Tanzanite Troubles

Gem and jewelry associations have challenged a Wall Street Journal article linking tanzanite to the al Qaeda terrorist network. Meanwhile, a report on ABC’s World News Tonight also alleged a terrorist connection to the gemstone.

“One needs better proof to build a story like the WSJ and not to depend only on small miners’ rumors without specifying any name of buyers or sellers,” says International Colored Gemstone Association (ICA) president Israel Z. Eliezri.

But Robert Block, co-author of the WSJ report, stands by his story. He says smuggling is easy at Mererani, a 30-minute drive from the tanzanite mines. “It’s completely uncontrolled out there,” he says. “There’s chronic under-declaration and absolutely no controls at the borders, or at the mines. Anyone can walk into Mererani and fly out with stones.”

Block says proof of the al Qaeda connection is in court records from the 1998 embassy bombing trial. “There are several affidavits by FBI investigators, the grand jury indictments, and the court testimony of 63 days, all revealing the business dealings of al Qaeda, showing tanzanite as a conduit—a commodity.”

“Not true,” counters independent gem wholesaler Dana Schorr. “There is no proof that tanzanite was a major vehicle for money laundering. Bobby Block did not do due diligence, or he partially fabricated his story.” Schorr maintains that although Block interviewed numerous gem dealers, he refused to use any comments that did not support his view.

But the ABC report included an interview with William Wechsler, who chaired a National Security Council task force that investigated Osama bin Laden’s finances during the Clinton administration. Wechsler said he found the tanzanite trail and noted that the tanzanite business is “both highly profitable and an easy way to secretly move money around the world.”

Schorr admits there was evidence of smuggling but says the criminals worked out of Kenya, not Tanzania. “They were not a regular part of the gemstone trade—it was a side business,” he says.

“Everything that took place, took place three years ago,” says Schorr, who adds that all those involved are either dead or serving life sentences. “There are close to 30,000 people involved in the tanzanite trade, and there were three people who were pinpointed to actually have been involved in this.”

Schorr says low export duties make smuggling unnecessary. “In the past, there was a huge duty, so there was a lot of smuggling,” he says. “Now there’s a 3% duty. Who would want to risk a $100,000 parcel of goods when they could pay $3,000 and take it out legally?”

Eliezri agrees: “Export taxes are minimal and not worth the effort and possible risk of smuggling. We have spoken extensively to a number of key members who are involved in tanzanite, who also emphasized that under the current set of laws and regulations in Tanzania, there is no logic to smuggling of tanzanite.”

“Why would anyone want to smuggle tanzanite to smuggle money?” asks Schorr. “If I wanted to smuggle a quarter-million dollars, I would have to buy a kilo of high-grade tanzanite.”

Eliezri estimates that more than 90% of the tanzanite produced at Mererani is bought and traded by ICA members. “That leaves very few goods for others to do business with,” he says. “Also, while tanzanite is a very beautiful gemstone, the trade in this stone unfortunately does not promise untold riches. This certainly discounts anything on the scale that the Wall Street Journal is suggesting.”

But Block says al Qaeda uses gems and other commodities for “balance.” “The books may not be even, so they move goods—computers, jewels, cloth, animal hides, etc.—just to balance the books. There may be no profit for some of the hands that it’s passing through, but it’s still in support of Osama.”

Block says Tanzania must come to terms with its mining industry. “One to two tons of gold every month are smuggled out of the country. Gemstones are a large part of the smuggling problem, too.” Block discussed smuggling with representatives of the Tanzanian Mineral Dealers Association (TAMIDA). “Their response to smuggling was ‘We don’t smuggle, but we do under-declare.’ Isn’t that smuggling?” he asks.

Branded tanzanite. AFGEM, the South African company that mines—and brands—tanzanite, says it wants to be “part of tanzanite’s untainted future,” according to spokesperson Joanne Herbstein. She calls tanzanite a key source of “economic uplift” for Tanzania. “To taint the entire tanzanite industry because of inference and assumption seems to be so unjust,” she says. But Herbstein adds that AFGEM’s branded tanzanite “becomes even more desirable in the wake of the al Qaeda controversy.”

Herbstein says the tanzanite industry is “unregulated and informal and has historically been a bounty for illegality.” Still, the association of tanzanite to al Qaeda was something the company never considered. “It is most distressing that the industry has been implicated with the al Qaeda network,” Herbstein says.

Suspended. As a result of the Nov. 27 Wall Street Journal article, Tiffany has suspended all sales of tanzanite, says Tiffany’s public relations spokesperson Linda Buckley. “While we have no reason to believe that any of the tanzanite we have bought or sold has passed through the al Qaeda network, it’s troubling,” Buckley says. “Until the factual nature of this is established, we will hold off selling tanzanite.” Electronic retailer QVC has also suspended tanzanite sales.

Cap Beesley, president of American Gemological Laboratories in New York, who was quoted in both the WSJ article and the ABC report, says that while there is a connection between tanzanite and al Qaeda, there are alternatives to suspending tanzanite sales. “That’s not the answer,” Beesley says. “Tiffany and QVC didn’t stop selling diamonds when they were confronted with the reality of conflict diamonds funding ethnic wars and terrorism in Africa. They dealt with it more responsibly.” Beesley likes to point out that Americans haven’t stopped buying oil products despite the “eminently clear Saudi connection to terrorist support groups” that taints our oil supply.

Beesley also believes his comments on ABC were misrepresented. In a critique to ABC News, Beesley writes, “The skewed presentation was tainted by Brian Ross’s apparent agenda and was a disservice to ABC News and the miners, retailers, and dealers that abhor any activity associated with terrorism.”

Other industry organizations weighed in with a joint press release. The statement from Jewelers of America, the American Gem Society, the American Gem Trade Association, Manufacturing Jewelers and Silversmiths of America, and the Jewelers Vigilance Committee doesn’t deny a terrorist connection to tanzanite but does disclaim any knowledge about it: “This report presents entirely new information not previously known within the industry,” says the release about the WSJ article. “If any portion of this report is substantiated, the industry will take appropriate measures to ensure that the U.S. gemstone and jewelry industry is in no way tarnished by such criminal transactions.”

Block says knowledge of terrorist links by jewelry trade organizations was never at issue.