Rapaport Magazine


By Marc Goldstein
Fighting Fiscal Fraud

The opening of a tax fraud trial in which Antwerp-based diamond company Omega Diamonds is facing potential fines of approximately $6 billion, originally set for September 12, has been rescheduled for November 7. Belgian Customs and Excise authorities allege that between 2003 and 2008, Omega imported 13.25 million carats of diamonds from Angola and the Democratic Republic of Congo (DRC) that had a counter value of $3 billion. In this case, Customs imposed a penalty almost equal to the value of the fraudulent amount.
   According to the government charges, Omega transported the stones through Geneva and Dubai, where certificates of origin were delivered and where the value of the stones was illegally inflated. Such action has the effect of reducing the company’s profit on the stones and, in turn, the tax due on those profits when the stones are eventually sold by the company. Omega is arguing that diamonds are not subject to import duties, so Customs did not suffer any losses from the imported diamonds in question.
   Attorneys for Omega said they welcomed the additional time to prepare for trial because they had been presented with 770 pages of case files from the Customs investigation. It’s important to understand that the upcoming trial is unrelated to a $200 million “settlement” for unpaid taxes that was concluded recently between Omega Diamonds and the Central Administration of the Special Tax Inspection and the Antwerp Prosecutor.

Settlement vs. Trial
   John Crombez, the Belgian State Secretary in charge of fiscal fraud cases, explained that the recent Omega settlement confirmed how preferable financial settlements were, as opposed to long and painstaking courthouse trial procedures.
   Crombez admitted that he would prefer that every accused company be forced to go to trial so that the Court would be able to make sure that justice was duly rendered. “If a company happens to be guilty, they deserve a huge financial penalty and jail time,” he told the Belga News Agency. But, he added, that is in an ideal world.

Money Buys Delays
   In fact, normally, these cases go to trial and it can take years before the charges are settled. Companies such as Omega have the means to call upon the best lawyers and make the case go on indefinitely. Eventually, a compromise is often the most realistic option. Crombez said he was not surprised when even before the trial, Omega Diamonds said they would try to take advantage of all possible procedural mistakes.
   If big companies go to court, there’s always a chance that they manage to end up free of charges due to technical mistakes. So, even though Crombez prefers that charges such as those in this case go to trial, a negotiated settlement is much quicker and less expensive for everyone.

Authorities On Site
   Belgian Customs and Excise authorities have duty officers monitoring the Diamond Office work. The Belgian Federal Public Service Economy, which also has agents working within the Diamond Office, confirmed to Rapaport Magazine that “We’re not allowed to comment on specific cases, or ongoing investigations. What is certain, however, is that all procedures were strictly respected and followed. Consequently, any problem detected was immediately reported to Customs.”
   Although no source was willing to claim it officially, a Rapaport Magazine inquiry confirmed that it was the Diamond Office itself that discovered the overvaluation of some shipments and that its officials informed the Customs office. It is that move that appears to have triggered the entire Omega inquiry.
   The allegations and the upcoming trial have raised some puzzling questions and concerns within the Antwerp diamond industry. The main two are: First, how exactly did Customs calculate the astronomic amount of $3 billion in value on the shipments? Second, how was it possible for such a situation to continue to operate over a period of six years before Customs noticed and intervened? The Omega trial, when it does finally happen, may provide the answers.

Article from the Rapaport Magazine - October 2013. To subscribe click here.

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