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AGTA Fires Back at Chatham By Filing FTC Complaint

Apr 14, 1994 2:50 PM  
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_____________________ New Skirmish in Ongoing Feud

_____________________



By Jane Everhart

Tucson, Ariz.- The latest fusillade was fired in the feud between

the American Gem Trade Association (AGTA) and top U.S. lab-gem

grower Thomas Chatham when Owen Bordelon, president of AGTA,

called a press conference during the Tucson Gem Shows and

announced to trade reporters that the AGTA has filed a formal

complaint to the Federal Trade Commission against Chatham.

It seems that after years of tolerating Chatham's

colorful and sometimes audacious advertisements, the natural

[mined]-gem proponent AGTA has decided that Chatham's ads "blur

and confuse" the distinction between natural and synthetic

stones. The fact that the San Franciso-based Chatham has

a suit pending against AGTA for denying him membership in the

400-member not-for-profit trade association "had nothing to do"

with AGTA's complaint, Bordelon asserted. "This is not

tit for tat. It's not a knee-jerk reaction to the law suit,"

Bordelon insisted. It was merely an accumulation of indignities,

he said, which added up as material was being collected for

AGTA's defense in the law suit. He compared Chatham's ads to

rocks piling up on a recumbent man's chest. At the press

conference, Bordelon, who is a lawyer as well as president of the

Dallas-based AGTA, presented reporters with a 3-lb., 182-page,

three-ring binder in which he had compiled Chatham's alleged

transgressions. The notebook, which Bordelon said was

sent to the FTC on February 1, contains alleged "evidence,"

ranging from documents dating back to the late Carroll F.

Chatham's case before FTC in 1959 (Carroll Chatham, who

discovered the Chatham process for growing emeralds, is Tom

Chatham's father) to an article written by Chatham in 1980 for

the now-defunct The Goldsmith magazine. On each page of

the complaint, the phrases that offended AGTA were highlighted

with a yellow magic marker, including such statements as,

"Chatham Created Gems have all the beauty, brilliance and natural

properties of the most valuable of gemstones at a fraction of the

price." (Chatham later charged that such marked phrases had been

"taken out of context.") Among the allegedly offending

ads in the three-ring binder was Chatham's famous cereal box ad

dating back to the mid-1980s, which claimed Chatham Created

Emeralds are composed of "100% Natural" ingredients such as

beryllia, alumina, silica and chromium. The ad created a stir

back then, mostly as a humorous parody. Bordelon said

during the press conference that New York emerald dealer Maurice

Shire had been complaining about the Chatham ads for years, "and

by golly, the old man was right." Shire and Chatham have been

vocal adversaries for years, and the cereal-box ad has long been

one of Shire's pet peeves. In a letter sent to the FTC

along with the 3-lb. "evidence," Bordelon urges the FTC to take

action and contends that "Chatham has, over an extended period of

time, engaged in a willful course of conduct calculated to

enhance sales of Chatham products by the intentional

misrepresentation of the nature of such products for the purpose

of blurring and confusing the distinction between natural and

synthetic gemstones..." Chatham said he first learned of

the AGTA's complaint from trade reporters who came to his booth

at the Gem and Lapidary Dealers Association show in Tucson.

"I feel 'attacked' publicly and unfairly," Chatham told

RDR. "This will be added to our lawsuit as another example of

AGTA's restricting our trade." Later, Chatham issued a

statement to the press that said in part: "The act of holding a

public forum to criticize and announce an FTC complaint was very

unprofessional and legally naive. This public announcement

appears to be just another shot in an unfair competitive war; it

only adds credence to our current anti-trust suit against the

AGTA... "To attempt privately to embroil our company in

disputes with the FTC on such baseless accusations would be bad

enough. But it is worse to do so in a public press conference in

such a way as to disseminate the false idea that we are guilty of

something throughout the trade. It flaunts the laws which protect

every citizen against slander and defamation. Our attorney is now

looking at the addition of this unfair tactic to the lawsuit now

in progress. "...We take great pains to make clear that

what we sell are created gemstones, not natural ones," Chatham's

statement adds. "What the AGTA has done to our ads, video and

newsletter to justify their position is nothing less than

blatant, out-of-context distortion, ignoring the plain meaning

and import of our materials." The statement concludes,

"Maybe the FTC should take a look at what the AGTA calls

'natural' in its trade show. Could they find one?" The

last two sentences appear to refer to Chatham's long-time

contention that so-called "natural" stones are hardly natural any

longer after they have been heat-treated, irradiated, diffused,

oiled, opticoned, nuked, colored, coated or filled with glass,

and it appears calculated to cross swords with the AGTA in a

matter on which the group is particularly vulnerable: gem

treatments. Another laboratory gemstone grower,

Judith Osmer, head of the Redondo Beach, Calif.-based J.O.

Crystal Co. and producer of the Ramaura Cultured Ruby, staunchly

defended Chatham. "In my opinion, Chatham has never

advertised deceptively and has never done anything unethical. He

clearly states in his ads that it is a lab-grown or created

stone," said Osmer. "Ask the public. They know the stones are

lab-grown. I think he's going overboard to be straightforward.

He's never tried to sell his stones as natural. "Why

isn't AGTA going after the Allenite people?" Osmer added.

[Allenite is a company that is selling stones, mostly CZs, as

"Allenite," a practice that has been condemned by many in the

industry.] Osmer felt that AGTA's complaint to the FTC

was an unsavory move: "When they [AGTA] take things out of

context, they are being unethical and deceitful. When they try to

use governmental agencies as their agent to fight their battles,

that may in itself be illegal." The AGTA-Chatham

imbroglios stem back at least 12 years to the time when AGTA's

now-defunct predecessor, the American Stone Importers

Association, Inc. (ASIA) was in existence. Chatham, in

the suit filed in June 1993 against AGTA, claims that he was

drummed out of ASIA without notice or explanation. Immediately

following Chatham's expulsion, ASIA and AGTA merged, and members

of ASIA were grandfathered into the new organization, AGTA.

Chatham has charged that individuals named in his suit

"conspired" to suspend him from ASIA in order to keep him from

becoming a full member of AGTA. Chatham's suit, which is

still pending, also charges AGTA with restraint of trade, and

contends that the defendants [the suit names five of AGTA's

former leaders] "have repeatedly disparaged Chatham and its

gemstones to he market, customers, regulatory agencies and other

gem dealers, to injure and foreclose competition from Chatham and

other gem growers." Thus, according to the suit, the

alleged conduct of AGTA "constitutes a conspiracy to restrain

trade in the market in violation of the Sherman Antitrust Act."

AGTA has sought to have the suit dismissed, but a U.S.

District Court tossed out only the suits against the individuals

named, although not their companies. Per California rules, both

sides are preparing additional arguments prior to pre-trial

meetings with the judge.

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