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Electrical short between starter gear and flywheel

Howdy. I have an 18 horse Mercury twin cylinder. It has a new starter and solenoid. And we replaced one of the coils. Now when we hit the key, the starter gear pops up and an electrical arc occurs between the gear and the flywheel. We made certain that the starter was well grounded to the block and even ran an extra ground back to the battery but it still happens. I think we have some wires crossed somewhere but we can't find anything wrong. Has anyone seen this before? What was the issue?
Thanks!
 
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