Genie out of the bottle – more transparency in diamonds?

Isaac Mostovicz writes...


Sightholder status from the Diamond Trading Company (DTC) is bestowed the world’s top diamantaires (as chosen by the DTC) for “their ability to market diamonds effectively and distribute them efficiently.” DTC Sightholders get access to rough diamond supplies, and in return “deliver specified diamonds in predictable quantities, assure the quality and integrity of their diamonds, and provide value-added marketing support.” (Both quotes from the DTC’s site here)

Recently, six companies lost their DTC Sightholder status following the result a criminal case in Antwerp. On December 6, 2007, the Antwerp Correctional Court convicted these diamantaires (and seven others) of fraud, fictitious invoicing and smuggling between 1994 -1999.

The judges refused to approve a settlement between the Belgian prosecution and the thirteen diamantaires, and gave the companies a six months suspended jail sentence. The DTC is also suspending these companies’ diamond supplies.

This editorial, “The Genie is out of the Bottle,” by Chaim Even-Zohar, makes an interesting argument that it wasn’t so much fraud as industry practice at the time that these (relatively small) companies were doing–they were actually increasing their taxable income by moving values that were ‘hidden in inventories’ to actual revenues, which the law now makes companies do. Their conviction is merely for show when larger companies with greater transgressions at the time were not targeted in the lawsuit. In any case, Even-Zohar believes the decision will accelerate growth of transparency, good governance, and Best Practice Principles in the diamond industry. Do you agree?

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