Over 40 New York diamond dealers are suing New York’s A. Taub Diamond Co. for $3.3 million, accusing the company of taking dozens of stones on consignment and never paying.
Listed as defendants are Alfred “Avi” Taub; his brother, Oren Taub; his father, Shalom S. Taub; and Shirin Alains—all company employees, the lawsuit says—as well as Shalom Taub’s wife, Ora.
The suit says that, “typical of a bust-out scheme,” the company “built up their credit over an 11-month period of time, slowly taking a few diamonds at a time [and] paying on time.”
Then in April and May, the suit alleges, the company took in at least $3.3 million worth of diamonds on consignment from over 45 dealers over a 36-day period. The suit alleges at least 45 other dealers are owed money by the Taubs but have not joined the action.
In June, the defendants refused to return the diamonds or pay invoices and stopped paying rent for their offices, the lawsuit charges. The suit also claims that Avi Taub told several of the dealers he had been robbed and had spent time in the hospital. The suit further charges that the Taubs’ office on 15 W. 47th St. “resembles a closet in that it is extraordinarily small and the door opens into the building corridor” and does not have the customary “man trap” for security purposes.
“Legitimate companies holding over $3 million in diamonds on credit customarily have a man trap,” it says.
A diamond dealer who is a plaintiff in the suit told JCK that he was in shock over the events. “To work like this, to lose this kind of money, it’s devastating,” he said.
He said he had done deals with the company before. “They found me on the Internet,” he said. “I gave [Taub] a few stones on memo, and he always gave them back.”
But then, the company took a $45,000 stone from him on memo, according to a sworn affidavit. “I called and called and could never get through,” he said. “Finally, I got hold of him, and he said that he had been robbed but that he sold my stone and would pay me.” He never did, the affidavit says.
“It’s so easy to take people in this industry,” the dealer added. “You go to the judge, and he will say this is bad business, it’s a collection problem. But when you take this many companies, it’s fraud.”
The plaintiff’s lawyer, Cindy Molloy, says she has obtained a temporary order restraining the defendants’ assets, and that Alfred Taub pleaded the Fifth Amendment in a recent meeting with the district attorney.
David Rosenberg, president of the Miami-based Bourse of the Southeastern United States, who first sent out a letter on the Taub situation, said the creditors are “absolutely” going to law enforcement. “Every six months it seems we have another case like this,” he says. “Six million here, 8 million here. At the end of the day, it destroys the industry. People become more reluctant to give out goods. The trust factor in the industry is fading away.”
According to a report in The New York Times, the Manhattan district attorney is investigating.
“Hopefully, they will get the district attorney to go forward on this case,” the dealer said. “We want to set an example, and, hopefully, it will stop people from doing this again. I hope that more companies will get involved. When you go to the district attorney with 50, 60 companies, it says something.”
The Taubs’ attorney, Melvin Greenwald, did not return a phone call from JCK for comment.