News Briefs

RAPAPORT... Gemex Sues Zale and GS Labs
GemEx Systems brought a lawsuit against Zale Corporation and GS Laboratories of America (GSL), alleging false advertising under the Lanham Act. GemEx told the court that it had helped develop Zale’s “celebration diamond” and the marketing rollout program for the product and that it had done so based upon Zale’s assurance that it would purchase GemEx Light Performance™ reports for its celebration diamonds.

But, GemEx contended, Zale retained the services of GSL, a GemEx competitor, instead. Gemex’s filing claimed, “Zale and GSL have falsely advertised the substitute OGI Firetrace report as the equivalent of GemEx’s report, using words, images and symbols to convey the message that the OGI Firetrace is a measurement of light properties, which serves both to mislead consumers and to disparage the quality of GemEx’s services.”
GemEx asked for a trial by jury, demanding that Zale and GSL cease and desist making claims about OGI Firetrace and that the court award it damages plus interest, enhanced damages for misrepresentation and attorney fees.

JVC and NCDIA Publish Color Diamond Guide
The Jewelers Vigilance Committee (JVC) and Natural Color Diamond Association (NCDIA) released “The Essential Guide to the U.S. Trade in Color Diamonds.” The Guide was developed in response to inquiries from the jewelry industry about the laws governing the manufacture, sale and marketing of color diamonds. It discusses the geology of natural color diamonds, defines natural, synthetic and simulated diamonds and the treatments used to alter the color of diamonds. To download the guide, visit JVC’s website, www.jvclegal.org, or NCDIA’s website, www.ncdia.com.

Think Tank Identifies Global Trends for 2009
The Institute for Global Futures, a San Francisco-based think tank shaped by the research of Dr. James Canton, its chief executive officer (CEO), released its annual Global Trends Report 2009.© The Institute identified the coming year’s top trends as the following:

• Managing Complexity — The top skill will be managing the immense and fast changes, the economic crisis, the job market, global competition and new technologies.

• High-Agility Enterprise — Innovations like customer care portals, wikis, predictive analytics, social networking and web 2.0 processes will drive competitive advantage.

• Global Connectivity — Entirely new business models, supply chains, customer care networks, markets and industries will be born from constant global connectivity.

• Blended Reality — The convergence of TV, computer, internet, wireless and telephony across interactive, fast, real-time broadband networks with GPS information will become a reality.

• Navigating the New Risk Landscape — Greater risk management will be prudent.

• Personalized Medicine — From prevention to mapping your personal genome to life extension, longevity medicine is coming fast.

• The MegaCity Consumer — From China to India to Latin America and the Europen Union (EU), there is a new consumer demographic driven by massive urban migration.

• Beware Dark Networks — More sophisticated and complex fraud, theft and terror attacks will threaten modern society, so invest in prevention now.

• Green and Clean Sustainability — Smart companies will leverage green policies, products and services — and be held accountable if they do not.

• Future Readiness — New profit opportunities will come from those companies that see the future and evolve before the competition.

Israeli Diamantaires Suspected of Fraud
An Israeli diamantaire has been detained on suspicion of defrauding a South African diamond dealer out of $35 million, Ha’aretz reported. The man’s brother, who is accused of the same crime, is currently abroad and has yet to be arrested. The two are co-owners of the Israeli subsidiary of a New York-based diamond company.

The South African dealer has pressed charges against the brothers, claiming that they paid him only $65 million, rather than the $100 million he was owed for diamonds that he sold on their behalf. Instead, the dealer alleges that the brothers sent him empty sealed boxes that supposedly contained high-end diamonds as payment, according to Ha’aretz.

DTC Sight Estimated at $100 Million
Diamond Trading Company (DTC), the De Beers sales unit, had one of its quietest sights in years in December 2008, as many sightholders deferred goods collection. Market sources estimated the sight’s value at between $80 million and $120 million or about a fifth of the size of the December 2007 sight. Prices remained relatively stable and there was little change in the assortment of goods.

DTC spokesperson Louise Prior stressed that the company’s sales reflected the level of demand from its sightholders. De Beers had previously warned that it expected the November and December sights to be smaller, given current global economic challenges and the prevailing lower level of demand.

While one sightholder noted a slight price decrease of 2 percent to 4 percent for smaller goods at the December sight, most market professionals surveyed by Rapaport News said they do not expect a significant downward price adjustment from DTC until a full assessment of the Christmas season can be made, which is unlikely until at least February.

Industry Groups and NGOs Call for KP to Suspend Zimbabwe
The Rapaport Group requested that the Kimberley Process (KP) suspend Zimbabwe immediately, citing severe human rights violations by the nation’s government. The firm asked all members of the diamond trade to refrain from buying diamonds from any suppliers who cannot guarantee that their diamonds do not originate in Zimbabwe.

News reports from the region state that the country’s president, Robert Mugabe, has been conducting a brutal crackdown on illegal artisanal diamond miners in Mutare, using methods that include attack dogs and machine-gun assaults via helicopter.

Ian Smillie, the research coordinator for Partnership Africa Canada (PAC), commented, “The Kimberley Process has to stand up and add its voice to those of ordinary Zimbabweans and those around the world who condemn what has happened in the country’s diamond fields.” Global Witness also urged the KP to suspend Zimbabwe.

Members of the Kimberly Process Civil Society Coalition stated that in recent months, smugglers have been arrested in India and Dubai with large quantities of diamonds — reportedly of Zimbabwean origin. The Coalition called the smuggling “a clear signal that Zimbabwe is no longer able to control a significant proportion of its diamond exports.”

The World Diamond Council (WDC) also called for stronger vigilance in combatting the trade of illegal diamonds from Zimbabwe.

RJC Rolls Out Responsible Jewelry Certification Documents
The Council for Responsible Jewellery Practices (CRJP) released implementation documents for its system of certifying responsible ethical, social and environmental practices through the diamond and gold jewelry supply chain. The council unveiled its new trade name, “Responsible Jewellery Council (RJC),” as well. The certification system requires its members to be audited by an accredited third party to verify that they conform to RJC standards. The system is expected to be fully operational by the second quarter of 2009, with members who join after December 31, 2008 required to complete the verification process within two years. The implementation documents are available at www.responsiblejewellery.com.

In addition, Mila Bonini was named the RJC’s new communications manager. Bonini most recently held a senior administrative/communications position at the World Jewellery Confederation (CIBJO).

Groups File Brief Against Tiffany
The Electronic Frontier Foundation (EFF), along with Public Citizen and Public Knowledge, filed an amicus brief in response to Tiffany & Co.’s appeal in its lawsuit against online auction site eBay. In the brief, EFF urged the 2nd U.S. Circuit Court of Appeals to reject Tiffany & Co.’s “attempt to rewrite trademark law and create new barriers for online commerce and communication.”

In its original suit, Tiffany claimed that when sellers offer counterfeit Tiffany goods on eBay’s site, eBay should be held liable for trademark infringement. The court ruled in July that eBay could not be forced by trademark law to police another company’s trademark. Tiffany filed its appeal in August.

Michael Kwun, EFF’s senior intellectual property (IP) attorney, stated in the brief that if Tiffany had its way, sites like eBay would be responsible for figuring out whether the items its users are selling are authentic or counterfeit, a task he deemed “impossible.”

IGI Sees Demand for “Canadian Origin” Reports
Since the introduction of the International Gemological Institute’s (IGI) Canadian Diamond Grading Report and Canadian Attestation of Origin, sales have increased “exponentially,” despite the lagging economy, according to the firm. IGI did not release any sales figures with its statement.

Terry Buckham, IGI Toronto’s laboratory manager, participated in discussions with the Canadian Jewellers Association and Jewelers Vigilance Canada (JVC) to establish guidelines for the Canadian jewelry industry. Launched in 2002 at the opening of IGI Toronto, the IGI Canadian Diamond Grading Report and Canadian Attestation of Origin authenticates that a diamond originated in Canada and states that it is in full compliance with the federal guidelines established by Industry Canada and the Canadian government.

IGI’s Canadian Attestation of Origin assures diamond buyers that the stone was responsibly mined and ethically sourced, making it “conflict free.” The Canadian Diamond Grading Report is a declaration of identity and grade based on the internationally accepted system for grading diamonds. An IGI LaserscribeSM laser inscription bearing the IGI report number appears on each diamond. IGI provides customized Canadian reports for vendors who wish to offer comprehensive records tracking their diamonds back to Canadian mines.

ALROSA’s KIT Buyout Approved
ALROSA received antitrust approval for its buyout of KIT Finance Holding, RIA Novosti, Russia’s state news agency, reported. The diamond mining company agreed to bail out KIT in early October by acquiring a 45 percent stake in the troubled bank. The acquisition is expected to close this month.

Russian Railways also agreed to buy 45 percent of the bank and has already received antitrust approval for its portion of the buyout, according to RIA Novosti. The remaining ten percent will be purchased by the National Capital company.

ALROSA’s acquisition of KIT has sparked some concern among investors regarding the company’s high level of debt. Standard and Poor’s (S&P) responded to the acquisition plan by placing ALROSA on CreditWatch on October 10, 2008 and downgrading its long-term credit rating to “BB-” on November 25. Reports estimate that KIT has liabilities of about $1.1 billion (RUB 30 billion). ALROSA received a $1.6 billion loan from VneshTorgBank (VTB) to help the mining company repay its creditors, according to Russian Finance Report.

In other company news, ALROSA’s board approved a revised plan for 2009, though the company will maintain its $29.9 million (RUB 835 million) budget for the development of underground mines. The company’s combined budget for other capital construction, geological prospecting, sponsorships, charitable help, regional development and administrative costs was cut to $164.2 million (RUB 4.6 billion). In the first nine months of 2008, ALROSA’s net profit, calculated according to Russian Accounting Standards (RAC), fell 62 percent to $126.8 million (RUB 3.5 billion).

UN Extends Mandate of Liberia’s KP Panel
he United Nations (UN) Security Council passed a resolution that extended the mandate of the panel appointed to oversee Liberia’s compliance with the Kimberley Process Certification Scheme (KPCS) to December 20, 2009. The council also renewed the arms embargo on Liberia and the travel ban on individuals who had “threatened the peace there” for another 12 months. The Security Council instructed the panel to conduct two follow-up assessment missions in Liberia and its neighboring states and compile midterm and final reports.

Liberia was accepted as a member of the KP in May 2007 and started exporting diamonds again in September of that year. A KP review of the country in April and May 2008 found that there had been some progress implementing KP controls, but there was still a long way to go, according to a recent report by the nonprofit watch group Partnership Africa Canada (PAC).
Indian Government Falls Short of Diamond Industry Bailout
Narendra Modi, Gujarat’s chief minister, did not announce the bailout package for the hard-hit diamond sector that many had expected at the launch of Sparkle 2008. Instead, Modi asked central government-run Hindustan Diamonds to supply rough diamonds to the Surat diamond industry and, in return, buy polished diamonds to end the crisis.

Modi said that diamond polishers who had returned to their native villages will be given benefits under various rural development plans that will provide jobs paying about $1.65 to $2.00 (INR 80 to 100) a day. He added that educational institutions have been asked not to charge fees for the children of unemployed diamond polishers.
—Additional reporting by Dialog NewsEdge.

HRD Antwerp Brings Lab Link to New York
HRD Antwerp launched its Lab Link service in New York in partnership with Malca Amit, according to a statement released by this subsidiary of the Antwerp World Diamond Center (AWDC). The service enables New York diamond dealers to send stones to HRD Antwerp’s lab for grading and certification.

HRD’s lab provides certification services including full diamond certificates, fancy color diamond certificates, laser inscriptions of HRD Antwerp Certificate identification numbers on the diamonds’ girdles and sealing. Earlier this year, HRD Antwerp launched Lab Link services in Israel, Hong Kong, Mumbai and Dubai.

Yehuda Files Suit Against Blue Nile
Yehuda Diamonds filed a lawsuit against Blue Nile to require the company to refund customers who wish to return emeralds or emerald jewelry purchased from Blue Nile. The complaint states that Blue Nile does not offer the necessary disclosures indicating whether its emeralds have been artificially enhanced.

Spokespersons for Yehuda, a competitor of Blue Nile’s in the online retail jewelry industry, said Yehuda filed the suit on behalf of unnamed individuals who purchased enhanced emeralds through Blue Nile’s website. The complaint states that Blue Nile sells emeralds filled with oil, wax, resin or other appearance-enhancing substances without informing customers.

Blue Nile released a statement in response to the charges, maintaining that “Nearly all emeralds sold at fine jewelers, including Blue Nile, are infused with a colorless substance to enhance clarity. Yehuda’s claims against Blue Nile are meritless.”

This is not the first time the two companies have faced off in court. In December 2007, Blue Nile filed a lawsuit to stop Yehuda Diamonds from comparing the price and appearance of its clarity-enhanced diamonds to natural, nonenhanced stones sold by Blue Nile. In its statement, Blue Nile claimed that the present lawsuit has been brought by Yehuda “in response to” the earlier lawsuit.

GIA Announces Layoffs
The Gemological Institute of America (GIA) cut 11 percent of its U.S. workforce due to the overall slowdown in the diamond trade during recent months. Executives at the nonprofit institute also agreed to take a 10 percent pay cut to reduce operating expenses. Laura Simanton, a GIA spokesperson, confirmed with Rapaport News that the layoffs affected the institute’s operations in Carlsbad and New York across all departments.

Those affected received a 60-day administrative leave with full pay and benefits, two weeks of severance pay and one additional week for every completed year of employment. GIA also provided job-search assistance and unemployment benefit information, Simanton stated. According to the GIA’s website, the institute had 1,100 employees across its grading, research and educational programs before the cuts were made.

ALROSA to Receive Government Aid
ALROSA will receive government support to help weather the financial crisis, Prime-Tass reported, citing the government’s press service. The diamond mining company was one of 295 firms selected for aid that was said to be “integral to the country’s economy.”

The companies will be eligible to receive government loans, government guarantees and subsidies to pay interest on loans, Prime-Tass explained. The government may also restructure debts, government orders and customs tariff measures for the companies.

GCAL, Waldman Partner for Diamond Certification
The Gem Certification & Assurance Lab (GCAL) and Waldman Diamond Company announced a partnership in which the two will jointly certify diamonds mined in Canada. The program assures consumers that the diamonds they have purchased comply with the Kimberley Process (KP) and the Canadian Diamond Code of Conduct.

Waldman chose GCAL on the basis of its Source Veritas™ Process and Gemprint® technology, which find a diamond’s unique optical fingerprint. GCAL-certified Waldman Canadian Diamonds are available for purchase at the Certified Diamond Exchange (CDE).

Article from the Rapaport Magazine - January 2009. To subscribe click here.