TOP OF THE NEWS

W.Va. Sues Friedman’s Over Insurance Sales

Friedman’s Inc., the third largest U.S. retail chain jeweler, has been sued by the state of West Virginia for allegedly charging customers for credit insurance without their knowledge. “While [this practice] is common in the auto industry, this is the first time we’ve sued a retail jeweler,” says the lawyer handling the state’s case.

A preliminary hearing to temporarily prohibit Friedman’s from selling undisclosed insurance was set for Nov. 1. Officials at Friedman’s, which operates more than 530 stores nationally, including six in West Virginia, couldn’t be reached for comment.

The lawsuit, brought by state attorney general Darrell V. McGraw Jr., claims Friedman’s sold its private credit-card customers insurance to cover their payments in case of death or disability—as well as property insurance on the product itself—without the customers’ knowledge or consent. That is “an unfair or deceptive business practice” under the West Virginia law.

In addition to an injunction, the state wants Friedman’s to pay $5,000 in civil penalties for each violation going back to 1995 and to reimburse each customer who was allegedly charged unknowingly for insurance.

The lawsuit claims that early this year Friedman’s employees in West Virginia were ordered by a district manager either to sell insurance to customers without informing them or lose their jobs. The alleged practice came to light when two employees quit rather than comply and applied for unemployment benefits. A judge granted their plea for benefits, saying the sale of undisclosed insurance (also called “insurance packing”) was “illegal and immoral.” A state undercover agent who later bought jewelry in three Friedman’s stores in West Virginia allegedly also was charged for insurance without being asked or informed.

McGraw also claims Friedman’s and its employees weren’t licensed to sell insurance in West Virginia, another violation of state law.—William George Shuster

DIAMONDS

Millennium Diamonds on the Web

Luxury Web site Ashford.com, which has sold watches and accessories to some 30,000 consumers, has entered the diamond and jewelry market and has already sold a $40,000 unmounted stone. Surprisingly, among its first offerings are De Beers limited-edition Millennium “branded” diamonds.

Kenny Kurtzman, CEO of the Houston company, says Ashford.com bought the diamonds from a sightholder and has “several hundred” in inventory. De Beers has issued only 20,000 of the “Millennium” pieces. “I suppose it was inevitable that someone would sell them online,” says De Beers regional director Derek Palmer. But he points out that a Web retailer can’t take advantage of one of the stone’s selling points—the “brand” inscription, visible only with a special in-store scanner. Ashford is selling the stones for 40% to 50% above the Rapaport Diamond Report list price—around the same level other retailers are getting.

Ashford also has signed a deal with the International Jewelry Design Guild that makes it the exclusive Internet retailer for Design Guild members. Twenty-five designers—including Lisa Jenks Ltd., JFA Designs, and Chris Correia Collection—have agreed to sell their merchandise on Ashford.com.—Rob Bates

CRIME

Presidential Candidate Urged To Address Jewelry Crime

Scott Kay, the well-known platinum jewelry designer and manufacturer, has asked presidential candidate Bill Bradley to take up the cause of jewelry-industry crime.

“Do you want the support of a large mass of people with a lot of influence and even more money? Then speak our language, Senator. A bold, well-publicized statement acknowledging the seriousness of this problem and your intent to correct it would be to your great political advantage,” Kay wrote in an October letter.

The appeal followed the loss of $500,000 worth of jewelry during an armed holdup of one of Kay’s salesmen. The robbery occurred just outside a Nordstrom store in northern New Jersey’s Garden State Mall. It was the third big loss Kay’s firm has suffered in recent years.

“The situation is out of hand,” Kay tells JCK. “It’s getting so bad that salesmen will have to carry laptops instead of jewelry. They’ll just have to show the jewelry on the computer screen.”

Kay selected Bradley from among all the presidential hopefuls because both men have roots in New Jersey. Kay’s firm is in Hackensack, N.J., and Bradley represented the state in the U.S. Senate.—Larry Frederick

Diamonds

The Solitaire’s Successor?

After its success in launching the diamond solitaire necklace three years ago, De Beers thinks it may have a follow-up: the three-stone ring. The ring will be targeted as a gift for wedding anniversaries, and the three diamonds are said to represent the “past, present, and future.” The campaign is set to be launched next year, but officials at J. Walter Thompson, which handles U.S. publicity for the South African company, say plans haven’t been finalized.—Rob Bates

Retailing

Jan Bell Must Pay Supplier Despite Underkarating Ruling

A Florida jury has ordered Sunrise, Fla.-based Jan Bell Marketing, parent firm of Mayor’s Jewelers and Maier & Berkele Jewelers, to pay $750,000 for breach of contract to jewelry supplier Giuseppe America Inc., even though a federal court earlier had found Giuseppe guilty of selling underkarated products.

In 1993, Jan Bell reportedly agreed to buy $1 million of gold jewelry annually from Giuseppe, then in Hollywood, Fla. Three years later, Giuseppe sued Jan Bell for allegedly failing to order enough merchandise to fulfill the agreement. Jan Bell countersued, claiming Giuseppe sold it underkarated goods. The supplier this year admitted to the federal court it “unknowingly” did so once in 1995 and once in 1996, each time owing to “a manufacturing error” by its supplier in Thailand. Nevertheless, the court ruled last July it had violated the 1906 National Stamping Act, which controls quality markings on gold or silver articles.

In August, a Broward County, Fla., jury decided that despite the federal verdict, Jan Bell must pay Giuseppe $750,572 for breach of contract. (Giuseppe had sought $1.2 million.)

Meanwhile, Giuseppe America (now out of the jewelry business) has appealed the underkarating decision to the 11th U.S. Circuit Court of Appeals in Atlanta and expects a decision next year. Jeffrey Feldman, attorney for the company, says if the decision stands, “It puts an incredible burden on importers of gold jewelry marked with a karat stamp. They will have to inspect every piece [for compliance with the law].” Otherwise, “they risk being sued” if jewelry they sell is found to be underkarated.

A spokesman for Jan Bell said corporate policy prohibits comment on litigation.—William George Shuster

Diamonds

Over the next 13 months you’ll be seeing a new De Beers TV commercial that breaks with tradition on three counts. It’s the first De Beers ad to promote a Web site—the “Design Your Own Engagement Ring” feature on its www.adiamondisforever.com. It also features a lighthearted tone and a female announcer.

The 15-second spot premiered in November and will run through 2000. The ad focuses on a woman’s hand using the “design” feature. As she clicks different styles on her screen, the ring on her hand changes with them. The announcer tells viewers they can “design the perfect diamond engagement ring in just minutes. You’ll have the rest of your life to design your perfect husband.”

“It’s more playful than our standard romantic commercials,” says Anne Ritchie, a De Beers account director. She adds that the design feature has been a huge success; since it premiered last June, hits to De Beers’ Web site have soared 900%, to 5.3 million a month, she says. “We’re getting a lot of feedback from retailers who come in with printouts from the site,” she adds.

Even though the design page features 7,500 options, most Web visitors go for the tried-and-true: round solitaire set in white gold, round solitaire set in platinum, or round solitaire with baguettes set in platinum.—Rob Bates