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| Gems & Jewelry |
Swindler’s List
Carol Besler
05/03/2004
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In a case known as Operation Oxbow, which lasted from 1996 to 1999,
the U.S. Postal Service, the FBI and the Royal Canadian Mounted Police (RCMP)
shut down a scam in which 5,600 victims lost a total of $50 million. One person
lost $1.4 million. (The criminals often operate in Canada but prey on victims in
the United States on the assumption that they will be able to decamp in the time
it takes for the law enforcement authorities to coordinate their
efforts.)
VALUE JUDGEMENT
Investing in gemstones is perilous, as the field is rife with
predatory swindlers. To avoid being the victim of fraud, we should
always:
• consult a trusted financial advisor before
investing;
• have the items appraised by a well-known expert before purchasing;
• be wary of unsolicited mailings about investments and
of advertisements—even in reputable magazines;
• realize that
legitimate high-quality gemstones are almost always traded through
well-known brokers or at reputable auction houses. |
Anne Neumann, a principal at Harold Weinstein, a Toronto appraisal
firm that advises the RCMP, has examined many of the seized gems, which she
refers to as “gravel.” “If the buyers had walked into a jewelry store and bought
gems at retail,” she says, “they would have done better by a long shot.”
Follow-On Fraud
The initial sale is only the beginning. A few weeks after
the gem arrives, a so-called “loader” takes over, and calls the buyer to
announce that the gems have appreciated in value. He offers to help give this
new “portfolio” a more complete investment value, quoting phony sales of phony
collections that have sold for millions. If the victim has already bought, say,
a 1.09-carat ruby, he will claim he can enhance the investment value with a
matching 1.09-carat ruby. He will say that several investors have formed a
consortium to pool their collections to create a million-dollar portfolio
for a specific buyer, but that one of the people had to drop out because he is
going through a divorce and his assets are frozen. We, the loader suggests,
could contribute the last share of the investment, but we will have to buy the
stones first. The calls come repeatedly, peddling more gems at increasingly
higher prices.
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