Antwerp has made significant efforts in recent years to transform itself into a transparent, streamlined diamond industry commanding center stage in the global diamond network. But recent media headlines on legal issues and fraud allegations appear to be getting in the way of that effort to shed its old image and become a new entity.
Making Changes
One of the most difficult tasks that the world diamond center is facing is to free itself from those issues that might appear as stains on its reputation. On the one hand, statistically, the risk of being confronted by fraud or misappropriation accusations is always highest where the number of transactions is greatest. In that respect, Antwerp’s huge trading volume carries equally huge risks.
Still, Antwerp can’t afford to use its energy fighting off fraud and tax evasion charges without it becoming detrimental to its business. The recent lawsuit by Lazare Kaplan International (LKI) against Antwerp Diamond Bank (ADB) and KBC, the bank’s parent company, as well as the recent judicial argument in the HSBC Bank case are two instances of the kind of cases everyone would prefer to never see in the city’s square-mile diamond district.
The LKI Suit
In its 163-page lawsuit, filed in the U.S. District Court in New York, LKI is alleging that ADB and KBC stole $135 million worth of revenue from the company between 2008 and 2010. Specifically, the suit says the banks stole rough from the company, sold the stones and then laundered the proceeds, which were used to pay off some “financially disastrous loans” the bank had made to an Antwerp diamond dealer.
In response, Stef Leunens, KBC press officer, quoted a December 24, 2011, bank statement, made in response to media coverage of the suit by the U.S.-based LKI. Calling the suit “without merit,” the statement said: “The dispute relates to legal proceedings before the Antwerp Commercial Court regarding a credit contract between LKI and ADB, terminated in 2009 by ADB in full accordance with all contractual obligations and relevant regulations. As a rule, and in order to respect customer confidence, KBC and ADB don’t release information on specific customer files. KBC and ADB emphasize that in the LKI case, all normal procedures and measures have been respected. KBC and ADB deplore the steps taken by LKI and will take all necessary measures to defend their rights and the interests of their stakeholders. In order not to influence the legal proceedings, KBC and ADB will refrain at this time from making any further statements.”
The HSBC Case
The Belgian press has been prolific in the number of articles it has published in recent weeks regarding new developments in the 2011 HSBC Bank tax fraud case that rocked the local diamond industry. In September 2011, De Tijd newspaper published the names of 179 Antwerp-based diamantaires who it claimed were being investigated for evading $1 billion in taxes by hiding assets in secret Swiss bank accounts. The 179 names were among 79,000 names of possible tax evaders worldwide whose account numbers were leaked to the media and the public by a Swiss subsidiary of HSBC. The new issue in the case that is being debated concerns the independence of the Antwerp judges in the legal and tax inquiries that are underway.
Annemie Turtelboom, newly appointed minister of justice, is requiring the Superior Justice Council to initiate an official inquiry into the way the general attorney of the city of Antwerp and the tax authorities in the city were collaborating and, more specifically, the leaks to the press and the classified information that was publicly circulated.
The most recent allegations appear to have been ignited by a Flemish TV station, VRT, which revealed during its “Panorama” show on January 10, 2012, that some judges could be considered under the influence of lobbyists with respect to the ongoing cases. Turtelboom denied allegations that outside influence has affected the impartiality of judges. But approximately one week before her ruling, VRT reported that a thorough inquiry was ordered by Antwerp’s general attorney into his deputy, Peter Van Calster, a magistrate who has been assigned HSBC cases.
The Marketplace
- Demand is very strong for princess and cushion cuts from very best to piqué goods in all colors and all sizes. Some say the demand is a result of these diamonds’ price advantage over rounds. A princess cut, for example, can cost half as much as a round diamond of the same size, color and weight.
- There is very strong demand for rounds in D-I, VS-SI, from 30 points to 2 carats. Some of that demand is from the U.S., where business picked up in the fourth quarter of 2011.
- The prices of very small goods below 3 points in high colors and high clarities haven’t corrected since August. It’s impossible to fill all orders, which are mainly coming from Swiss watch manufacturers.
- Generally, there’s a feeling that there are pockets of shortages. The few dealers who hold inventory are standing firm on prices, which is considered a good sign that the industry is stable. Prices almost doubled between January and August 2011, and everybody feared there would be a drop. Eventually, there was only a minor price correction between 0 percent and 10 percent in September/October.
Article from the Rapaport Magazine - February 2012. To subscribe click here.