Duo Defendants Lay Claim to Diamond in GIA Case

Nov 8, 2005 4:30 PM By Jeff Miller

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(Rapaport...November 8, 2005) The Gemological Institute of America (GIA) the plaintiff in case involving the sale of a stolen diamond, sued defendants Zarian Co. Ltd., and S.B. Diamond Corp., as a form of protective measure. Zarian and S.B. Diamond independently claim they own an 11.57 carat Cushion Brilliant diamond in GIA’s possession.

The GIA was in doubt “as to which defendant is right” and could not deliver the diamond to either defendant without risking future liability should it wrongfully determine the owner. The GIA seeks full legal costs from the defendants for actions it took to protect itself.

The Hon. Ronald Ellis of United States District Court for the Southern District of New York, ruled in December 2004 that the diamond in GIA’s possession had been stolen. But the judge wrote that where the diamond was stolen was not relevant. Where the “sale of the diamond occurred is material in this case, because it will determine” which law –New York or Israel-- it applies to the purchase of stolen property. Zarian and S.B. Diamond are to present their evidence on November 15, 2005.

Zarian, a company based in Thailand, held the diamond on consignment at the time it was reported stolen in 2001, but it claimed the subsequent sale of the diamond that year (between David Gems and S.B. Diamond) occurred in New York. If that is proven, then New York law applies to the sale of stolen property. The judge wrote that Zarian’s first attempt at cause “does not prove that the diamond was purchased in New York.”

S.B. Diamond claims it has no knowledge of the diamond being stolen, and that the sale transacted in Israel between David Gems and a diamond broker, with a “good and valid title to the stone.” If proven, Israeli law may influence the court’s decision, “where a good faith purchaser can acquire good title from a person who had defective title,” the judge determined.

Under New York law a purchaser of property cannot “acquire good title from a seller who stole the property,” the Hon. Ellis wrote.

GIA’s Involvement

On October 29, 2001, GIA received the diamond from S.B. Diamond, which at the time had an approximate value at $400,000, according to the GIA. Three graders at the New York laboratory confirmed the diamond submitted by S.B. Diamond was the same submitted by Zarian in June 2000. Zarian notified GIA in June 2001 the diamond had been stolen from their booth at a show in Dubai, United Arab Emirates, on May 16, 2001.

GIA said the diamond was "slightly re-cut," and based its report upon the "the diamond's immutable fingerprint like" characteristics. According to court records, GIA followed federal procedure and contacted the Federal Bureau of Investigations (FBI.)

Zarian

Dating back to June 20, 2000, Zarian received GIA’s diamond grading report for an 11.60 carat D-IF diamond. In early May 2001, Zarian along with Dehres International Ltd (of Hong Kong,) mounted the diamond in a ring with 111 diamonds for a total carat weight of 12.20. The ring was priced at $698,000.

On May 10, 2001, Zarian transported the ring along with other jewelry to a show in Dubai, and six days later Zarian's booth was robbed. Zarian faxed the police report to the GIA in New York.

At press time, Zarian said it had no further comments on the case, other than what had already been determined by the Hon. Ellis.

The Diamond Reappears

In October 2001, Michael Sianes (also Siyance) of David Gems in Ramat Gan, Israel, bought an 11.57 carat loose diamond from diamond broker Zevulun Shemesh. In deposition papers, Sianes says he offered that diamond to his brother, Benyamin Siyance of S.B. Diamond in New York. Siyance agreed to receive the diamond, Sianes shipped it from Israel (although he can not recall which shipping agent he used) and on October 29, the diamond was delivered to GIA for grading.

At Issue: Establishing Location of Sale

Through an interpreter at deposition in New York on May 24, 2005, Israel resident Shemesh told Zarian’s attorney, Jonathan Chernow of White, Fleishcner & Fino LLP, that he'd sold an 11.57 carat diamond to Sianes on October 15, 2001. When he was asked from whom he bought the diamond from he said, "I am not willing to disclose that." Chernow told Shemesh during the federal deposition, "That you have to tell me. Who did you buy the stone from?”

"I don't remember the man," Shemesh said. "He came. He showed me the stone," he said in Hebrew. Shemesh gave the man a receipt for the diamond for "more or less" $358,000, but could offer no documentation to the actual transaction.

Chernow: "Do you still have copies of the papers that you gave him?"

Shemesh: "No, I don't keep them. I know I bought the stone for this and once I paid, I don't care what he does."

During deposition, the lawyers on both sides agreed translation of terms used in the United States may not mean exactly the same in Hebrew, nonetheless, when Shemesh was asked about a "title" to the diamond, he said the seller didn't have one, nor did he provide one to Sianes. "I trusted from what I saw in the stone," Shemesh said.

Chernow: "When Sianes met with you, did he state he was going to export this diamond stone to the United States and New York?"

Shemesh: "I didn't ask and he didn't tell me."

Chernow pressed for documentation on the sale, key to the case, from Shemesh who responded, "No, we have an agreement...it could be then I owe him 300,000 and then only the balance was 80, I don't remember." Shemesh, 41, said the transaction was largely built upon trust and that he didn't track individual diamond sales, but provided his accountant with total monthly and yearly figures.

Chernow: "You didn't do any paperwork in connection of your sale of this diamond to Mr. Sianes?"

Shemesh: "After in 2001, he said, ‘That my brother [Beyamin Siyance] needs an invoice,’ that I sold him a stone. So, I made him an invoice."

At first, Shemesh said Sianes had given him a receipt at some point after the transaction, and when their accounts were balanced he returned the receipt to Sianes. Shemesh said Sianes asked for an official invoice of payment in year 2001, but later during testimony said he'd given the invoice on October 15.

Exhibit H shows an invoice from Shemesh to S.B. Diamond for $370,000, with a date of October 15, 2001, and a fax date of June 23, 2002.

Chernow: "You gave him this invoice on October 15, 2001?"

Shemesh: "Yes, the same day that he asked me for an invoice."

After further discussion and repeat of the question, Shemesh stated, "No, I gave it to him after, after he asked me. I don't remember."

Timing the delivery of the invoice from Shemesh directly to S.B. Diamond was an issue Chernow continued to press. Shemesh’s invoice listed him as vice president of the Israel Precious Stones & Diamonds Exchange (IPSDE,) a position, which according to press reports was an elected title Shemesh held beginning mid-year 2002.

According to an article published in August 2002 (Exhibit C) by Israel Diamonds magazine, it says “Zevulun Shemesh was elected IPSDE vice president, succeeding [Shlomo] Eshed, who served in that position since 2000.” The election is reported to have taken place in July, but IPSDE would not discuss any issues related to its officers with Rapaport News.

According to testimony by Shemesh, he said he was vice president of the IPSDE, “From [year] 2000 to now, I ran twice, two times.”

Chernow: “Do you have any documentation indicating that you were first elected vice president of the Israel Precious Stones and Diamond Exchange in 2000?”

Shemesh: “Of course, there is some documentation, I could send from Israel,” and later he asked, “What is the difference of when I was president or when I was not?”

Chernow: “Because, sir, you testified…you were first elected vice president of the Israel Precious Stones and Diamond Exchange in July of 2002 and this document [invoice] is dated October 15, 2001.”

In testimony with Sianes, Chernow pressed on specifics of the transaction paperwork. After a receipt for payment was made "I would throw it out," Sianes said. Sianes, 46, is a resident of Israel and was present for deposition in New York on May 25, 2005. Sianes shipped the diamond to New York at some point between October 15 and 26. Chernow asked Sianes to name his courier, to which he responded he uses several. Sianes said, "It is not my business how he brings it or how he travels."

Chernow: "You mentioned previously...that you did not really care to consider it your business how a courier took a diamond into New York. Could you elaborate on that?"

Sianes: "What should I explain? He gets it in Tel Aviv, that's his work, he gets it in Tel Aviv and he has to deliver to New York."

Chernow: "...Whichever courier got on the plane, was he suppose to declare the diamond when it arrived in New York in other words?"

Sianes: "I don't know how it works here."

Chernow: "Did any courier ever tell you after a trip to New York that he or she paid duty on the importation takes on the diamond?"

Sianes: "I think there is no taxes in America for diamonds, tax or duty on diamonds in America."

Sianes said that he receives notice from the final destination that the diamond(s) arrived in New York. As for any other transactions with Shemesh "in excess of 11 carats," Sianes said he didn't remember and that there are no records of diamonds he'd bought for S.B. Diamond in excess of 10 carats.

Chernow: "Did you ask Mr. Shemesh if he had any certificate for the stone?"

Sianes: "No," and "I never ask if it belongs to him or what. He says I have a stone to show you. I said please come and show it. If he says I have a stone, that means it belongs to him."

Chernow: "I understand that, but just because [he] had the stone with him doesn't necessarily mean that he owned it, is that correct?"

Sianes: "I don't understand what you mean."

Chernow asked Sianes when he'd received the invoice from Shemesh. "After a period of time, I don't remember exactly, but in a long period of time," Sianes said. "It wasn't on October 15, 2001."

Chernow: "Was it in the year 2001?"

Sianes: "Perhaps even 2002."

According to Sianes, Siyance "told me there is a problem with the stone, that he wanted to enter in the GIA. So I wanted to show that I didn't just buy a diamond from anybody off the street..."

Chernow: "What was the approximate date that you asked Mr. Shemesh to create this invoice in 2002, because you said it was likely in that year."

Sianes: "I don't remember, maybe the fourth, fifth, or six months."

Sianes said he asked Shemesh to date the invoice October 15, 2001, because "that was the date that the stone was purchased."

Chernow: "Did you ever pay Mr. Shemesh 370,000 U.S. dollars for this diamond?"

Sianes: "What do you mean by dollars?"

Chernow: "Was it in cash?"

Sianes: "No."

In further explanation, Sianes said it wasn't handled as a single transaction, "we had accounts between us...He bought from me a stone or I bought from him a stone."

When Chernow pressed for specifics on how the diamond was paid for, Sianes said, "Perhaps it was me, maybe I'm the one who settled with him [Shemesh.]" And to whether or not S.B. Diamond paid Sianes he said, "I'm saying again we are settled...but specifically to this I don't know."

According to S.B. Diamond's office register, the diamond was present on October 26, 2001, at its office in New York.

Chernow: "I want to know who took this stone into the United States."

Sianes: "I don't know."

Chernow: "Did you get a receipt from the courier?"

Sianes: "No."

Chernow asked Sianes about paying export taxes for diamonds from Israel. "I don't pay specifically per stone," Sianes said, "I settle at the end of the year."

The attorney for S.B. Diamond, Robert Bodian of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC, asked Sianes to comment for the deposition. Bodian asked questions establishing a history of credibility between Saines and Shemesh’s past transactions.

Bodian: “…Did you understand that Mr. Shemesh owned the diamond?”

Saines: “If somebody says he bought, that means that it’s his.”

There were “no” reasons to question Shemesh about ownership, Saines told the S.B. Diamond attorney.

Bodian: "Would it be the normal course of your business to question somebody about ownership if they told you they bought a diamond?"

Sianes: "Never, that's I never asked. That's our work to buy and sell. I never asked whom you bought from or who did you buy it from or where you bought it from."

Sianes added that even if he had asked Shemesh were the diamond came from, that "he was not going to reveal whom he bought merchandise from."

Bodian: “Did Benny [Benyamin Siyance] agree to try and sell the stone in New York?”

Saines: “Yes.”

Bodian: "Now, you didn't actually sell the diamond to S.B. did you?"

Sianes: "I don’t' sell my brother's merchandise. I send him merchandise. He sends me money."

Submitted by S.B. Diamond to the court dated February 14, 2005, (Exhibit A) Irit Ben-Shachar, deputy managing director of the Israel Diamond Exchange, confirmed that Sianes and Siyance had been active members of the exchange since 1994 and 1977 respectively.

Both Siyance and Saines reported in deposition that they are members in good standing and say no prior legal issues have arisen. Both men explained in detail the lengthy process required to join the exchange, which includes bonding and sponsorship by active, long-standing members.

Chernow: "What is the reason you got the letter we previously marked Exhibit A, the one dated February 14, 2005?"

Sianes: "I asked for it."

Chernow: “What is the reason you asked for that one?"

Sianes: "That I'm working in diamonds and I'm a member of the exchange and I'm not just a passerby from the street."

New York resident, Benyman Siyance, Sianes' brother, confirmed that S.B. Diamonds also conducts business as Ramco Jewelry Manufacturing and Siyance Inc., during deposition testimony on September 14, 2005. Siyance, who is 58, told Chernow that S.B. Diamond does not record the larger stones.

Chernow: "Do you still have the note paper or the book entry for this stone when it came in?"

Siyance: "I don't remember, I have the memo what I give to that person."

Siyance said the invoices go to his accountant, but when pressed by Chernow on invoices dating back to year 2000 that showed "there are no purchases of stones that were more than individual 6 carat weight...," Siyance said, "We don't have the invoices...but Micky [Michael Siance] I think he did."

Chernow: "Do you control who Michael Siyance [Sianes] bought stones from?"

Siyance: "We are partners. I trust him and I don't stick my nose into this business."

Further, Siyance said profits "remain in the company for everyone," as it is a family business with offices in Italy, Israel, and New York, and that he doesn't tell Siance how much he sells a diamond for, nor does Siance say how much he paid for a diamond.

Chernow: "Do you know if Mr. Shemesh used the words 'good and valid title' when he sold the stone to Michael"

Bodian directed his client, Siyance, "not to answer" since Siyance was not in Israel during the transaction.

The diamond arrived at S.B. Diamond October 26, 2001, and Siyance said it was delivered to him directly.

Chernow: "Who was the person who put it in your hand?"

Siyance: "Somebody."

Chernow: "Was it a man or a woman?"

Siyance: "A man I think."

Siyance said he'd never seen the man before or hadn't since.

Chernow: "Do you know who carried the stone into the United States?"

Siyance: "No."

Chernow: "Do you know whether this person declared the stone on any form when he entered the United States?"

Siyance said, "I don't know." He added that "To my regret" he had no receipt from the courier who carried the diamond from Israel.

Siyance then consigned the diamond and another 2.30 carat diamond to Myer Somer on memo for delivery to the GIA (Exhibit I.)

Chernow: "When had you first learned the Myer Somer had not gotten the gem back from GIA?"

Siyance: "He told me."

The date could have been “a few days” afterward, "I don't remember how many days," Siyance said. Somer told Siyance there was a problem, "but he didn't know what the problem was." Siyance later sent an employee to the GIA, who was told the diamond was under suspicion.

"I didn't give the stone to GIA. So, GIA didn't report directly to me about the stone. They reported directly to the one that gave it to them," Siyance said. According to the statement the GIA informed Siyance to prepare for a visit from the FBI, at which time Siyance said he requested documentation of the sale from Sianes.

Siyance couldn't remember exact days, but thought he'd requested documentation after December 7, 2001, "I think much after," he said.

"The invoice is never made at the same moment," Siyance said, "in the diamond industry, you just make the invoice for the books and other things."

Chernow: "Did you ask Michael Siyance [Sianes] to ask Mr. Shemesh to date back any documentation that he was going to send for the original sale date of October 15, 2001?"

Siyance: "I don't tell Micky what to do. He must have asked for it to be written to put the date of when it happened."

When Chernow asked Siyance if S.B. Diamond receieved the invoice by fax on June 23, 2002, Siyance said, “seemingly.” Siyance said he filed the invoice with his other invoices and said, “I didn’t speak to the GIA anymore.”

“I was worried for awhile and then I went to the [New York] Diamond [Dealers] Club and I discussed it with the president,” Siyance said. He told “then GIA is holding the stone for me and I don’t know why.”

Chernow asked Siyance who paid Sianes for the diamond, "Do you have any receipts or records as of today to confirm that Michael Siyance paid the sum of $370,000 to Mr. Shemesh other than an invoice?"

"If he wouldn't have paid, they wouldn’t' have done business again," Siyance said. "Of course he paid....We don't have specific notes or invoices for each purchase. It all goes into different accounts."

Whether or not Sianes was paid for the diamond by S.B. Diamond remained unclear. "I don't know were the money goes," Siyance said. When customers pay, "I tell him I have $100,000, $200,000. He tells me where to send it, but I don't know what it is specifically for."

Chernow: "What I am asking is has S.B. Diamond...paid Michael Siyance since this interrogatory?"

Siyance: "It is paid. It is not open anymore."

Chernow: "What I am asking is have you sent money to Mr. Siyance for the money he laid out for this stone?"

Siyance: "I am send him all the money that reaches my hands from the sales he pays for what he buys. I don't know for which he paid for what he paid."

In Siyance Exhibit F from the December ruling, it was written, “S.B. Diamond has not yet reimbursed Michael Siyance for the diamond,” and during deposition Chernow resubmitted the document as Exhibit U.

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Tags: Dubai, GIA, Hong Kong, Israel, Israel Diamond Exchange, Jewelry, Manufacturing, United States