TOP OF THE NEWS

Lazare Kaplan Takes the Wraps Off Mystery Diamond Treatment

Lazare Kaplan International and General Electric, the companies behind the new diamond color-enhancing process, have acknowledged for the first time that the treatment involves heat and pressure—an annealing-type procedure many had suspected all along. “The treatment simulates the conditions where the earth forms diamonds and allows the process to finish,” says Bill Woodburn, general manager of GE Superabrasives.

The treatment—which has sparked an uproar in the industry (“Mystery Diamond Treatment Dominates GIA Symposium,” JCK, September 1999, p. 92)—elevates brownish and yellowish diamonds to D through G (colorless to near-colorless status). LKI says the process, invented by GE and kept under wraps until now, is permanent, irreversible, and undetectable.

In another surprising twist, LKI says it wants to sell the diamonds directly to retailers instead of through an LKI subsidiary in Antwerp called Pegasus Overseas Ltd. In fact, LKI has already approached some jewelers about stocking the stones for Christmas. “It’s to everyone’s advantage to shorten the distribution channel,” says LKI president Leon Tempelsman. Selling directly to retailers also makes it less likely intermediaries will polish off the “GE POL” girdle inscription signaling the diamond has been treated and gives the company a long-term “brand” to build on, LKI says.

Woodburn asserts the stones have strong selling points—their rarity and the fact that they’re backed by a GE warranty (which becomes null, however, if the “GE POL” inscription is polished off). And for “a certain kind of consumer,” the stone’s “new technology will be appealing,” Woodburn believes.

Previously, LKI tried to sell the treated diamonds at the same price as that of comparable untreated stones. LKI will now experiment with different price points. Both GE and LKI stress that the diamonds will be sold with full disclosure, including consumer brochures that describe the de-coloring process, along with Gemological Institute of America grading reports.—Rob Bates

Meatyard Murders Yield Connection To Jewelry Gang

On the surface, the crime was unrelated to the jewelry industry: Six armed gunmen ambushed a guard outside a Bronx, N.Y., meatpacking company in August, stealing $52,000 in bank deposits.

But before the guard died, he fatally shot one of the gang members. Searching the robber’s body, police discovered an address book with aliases and phone numbers for other suspected gang members. (The murdered guard was a retired New York police detective.)

Police have used the address book to link the gunmen, said to be Colombian, to more than 50 armed robberies of jewelers and other businesses in six states. The address book also enabled agents to seize evidence that formed the basis of a racketeering indictment against 11 suspected gang members (including the Bronx gunmen) for at least four years of violent cross-country crime sprees.

“This is a very important case for a number of reasons,” says John Kennedy, president of the Jewelers’ Security Alliance. “First, it was a very active gang. Second, I am heartened to see that the police commissioner of New York City has said, ‘We will pursue these people wherever they go’—committing a dramatic amount of resources and personnel to this investigation. We don’t see that too often with jewelry-related investigations. And most importantly, a big investigation like this will bring in many more suspects and crimes and will certainly lead to other gang members in other cities with whom these people worked or had connections.”

So far, the case involves the New York police, the Federal Bureau of Investigation, the Drug Enforcement Agency, Interpol, the Federal Immigration and Naturalization Service, and state and local police in Florida, where the remaining suspects are thought to be.

Investigators have linked the gang to a shooting in February 1996 during the JA show when gunmen ambushed a Hong Kong jeweler, stole a duffel bag with $1.2 million worth of diamonds, and shot him in the chest. In May, two members of the group were arrested on charges of stealing more than $500,000 in jewels from a Kay Jewelers store in Union County, N.J. The gang is also suspected in supermarket robberies and in robberies of drug dealers and suppliers.—Jessica Stein Diamond

JVC Seeks Exceptions To FTC Disclosure Rule

The Jewelers Vigilance Committee has proposed a revision of the Federal Trade Commission’s Guides for the Jewelry Industry that is meant to lessen the liability of retailers and dealers who unknowingly sell a drilled or color-treated diamond.

Earlier this year, FTC proposed a change to its Guides mandating disclosure of “permanent treatments … that have a significant effect on a stone’s value.” The commission solicited comments from the industry about the revision.

In her comment for JVC, executive director Cecilia Gardner argued FTC should include a sentence that mandates disclosure only if “said treatments are known or reasonably should have been known at the time of sale.” Gardner says the seller will not bear the burden of treatment disclosure if the seller “has been deceived and [the treatment] could not have been detected, despite the seller’s good-faith best efforts.”

If FTC incorporates the clause, it could provide relief in at least two situations. The first is laser-drilling in small diamonds. Zale and other major retailers argue that, with smaller stones, it’s too time-consuming to inspect each gem to comply with the rules.

The second situation involves the controversial new Pegasus diamonds from Lazare Kaplan, which have their color upgraded through an undetectable process. “If a seller gets a Pegasus diamond where the GE POL inscription has been polished off, he’s just as unable to detect that as anyone else,” Gardner says.

Gardner notes that, under the new rule, anyone who’s aware that a stone is Pegasus-treated or laser-drilled has to disclose that. Plus, the seller still must make a good-faith effort to determine if the stone has been treated. “The Guides won’t protect you from your own negligence, or failure to inquire,” Gardner says. “You can’t not have a quality-assurance program.” But if someone makes the effort, is deceived, and then sells the stone as untreated, the new rules say “they are as much a victim as anyone else.”—Rob Bates

Two Jewelry Groups Coordinate Hurricane Relief

Just days after Hurricane Floyd swamped the East Coast, two jewelers’ associations had established disaster-relief hotlines for owners of damaged jewelry stores throughout the region. The groups are putting anxious callers in touch with jewelers and manufacturers across the nation who are offering aid.

The two organizations are the Kentucky Jewelers Association, (800) 949-5675, and the Florida, Georgia, and Tennessee Jewelers Association, (888) 243-3252. According to KJA president A.J. Sales, jewelers calling the hotlines need everything—showcases, trimmings, and packaging material as well as benchworking tools.

Though Floyd missed Kentucky, Sales views the association’s involvement as a way to pay back the many jewelers who came to the assistance of Kentucky jewelers hurt by flooding there two years ago. Also, he chaired the Florida Jewelers Association’s relief effort after Hurricane Andrew hit that state in the early ’90s and thus is experienced in responding to disasters.

“It’s not just the goods that will help,” says Sales. “There’s also some psychological benefit victims get from a show of support.” He’s challenging suppliers to be sensitive to store owners’ needs. “Extension of credit will be very important to help jewelers survive the immediate and long-term impact, especially in hard-hit areas where consumer spending may not rebound for quite some time.”

The full impact of Floyd on the jewelry industry won’t be known for some time. By early October, Jewelers Mutual reported 29 policyholders had filed claims from eight Southeastern states. The firm’s standard business-insurance policy covers wind damage and loss of income due to business interruption for a covered peril—but not flood damage. In most instances, flood coverage is available only through the federal government.—Jessica Stein Diamond

De Beers Announces Price ‘Adjustment’

A recent De Beers price “adjustment” will likely mean increased prices for diamonds favored by American retail jewelers.

A De Beers statement says the “increase” results from the “improved retail market in the United States.” The company wouldn’t be specific about the amount of the increase or the exact size of the affected stones, but initial indications are that prices of better- and medium-quality goods, particularly in the “bread and butter” 1-ct. to 3-ct. range (in polished), could increase as much as 7%.

Meanwhile, some smaller, Indian-manufactured stones are also going up in price, by around 10% to 12%. Sightholders say that means some small goods will be getting more expensive. “There’s a shortage of those stones, so it’s a double whammy,” says Victor Weinman of ODI in Long Island City, N.Y. “By next year, we could see prices of those goods go up as much as 20%. We’re already seeing them climbing.”

The De Beers statement said the overall effect of its “realignment” was “price neutral”—implying there was a decrease to match the increase. But some sightholders have seen no decrease. De Beers’ last official price increase was in 1996.—Rob Bates

Watches

LVMH Buys Tag Heuer, Swatch Buys Breguet

Just three years after Tag Heuer went public, the Swiss sports watchmaker has been acquired by French luxury group LVMH, which owns Louis Vuitton, Moet Hennessy, Givenchy, Christian Dior, and other elite brands. The purchase price was $789 million, according to the Wall Street Journal.

LVMH plans to aggressively expand its watch business through this and future acquisitions—its next takeover might be Swiss watchmaker Ebel. LVMH also will extend the Tag Heuer brand into product areas beyond timepieces.

The Financial Times of London attributes the purchase—along with Swatch’s acquisition of Groupe Horloger Breguet, also in September—to pressures facing Switzerland’s luxury watchmakers. While Rolex has a brand and distribution system that should allow it to remain independent, the Times said, most analysts believe that the future for other famous companies, such as Audemars Piguet, Breitling, and Patek Philippe, is less assured. Among other problems, their domestic profitability is threatened by a Swiss government investigation into price-fixing in the Swiss watch trade.

Tag Heuer’s chief executive, Christian Viros, told the Times, “It’s going to be more and more difficult for prestigious brands to remain independent.” An analyst with Zurich’s Bank Sal Oppenheim added, “Watchmakers with no real global distribution are more and more vulnerable in an era of global brand names.”

Other Swiss watch companies that have been purchased by larger firms in the last decade are Blancpain, acquired by Swatch in 1992, and Vacheron Constantin, bought by Vendôme in 1996.—Jessica Stein Diamond