Banking on a Ruby Appraisal

When an officer of an overseas bank called Stuart Robertson and asked him to appraise several large ruby crystals, Robertson could tell from the description that they weren’t gem quality. Robertson, research director and appraiser for Gemworld International in Glenview, Ill., had seen similar material at gem shows in Tucson, Ariz., whose value was far below what the original appraiser—an unnamed lab—had reported to the bank. A client of the bank offered the rubies as collateral for a loan estimated at several million dollars.

“There were several pieces, all valued at $4.5 billion,” says Robertson. The ruby crystals weighed approximately 7–9 pounds each, “not quite as big as a bowling ball,” Robertson adds. “It was classic. I think they put the decimal point in the wrong place. There were no transparent areas in them at all.”

Nor was there any record of huge gemmy material ever being found. “Here’s a big piece of rough, and valued using the value of a small 1.00 ct. high-quality ruby,” says Robertson. “Nothing on these boulders was even bead quality. Our final appraisal value was less than the cost of the appraisal and the airfare. And we told them that’s what we suspected, even before we went. We collected comparables, and sure enough, you can buy this kind of stuff from mineral collectors for about $10,000. And these things had all been polished, which ruined much of the mineral collector value. Finding value was not a problem.”

The ruby-related loan was not unique. “I had three more calls from overseas for this type of appraisal,” Robertson says. “And they all dried up when our report went out stating a value of $12,000.”

On several occasions over the past 30 years, bank clients have attempted to use big boulders of ruby or sapphire as collateral for large loans. Borrowers apparently assume that the value of a 5 pound ruby boulder equals $10,000 (the average price per carat of gem ruby) multiplied by the number of carats in the boulder. That might work if the ruby were gem quality, but that’s never the case.

In 1987, a 1,906 ct. star sapphire was purchased for $10, and then appraised as the Star of America and valued at $2.2 million. The star was faint, the gem was opaque, and the bluish gray color was uneven and not pretty. The original $10 purchase price represented the correct value.

Dr. Peter Keller, executive director of the Bowers Museum in Santa Ana, Calif., remembers a collection of rubies and sapphires that he saw 30 years ago. “It was in 1976 or ’77, and, at the time, I was curator at the Los Angeles Museum of Natural History. They were all a part of the Mozambique Originals, a collection in Beverly Hills,” he says.

“So one day I had a banker from one of the Los Angeles banks come in, and he presented me with pictures saying, ‘Look at this spectacular collection of rubies and sapphires.’ They were, of course, being used as collateral,” Keller explains. “In the collection was the Star of Mozambique.” The value of the ruby was stated as $10 million.

Keller continues, “I reached into my desk and pulled out something almost identical and told him, ‘This is my paperweight, and it’s worth $25.’ He didn’t believe me. So I sent him to Digby Matheson.”

Matheson was a gem dealer in downtown Los Angeles who had several pieces of that kind of material in his office. “He had a similar ruby and told the banker, ‘Here’s my paperweight,’” says Keller. “And Digby actually gave it to him.”