM), “Per our conversation earlier today relative to the ‘‘other’ penny retrieval program, [Mint Director] Brooks agrees that it would be best to have the Secret Service contact those who still have aluminum pennies in their possession.”
That evidently included (35-36) Clawson himself.
As 1975 began, the Mint was busy producing 1975-dated aluminum cent patterns. On Jan. 27, 1975, of the 36 coins on the June 19, 1974 list, Humbert reported to MacDonald (in a memo dated April 9, 1975) that “14 of these coins were obtained from Reba Rhyne and destroyed.” Rhyne worked for Mint Director Brooks in her office.
Rhyne also provided “a list showing the location of the remaining 22 coins. The list showed that Betty Higby, Frank Rhea, and Seymour Rosenbaum and the Bureau Laboratory each had one coin. These were destroyed in Denver, Philadelphia and Washington with internal auditors witnessing the destruction.” No mention or count is made of the Driscoll specimens, which would leave 18 or 21 unaccounted for (the 14 coins destroyed plus the Mint and Mint employee specimens total 18, from 36 equals 18, plus the three).
Humbert then related that of the 23 coins charged to Goldman in the June 1974 memo and on receipt forms dated Feb. 7 and April 18, 1974, 18 were destroyed on Jan. 27, 1975. That left five coins in question, “three could not be located”.
The memo continues with Goldman’s recollection of having delivered three to “Mr. Simon for Secretary Schultz” [sic], even though Goldman’s memo of Oct. 23 said but two pieces were given.
Then, Stephanie Dick “gave us 2 aluminum cents from your safe for destruction. These were mounted on black cardboard by Debbie (Duke) Swan for last year’s hearings and were destroyed.” Debbie Duke, who married Lance Swann while he handled the GSA Carson City silver dollar program, was a trusted Mint employee in the marketing program.
According to Humbert, “The Striking and Destruction records at the Philadelphia Mint showed that the Office of Technology safe should have contained 51 aluminum cents dated 1974 and only 12 coins dated 1975. In other words there was one extra 1974 coin and a shortage of 2 coins dated 1975. There was no record of any 1975 aluminum cents being sent to Washington.”
The memo concludes that “Jim Morgan expresses the belief that some aluminum cents may still be hung up in the Philadelphia presses and may show up when the presses are disassembled or moved. Mr. [Frank] Breen says that this is not likely to happen for many years.”
On April 16, 1975, Humbert wrote to Morgan at Philadelphia asking that he revise the destruction form “to show that 14 instead of 16 of the aluminum cents destroyed were originally obtained from the director’s office, and all were assumed to be part of the total charged to Mr. MacDonald.” The reason is that “we were subsequently informed that two (mounted on black cardboard)” were originally charged to Dr. Goldman.
Five days later, newspaper columnist Jack Anderson broke the story in his “Washington Merry-Go-round” syndicated column that “some distinguished members of Congress may have sticky fingers” and mentioned the 14 missing aluminum cent coins. The article quoted Mrs. Brooks: "'I’m not worried,' she told us sweetly. 'The coins will show up eventually. I’m sure of that.'"
Anderson’s article created a scandal, and some backtracking. MacDonald wrote a July 15 memo recalling the Oct. 18, 1973, meeting with Deputy Secretary Simon and the two coins left with him. He further dictated a memo about how, on Dec. 7, 1973 he and Mrs. Brooks “met with Congressman Patman and several committee staff members in the Congressman’s office to discuss the proposed legislation ... We left seven sample coins for the Committee’s use in connection with the proposed legislation.”
His typewriter was busy that day, for a third memo recited the meeting that he had with “Senators Hathaway, Taft and Biden on December 3, 4 and 5, 1973” with an allocation of one for Hathaway and two aluminum cents for the other Senators.
By July 17, 1975, the matter had clearly gotten out of hand. A meeting with two agents of the Federal Bureau of Investigation was held. They were, MacDonald’s contemporaneous memo recites, “collecting facts associated with the destruction or location of 21 existing 1974-dated aluminum pennies.”
The FBI was “given the names of Congressman Steed, James B. Clawson, Jim Hogue as being recipients of coins.” He reports that prior to the meeting, “we received one aluminum penny from Oram [sic] Fink, House Banking & Currency Committee, one from Tricia Wilson (James B. Clawson)” together with “two 70/30 brass 1974-dated pennies.” These went to Stephanie Dick for delivery to Humber for reconciliation and destruction.
The Mint’s next approach was to try and convince Congress to restrike the aluminum cents in quantity to kill their market value. MacDonald wrote to the file, with copies to Deputy Secretary Clawson, Mint Director Brooks, Mint general counsel Miklos (“Mike”) Lonkay and two others, “I feel that producing these coins now would be overkill’ even though he said that “Senator Proxmire was agreeable to handing legislation to stamp some number of these 1974-dated aluminum pennies.”
Significantly, Assistant Secretary David MacDonald (no relation) asked Frank MacDonald to “relate to him my conversation with Gary Stark of the U.S. Attorney’s office, which took place the previous evening, Sept. 24.
“I told him that Stark had read me a rough draft of a memorandum the tone of which had been agreed to by U.S. attorney Earl Silbert. It said in effect that the Justice Department was not going to pursue a course of criminal prosecution in the case of the aluminum pennies.”
Specifically, “they felt that the informal manner in which these ‘‘gifts’ were distributed would make it very difficult to prosecute and would be a misuse of the grand jury system. They would, though, leave open a course of civil action, but they did not state that they would initiate civil action.”
On Feb. 19, 1976, Acting Director of the Mint MacDonald wrote to Superintendent Nicholas Theodore, “Please have your die shop prepare a set of faceless cent dies. The dies will be used to strike twelve (12) aluminum blanks having the dimensions of the cent.” Strict accountability was required.
The next to the last memo in the Mint’s file, dated Aug. 18, 1976, lists a total of 16 coins, of which 11 are outstanding under MacDonald, three to Dr. Goldman, and two to M. Shreeve (with the note W. Smith replaced M. Shreeve). The Shreeve coins were all dated 1975, the rest 1974).
Evidently, there was some movement from members of Congress, for on July 24, 1978, General Engineer Frank H. MacDonald memoed the new Mint director, Stella B. Hackel, that “the FBI had been informed that five of the ‘missing’ aluminum pennies had recently been returned to the Mint from people in Congress.” Humbert was asked to note the recent activity in the file and Agent Kirby Majors of the FBI was advised to talk to the Mint director or Dr. Goldman “for further information.”
That’s the government’s paper trail.
It is obvious that they never did have a handle on how many aluminum were produced, who had them, who kept them, where they went and who acquired them. They differ from many other coins in that they look like coins but aren’t. Not legal tender. Just a pattern.
Collectors’ chance to own this history comes up at Central States in the Heritage auction sale.
More Coin Collecting Resources:
• Strike it rich with this U.S. coins value pack.
• Collect specialized issues? Get the new Standard Catalog of World Paper Money value pack!
• Build an impressive collection with Coin Collecting 101.
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On March 5, 2014 Mary C.
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