Sightholder Lawsuit Charges Unfair Loss of Sight

Former sightholder W.B. David has launched a blistering lawsuit against its one-time supplier De Beers, seeking $100 million in damages stemming from its loss of sightholder status last year. Also sued were all 84 De Beers sightholders, all the sightholders’ accountants, De Beers’ U.S. ad agency J. Walter Thompson, JWT trainer (and former W.B. David consultant) Diane Warga-Arias, De Beers’ subsidiary Diamdel, and most of De Beers’ top management, including chairman Nicholas F. Oppenheimer and managing director Gary Ralfe.

The 140-page suit charges De Beers and the other defendants with antitrust violations, racketeering, fraud, unfair competition, breach of contract, and defamation, among other things.

At the lawsuit’s heart is the claim that W.B. David, a sightholder from 1969 to 2003, unfairly lost that status during last year’s launch of “Supplier of Choice.” David “more than satisfied the so-called SOC criteria, and is, indeed, eminently more qualified than others who were selected as sightholders under Supplier of Choice,” the suit says. Instead, David was dropped because De Beers wanted to decrease “the number of U.S. sightholders to give it even greater control over the horizontal and vertical rough diamond market, especially the 2+ carat rough sub-market,” it says.

It also alleges that De Beers “stole” David’s Leading Jewelers of the World initiative when it launched a “carbon copy” of it in Japan. It claims that theft was one of the reasons David lost its sightholder status.

David’s complaints against the current sightholders and their accountants includes the allegation that they “submitted to DTC false financial and other information in their applications, in order to enable them to obtain or retain sightholders under SOC while precluding [David] and other former sightholders from retaining their sights.”

The suit even takes shots at industry entities that are not defendants, like U.S. retailers Zale, Sterling, and Helzberg’s, which it says received De Beers promotion money “laundered” through sightholders. In response, Sterling chairman and CEO Terry Burman said, “We take co-op from many, many companies.”

The suit also makes charges against the Diamond Dealers Club and its president, Jacob Banda. “To restrain the [DDC] from commencing litigation against [De Beers],” it said, “Diamdel agreed to provide $250,000 worth of rough diamonds per sight” to U.S. manufacturers, for which Banda received a 1% commission. (The DDC was on vacation at press time, and Banda was unavailable for comment.)

The suit makes so many charges and involves so many people that some in the industry wondered if the company wasn’t jeopardizing its future in the business. But David’s attorney, Clifford Bond, told JCK, “The Davids took the action they thought was appropriate.” He said the company “tried to reach a settlement with De Beers, but they would not come to the table.” He said the filing of the suit, just before De Beers was expected to settle an outstanding antitrust indictment, was “just coincidence.”

J. Walter Thompson declined comment. De Beers did not respond to JCK‘s request for comment. A spokesman from W.B. David told JCK it cannot comment beyond the lawsuit.

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