DDC Split Over License Controversy

It was a bold and ambitious move for a diamond club, but now it’s mired in controversy.

In January, the New York Diamond Dealers Club purchased a license from the Sierra Leone government to establish a rough buying office in that country. (The license covers only diamonds with government-issued certificates, not diamonds from rebel group RUF.) The license cost $25,000, but extras could increase it to as much as $40,000. The club set up a separate corporation, New York Diamond Dealers, to manage the proposed office.

The purchase passed the club’s board of directors handily on two occasions, but only after heated debate, and over the opposition of club president Jacob Banda. Now the project is stalled, with Banda reluctant to release money to hire on-site rough buyers. Opponents feel the office is too much for the club to handle, but supporters say the bickering has held things up.

“The minute we stop fighting we can go ahead and do it,” says DDC treasurer Mayer Herz, who was a major proponent of buying the license. He notes that the club isn’t shouldering the burden alone. “We have people in the United States government who are supporting us,” he says. “The $40,000 is only a tiny fraction compared to what the United States government is willing to invest on our behalf.”

One of the license’s friends in high places is Rep. Tony Hall (D-Ohio), a friend of Herz and the congressman most active on the conflict diamond issue. In a press release, Hall said the initiative “will directly link Sierra Leone miners with American retailers and reinvest more of the dollars Americans spend on diamonds in the African communities that produce them. I would like to see more joint ventures like [it].”

The license is meant to re-energize New York as a cutting center. Under the plan, a native Sierra Leonean, working for the club, will purchase rough that will then be sold in New York at auction.

“Cutting, and access to rough, is our future, and the only way to guarantee a prosperous future for all,” Herz wrote to club members. “If you don’t try, you are defeated.”

Herz says this will give New Yorkers an opportunity to cut diamonds that De Beers allocates to other centers.

“People don’t understand that you can do business in Africa without De Beers,” he says. “This is a new world.”

But opponents argue that it is inappropriate for the club to deal in Sierra Leone, given the still-knotty situation there.

“We are a nonprofit organization going where there is all this corruption, where there was genocide,” says dealer Bruce Smith, who with Scott Cohen and Ron van der Linden was elected to the DDC board after criticizing the purchase. “The people who voted for this license have never been there, they have no idea how to run something like this. If something goes wrong, it will reflect badly on all our members.”

Smith cited news reports that most of Sierra Leone’s diamonds were still coming from rebel-held areas, and that the club can’t guarantee all its diamonds will be “clean.”

“The blood hasn’t even dried yet, and we are looking to see how we can make a diamond deal,” he says. “Let the club buy from Russia or Canada, where we didn’t have children maimed and all these atrocities.”

Advocates insist they are doing everything in an aboveboard manner and note that the project’s funds will be reinvested in the country.

“The goal of this plan is to help the starving and suffering people of Sierra Leone,” Herz wrote. “This will allow the government to regulate [diamond] production, establish stable prices, and ensure that all revenues are funneled back into government programs to provide food, medicine, and social assistance for the population.”

Smith and others will ask the board to sell the license. But supporters say that if the club doesn’t hold on to it, it will end up in the hands of someone who won’t use it to benefit the entire trade.

“The whole membership should benefit from this, but if the club won’t do it for the whole industry a few entrepreneurs will do it for themselves,” says Herz. “Why should the big players take this and run with it?”

”Smith says he wouldn’t mind. “Let private individuals do it if they want,” he says. “But don’t involve the entire organization.”