Will New JBT System End “Memo Fraud”?

Usually, press releases are full of hype. But this recent release about a “diamond reporting system” from the Jewelers Board of Trade and the Diamond Manufacturers and Importers Association actually underplays its possible ramifications.

We all know there is a big problem with bankruptcies in New York. There is the now-notorious Taub case, where the Taubs allegedly got millions on memo in a matter of weeks.  And I’ve heard talk of financial issues involving a board member of a prominent New York organization (and nice guy, too.) Obviously, this can’t keep happening.

In this information-driven age, there should be a way of knowing if a company has acquired large amounts of diamonds on memo in a short period of time.

The proposed JBT system, which is hoped to be up and running in about six months, would have companies report — hopefully in real time — when they give another company a stone on consignment.  

So, as JBT’s second vice chairman (and colored stone dealer) Richard Greenwood told me:

Right now people can take diamonds from different companies and no one knows what the other person has given. They are working blind …

[With this system] you can see, if a guy is asking you for goods on memo, whether he’s already gotten several times that amount in the last couple of days. And then you can say, “Why are you asking me for goods, when you already have so much out already?” It won’t tell you what to do, but it will allow you to make better business decisions.

 

A lot depends on whether people in the diamond industry are willing to share information, never a sure thing. (Though the names of the consignors would be anonymous.)  But it’s certainly an interesting and promising approach to a serious problem. Put this in the file of “good ideas it’s a shame no one thought of earlier.” 

JCK News Director