RAPAPORT... It is hoped that a recent court decision might play a breakthrough role in alleviating — or even ending — a long, painful nightmare of the Antwerp diamond community: police raids and the accompanying seizure of diamond stocks.
Monstrey-Ferrari CaseAlmost three years after the initial raids at the Monstrey Worldwide offices in Antwerp, the now famous Monstrey-Ferrari case has had an unexpected development. The shipping company was closed by Belgian law enforcement authorities in October 2005 after the discovery that some of its clients were using its services in furtherance of such illegal activities as Kimberley Process (KP) fraud and money laundering.
It turned out that many Antwerp-based diamantaires did shipping business with Monstrey. Some figures suggest more than 300 companies were customers, which represents virtually all seriously active businesses in the Antwerp diamond community. To date, approximately 30 to 35 of those companies have been raided by the police as part of the Monstrey investigation and have had their goods seized to cover any fines that might be levied.
Suddenly, without notice, toward the end of June, the Chamber of Accusation instructed the Antwerp prosecutor to return some of the seized goods to approximately 25 percent of the companies that had been raided.
Interviewed on condition of anonymity and confidentiality because a court case is pending, a chief executive officer (CEO) provided this background. “Upon seizure of our goods, we appealed immediately to the instruction judge, pleading our case, but he refused to hear us. Then we turned to the prosecutor, explaining to him why we considered the seizure of our goods a mistake. Unfortunately for us, not only did he not sympathize with our case, but he proceeded to more than double the estimate of alleged fraud. That placed a Damocles sword over our heads, a sword that weighed several dozen million euros. It was devastating.”
At that point, the only option that affected diamantaires had was to appeal to the Chamber of Accusation. “The judge reviewed our arguments and agreed that most of the charges should be dropped, such as those of interest to the custom authorities and those alleging Kimberley Process fraud, money-laundering activities or criminal association. As a matter of fact, all that’s left of the charges is a possible fiscal fraud charge, which will be addressed during the trial that is expected to take place no sooner that two to four years.”
The CEO told RDR his company almost immediately recovered two-thirds of its diamonds that had been seized. Value- and quality-wise, the goods were apparently returned in a fair proportion to what was seized. However, the owner of the confiscated diamonds insists that, when they were taken into custody, no real valuation was made. It’s only after they were seized that an independent valuator was hired. The whole valuation process also was carried out without the owners being present. As a matter of fact, the judicial authorities decided on their own which goods would be returned.
More to the Story
As is often the case with human decisions, there’s more to the story than meets the eye. “The Monstrey fraud involves some diamond companies, that’s certain,” said the source. “But the scope of the investigation was artificially spread to many other companies because of the way the search parties were organized in Switzerland.
Indeed, the Swiss instruction judge issued warrants to seize material evidence on the grounds of the Geneva free port. And that’s where the whole story inflated. Indeed, many companies other than Monstrey were, and still are, active — totally legally, I might add — in the free port, including many legitimate offshore trusts. However, all material seized was, from day one, attached to the Monstrey case, with the burden of proving innocence unfairly placed on the shoulders of every individual company active over there. The most unbearable aspect of this story is that the safes of those who were involved in the Monstrey case have remained empty ever since because their diamond inventories were seized at the time of the initial raids and never returned.”
The recent court decision, however, represents a tremendous breakthrough. The milestone is that the court indicated that should one suspect a fraud, the collateral that could be provisionally claimed and seized would not have to cover the whole alleged fraudulent transaction, but only the part of the tax that was evaded. In other words, assume that a 10 percent tax was due. According to the court determination, the seized collateral would be 10 percent of the transaction value, not 100 percent, which was how the law enforcement authorities were calculating it.
Philip Claes, spokesman of the Antwerp World Diamond Centre (AWDC), said that “Even though these court rulings are the results of individual procedures, it’s a sign that the law that has been proposed and is pending before the parliament, which aims to limit the power of the inquiry judges in order to protect the industrial fabric of the country, is gaining an increasing number of supporters.”
The Marketplace• Since the Antwerp Diamond Center was closed for the August holidays and reopened only at the end of the month, no real trend could be seen at the time this report was being written.
Article from the Rapaport Magazine - September 2008. To subscribe click here.