The autographed letter was supposed to be auctioned off this month, but Bill Panagopulos, president of Alexander Autographs in Greenwich, Conn., told CBSNews.com the letter was withdrawn after the forger came forward and admitted his handiwork.
Originally it was believed Reagan wrote the note to a friend in February of 1998, about four years after he mostly disappeared from public view following his announcement that he had Alzheimer's Disease. In the letter he told a friend, "Individuals like you give me the courage and inspiration to move forward, and with your prayers and God's grace, we'll know we will be able to face this long latest challenge." He adds a P.S: "I didn't write this with Nancy's help."
But Panagopulos said the letter was actually a form letter that Reagan wrote in 1994 to thank those who expressed sympathy for his affliction. Reagan had hundreds copied onto his official letterhead.
Panagopulos said the forger, who he refused to identify, somehow got a hold of one and used a heavy felt-tip pen, which Reagan often used, to trace over it. The forger allegedly added mistakes, crossed out words and changed some of the text and the date.
Panagopulos said the letter fooled everyone who saw it. "We showed it to 3 or 4 prominent collectors, and they also missed it. This forgery has been fooling collectors and dealers since its creation in 1999, and it continued to do so until we withdrew it."
The forger allegedly called Panagopulos after seeing the letter on the cover of the auction house's catalog. He told Panagopulos that he created the forgery back in 1999 to increase the value of a box of other autographs he was auctioning off."
"It's called 'salting the lot,'" said Panagopulos. "He had a box of worthless autographs and he wanted to get more for it."
Panagopulos said more than 2,000 customers received a catalog that contained images of the letter and millions of others could have viewed it, but not one complaint or suspicion was raised.
"Since the letter was traced-over, the handwriting was a very close approximation of Reagan's actual hand, with any discrepancy easily attributable to his advanced Alzheimer's," said Panagopulos.
In a statement on his company's Web site, Panagopulos said, "Despite careful examination and the obvious evidence pointing to the letter's authenticity, we were wrong...Autograph authentication is not an exacting science, sometimes all the diligence in the world is not enough to unravel the forger's handiwork."
The auction house thought the letter could fetch as much as $9,000.
The cold war crusader whose sunny optimism made a nation believe it was "morning in America" died June 5, 2004, at the age of 93.
Reagan battled the effects of Alzheimer's disease for a decade before passing away. He returned to the spotlight shortly before he died, as his health deteriorated and his wife, former first lady Nancy Reagan, began to publicly support stem-cell research as a way to find cures for Alzheimer's and other diseases.