Looking at the tumultuous, profitable world of diamonds. A worldwide cartel controls supply and demand while labs try to mass-produce diamonds, squabbling between shareholders guts a successful jewelers, and the heist of the century that remains unsolved.
Edward Jay Epstein’s classic 1982 piece on the De Beers cartel. At its height, De Beers was one of the most successful cartels in the history of commerce. It controlled or owned all the diamond mines in South Africa, diamond trading companies in England, Portugal, Israel, Belgium, holland and Switzerland, and was so in control of the price of diamonds that even speculators began buying them to guard against inflation and recession.
When diamond prices collapsed during the Depression, De Beers created an advertising campaign to instill the sentiment that diamonds are forever. By painting diamonds as intrinsic parts of courtship and marriage, they ensured their owners would be less willing to sell them, stabilizing the diamond market.
The story of Harry Winston, once one of the most successful jewelers in the world, its diamond-buying power rivaling even De Beers. Its finances and reputation were left in tatters by the brothers Ron and Bruce Winston following a squabble that lasted over ten years.
When Harry Winston, the company’s founder, died in 1978, he left control of the company to Ron, but equal shares of the company’s proceeds to both brothers. Bruce filed suits in 1990 and 1992 claiming his salary had remained the same while Ron’s gradually increased over the previous ten years, and that he had mismanaged the firm and taken advantage of his financial naïveté. The ongoing squabble and growing army of lawyers reduced the company’s worth to a third of what it once was, what jeweler Bernard Hammerman calls “one of the big heartaches of the business.”
Six years ago a team of thieves got into the Antwerp Diamond Center, passing 10 layers of security, and stole more than $100 million of loose diamonds, gold, and jewelery. It was called the heist of the century; the loot was never discovered and even now authorities don’t know for sure how they did it.
Leonardo Notabartolo was sentenced to 10 years in prison for his suspected involvement in the heist. He’s denied involvement and refused to talk to journalists for six years. Until now. “I am going to tell you a true story,” he tells Joshua Davis.
People have been trying to manufacture diamonds since the mid-19th century, and there are now two startups producing gem-quality diamonds. The sudden arrival of mass-produced diamonds could alter the public’s perception of diamonds and transform the diamond market. It also opens the door to diamond-based semiconductors, that could handle much faster speeds than silicon.
De Beers’ reaction to these startups was to set up the Gem Defensive Programme, a campaign warning jewelers and the public about manufactured diamonds and supplying gem labs with machines that can tell the difference between man-made and natural.
When Brian Boucher finds folders full of his mail and personal information in his troublesome tenant’s room, he suspects a scam. The truth was worse: his tenant was Dino Smith, a wanted jewel thief on the lam.
The discovery of a huge diamond mine in Botswana by De Beers has been a huge catalyst in Botswana’s economic growth. Unlike most companies that have exploited Africa’s growth, De Beers entered a 50/50 venture with the government and sold them a 15 percent stake in the company. Largely thanks to the discovery of diamonds, Botswana is now one of the most prosperous countries in Africa.
(Image via Flickr)