COLUMN ONE : Pawnshops Puttin’ On the Ritz : Upscale shops offer quick money for high-rollers who can’t quite keep up with their images. Instead of the shabby stores of the past, brokers run boutiques that trade in Ferraris and fine art.
Do you dump the Renoir or give up the Bentley?
Sam Gonen sees people torn by this type of decision. They are the elite of Beverly Hills--actors, producers, big tycoons. They have an image to maintain, yet they are squeezed. They can’t quite keep up with the Joneses.
At Gonen’s pawnshop, they solve pressing cash-flow problems by borrowing on their Tiffany lamps, Cartier bracelets or luxury cars. There is never the fuss of a loan application, or a fear of the deal making the tabloids.
“We take Mercedes, Porsches . . . a lot of Rolls-Royces,” Gonen said, gesturing across a display floor shared by a cherry-red Ferrari and two concert grand pianos, each worth more than $80,000. Gonen led the way to a vault where a gleaming Oscar--circa 1940--stood next to a box crammed with $150,000 in Rolex watches. The Rolexes, Gonen said, are just one more part of the image game--flaunted during flush times, hocked when the deals and clients cease to materialize.
“If you’re in the business of selling yourself,” he said, “you have to wear a gold ring. You have to have a Rolex. You have to have a nice sports car. And sometimes, if business is not hot, these are the items you’re going to bring in for pawn. . . . There’s not a day that you don’t see somebody famous.”
Gonen won’t name names, but he will say this: His shop--Collateral Lender, which opened five years ago--is part of a trend toward elite pawnshops that first emerged in the economic doldrums of the late 1980s. The number of licensed pawnbrokers in Beverly Hills has doubled to 10 in five years. That rise has been accompanied by a similar increase, from about 60 to 110, in adjoining Los Angeles.
People who once associated pawnshops with usury, con artists and stolen merchandise are rethinking that attitude, in part because the sluggish economy has added urgency to their need for cash. Trade groups and law enforcement agencies have helped shape new laws designed to protect the consumer. New pawnbrokers now must post bonds to assure their solvency, and borrowers who trade collateral for money must also be thumb-printed. One of today’s largest pawn brokerage houses--Cash America International Inc., of Ft. Worth--is even traded on the New York Stock Exchange.
“People think of an old guy with a cigar, and thieves waiting in line--that’s the old idea of a pawnshop,” said Los Angeles Police Detective Billy Heinlein, who heads a seven-member pawnshop detail aimed at curtailing the traffic in stolen goods. “But that’s not the way it is.”
Certainly, there are still crooks and shady deals. Ill-gotten stereos, cameras, guns, watches and diamonds still trickle through pawnshops every day; Heinlein estimated that 1% of items handled by local pawnshops can be shown to be stolen. Shop owners are still accused of cheating on paperwork, making it more difficult for police to trace items that may be “hot.” Even brokers who abide by the law are able to hike up interest rates--to more than 80%, in some cases--for borrowers who are desperate for large loans.
Occasionally, there are elaborate scams. In one, a man paid several visits to a Los Angeles jeweler and rented $250,000 in diamond necklaces, rings and earrings ostensibly to be used in movie shots by actresses Cher, Jennifer Tilly and Annette Bening. Instead he pawned them at three shops (two in Beverly Hills) for a total of $70,000. Then he fled the country, leaving behind a bitter legal fight and questions that may never be fully answered.
In another case seven years ago, conflict escalated to the point of murder. A woman whom police believe to be a disgruntled customer showed up at Beverly Hills’ oldest pawnshop, Beverly Loan Co., hiding a gun. She got past the electronic door and inch-thick, bulletproof glass, killed two people--the shop’s co-owner and his son--and disappeared. She is believed to still be at large in the Philippines.
Such incidents tend to be aberrations. Pawnbrokers say they have forged a niche in the upscale market in part by discarding the ways of the past, including the trappings of the familiar urban shop: a storefront crammed high with cameras, guitars and old electronic equipment. Those in Beverly Hills are more likely to display fine paintings, statues and spectacular jewelry. Some that do occupy storefronts have a gilded, boutique-like air; others, such as Beverly Loan Co., hide themselves on the upper floors of office towers, where their customers can borrow with the utmost secrecy.
Pawnshops have become popular among the elite because even the wealthy find themselves short of cash, and many dislike waiting for a bank loan, dealers said. At a pawnshop, high rollers can score $10,000, $50,000, $100,000 or even more. Most deals take only minutes, especially in the case of repeat customers, who account for much of the action.
“You deal with a lot of gamblers,” said Jeffrey Clark, owner of Cheryl Jeffries Estate Jewelry & Loan in Beverly Hills. “They’ve got a bookie to pay off . . . [or] a horse down at Del Mar. These are career gamblers, guys that totally subsist on the fact that they gamble.”
Over the years, Clark has given loans on two Super Bowl rings, a Lakers championship ring and untold numbers of Rolex, Bulgari and Piaget watches. Most of the time, he said, borrowers eventually reclaim their possessions. Some borrow on the same items over and over again. Pawnbrokers say they generally encourage their customers to pay off the loans and take their property back because it encourages repeat business and puts money in the cash register without the trouble of having to resell the merchandise.
Many rich clients take out loans to meet mortgages, pay alimony, buy new cars or motorcycles, throw big parties or travel the world, brokers said.
“You’d be amazed why people need money,” said Yossi Dina, who founded South Beverly-Wilshire Jewelry & Loan two years ago. Some of his own customers like to hit Rodeo Drive, just a block away. One woman--”She’s really, really famous”--borrows $25,000 or $50,000 at a time, Dina said. “She likes to shop cash. She doesn’t want her husband to know when she’s taking money. Every couple weeks she’s taking out a loan.”
Another customer, an English lord, once pawned a Picasso for $50,000 to pay the rent on a Beverly Hills estate. “His father was sending money from England,” Dina said, but somehow the money was late arriving.
Dina strode into a huge vault of valuable collateral. Carefully wrapped and stored on a broad shelf were a stack of LeRoy Neiman paintings. “I have the five best pieces he ever made in his life,” Dina bragged, showing part of one boldly colored canvas called “The Elephants Stampede.” The man who owns them is big in the music industry; he needed money for his ventures.
“I gave a loan for $200,000,” Dina said. “The pieces are worth $1.5 million.”
Dina showed off a box of auto pink slips--Porsches, Mercedes-Benzes--and unwrapped a 1920 Cartier necklace and matching bracelet. The necklace, 28 carats in diamonds, commanded a loan of $25,000. The bracelet, encrusted with a similar galaxy of Burmese sapphires, fetched its owner $20,000, Dina said.
The young woman who pawned them financed a trip to Europe.
“Honestly, I don’t think she cared for the pieces,” Dina said, packing them away. “She got [them] . . . from her husband’s family. It’s old money. Sometimes young people don’t care for this stuff. It’s a shame, really.”
Turning around, Dina found another painting, propped against the wall. In his thick Israeli accent--he came to America 15 years ago--Dina stumbled in identifying the artist: “ Grins--? Grinsbule? “ He pointed to a tiny brass nameplate below the ornate gold frame: Gainsborough.
The oil canvas, “Paddington,” of a man leading a mule on a country road, is marred: There is a three-inch hole in the painting, right through the middle of a tree. A man brought it into the shop not to pawn, but to sell--for $60,000. It was about to be shipped to New York so that Dina could try to verify its authenticity.
“I have the piece to fix it up,” Dina said, staring at the hole. “If [the painting] is real, it’s worth $1 million.”
Although pawnshops occasionally buy merchandise from customers and sell it at a profit, they operate mainly by making short-term loans at high interest rates, using their customers’ possessions as collateral. When people pay off their loans, they get their belongings back, and pawnbrokers pocket a profit on the interest. If a loan is not repaid in four months, a pawnbroker may, by law, take ownership of the property and sell it to recoup his money. That often results in a profit as well because brokers usually lend only a fraction of an item’s market value.
Because brokers stand to make money no matter what, there is never a need to see or file credit reports. No one asks why a loan is needed, and defaults are never reported. A customer can get cash with zero risk to his reputation and spend the money any foolhardy way he chooses.
One man, a 74-year-old real estate investor, described taking a series of loans at Dina’s shop totaling $100,000. He pawned artwork, a silver collection and two pieces of exquisite jewelry--his wife’s pearl necklace and her diamond choker, which together commanded more than a third of the total. He used the money to buy 20 acres in Palmdale.
Two years later, the investment is looking like less than a stroke of genius. The man said he is trying--unsuccessfully, so far--to unload the property. His wife is not pleased. He definitely does not want his name in the paper. He is only grateful that Dina has been kind, extending the loans rather than liquidating the merchandise.
“Technically, I should have lost it,” he said. “Normally, people in [the pawn] business are ruthless people. But Yossi is a fantastic guy.”
In a trade where secrecy is so closely tied to fast money and valuable property, there are, inevitably, a few bad actors. Los Angeles wholesale jeweler Ronny Levy ended up suing Collateral Lender after he was fleeced by a man who apparently did, for a while at least, rent jewelry for movie stars.
During the summer of 1991, Jose (Pepito) Albert began renting larger and larger pieces, including a $35,000 platinum bracelet and a pair of 10-carat diamond earrings worth $100,000, according to court documents. Albert took one piece after another to the two pawnshops. The bracelet got him a loan for $12,000, the earrings $16,500. He disappeared without ever repaying the money.
Levy said he had no idea the jewelry was being pawned. The case broke when Collateral Lender allowed an agent to try to sell the earrings, with the shop to share in the asking price of more than $60,000.
The would-be buyer, however, turned out to be the same man who had consigned them to Levy. He was the rightful owner. When he took the earrings, a legal fight followed. Levy sued Albert--who had fled the country--and Collateral Lender, charging conspiracy with Albert to pirate the earrings. Collateral Lender sued back, contending that Albert had obtained the earrings legally and granted valid written consent to sell them.
“[Collateral Lender] also sued the owner of the earrings because he was in possession of the earrings,” Levy said. “It was awful.”
Eventually, the case was settled out of court: Levy had to pay off the money Albert had received from the pawnshop, but not the interest. The pawnshop came out more or less unscathed.
“We were clean like a whistle,” said Gonen, who boasted of his efforts as a governor of the Collateral Loan Secondhand Dealers Assn. of California to clean up the industry.
Most of the time, brokers said, transactions are far less acrimonious--but still fascinating. Dealing with the dreams and money woes of the “richest people on earth,” as one broker described his clients, produces an inevitable abundance of amazing tales, tiny slices of life that Robin Leach never imagined: the guy with his credit card pushed to the max, selling his Renoir etching at Charles Sherman’s Pawnbroker for the Arts, or the big spender who strolled into Beverly Loan not long ago, excited about the deal he had just found on a classic Rolls-Royce.
He dropped off a diamond ring and necklace, pocketed $25,000 in cash and went out to make the buy, said pawnbroker Jean Zimmelman.
“He couldn’t pass it up,” she said. “He had to have it.”
