Two of the lawyers involved in the big Whitehall consignment fight — Lawrence Ginsburg of Moses Singer, and Joseph Vann of Cohen Tauber Spievack and Wagner – held a very interesting seminar with the Indian Diamond and Colorstone Association last night.
Their main message: Though the Whitehall situation came out okay in the end, with consignors retaining rights to their goods, it could have gone the other way, and a lot of people — not to mention the industry’s business model — would have been seriously hurt as a result.
“This is no longer in a handshake industry,” said Ginsburg, noting that it’s increasingly being funded by non-traditional players like hedge funds. “You are dealing with people who, if things go bad, will use every angle.”
He warned attendees not to give out diamonds out to people “they don’t know.” (Something which nevertheless happens every day in the diamond industry.)
“More than ever you have to know who you are dealing with,” he said. “We won the battle with Friedman’s. We finessed the battle with Whitehall. Next time, we may not win. Be careful. Be cynical. We are in a different world.”
Vann said consignors to big companies have to do extra due diligence — including checking the company’s financial health, and reviewing company filings to insure the company hasn’t changed the spelling of its name (something which, rather ridiculously, became an issue with Whitehall.)
Vann had the most interesting suggestion – urging the industry to band together and lobby Congress for changes in the UCC laws so that the jewelry industry, which is uniquely dependent on consignment, can be better protected. This suggestion was enthusiastically received and hopefully something will become of it.