A ‘Bloody’ Court Case in Switzerland

Just imagine that you allegedly ran through a red traffic light and got caught. The police will investigate the circumstances of the offense. Then the press learns about it, and the morning after, news articles are implying or insinuating that you are being held on a triple-murder charge. Is this international disinformation? Or is it deliberate dissemination of false information? These thoughts crossed my mind when reading the story by The Associated Press (AP) headlined “Swiss authorities will hand over documents to aid Belgian blood diamond probe.”

It was hard to miss the most disturbing report that, “Swiss authorities decided to provide Belgium with judicial assistance in its investigation of two Belgians accused of dealing in blood diamonds. Belgium alleges that five Geneva-based firms used fake certificates to import raw diamonds worth US$525 million. The diamonds were then sold to Belgians suspected of having made payments contributing to the funding of warfare in African countries.”

The article further stated that, “Switzerland's highest court rejected appeals from the Geneva firms to block the transfer of documents and bank records to Belgian authorities. The rulings by the Swiss Federal Tribunal were released Wednesday. Belgium is also investigating whether fictitious business deals were made through Geneva as a tax evasion scheme, according to the rulings,” wrote AP, as quoted in the International Herald Tribune and other newspapers.

What really got to me was the ease in which the term “blood diamonds” was used – the ease with which the report concludes that five Belgians contributed to the funding of warfare in Africa. Though I am not privy to all the details of the investigation, I know enough to be able to write that it involves large volumes of diamonds smuggled out of Russia, which somehow ended up in Switzerland. It is not clear whether the investigation involves recent smuggling or whether the diamonds involved were stocked a long time ago in that country.

Somehow, these previously uncertified rough diamonds received Kimberley certificates and ended up in a number of different diamond destinations. Without getting into details, one thing is absolutely indisputable: these diamonds are not “blood diamonds,” they were not diamonds sold by rebels in order to finance arms to commit atrocities in fights against legitimate governments. Undoubtedly, various laws may have been broken here, but that doesn’t justify using the heavily loaded words “blood diamonds,” which are words as damaging and out of place as “triple murder charges” in the aforementioned traffic violation.

Unless my information is completely wrong, the investigation involves rough diamonds that had no Kimberley certificates when they entered Switzerland, though this didn’t prevent them from leaving Switzerland duly certified. As it turns out, the customs authorities in Switzerland had asked a few countries for assistance in this investigation, though at least one diamond center declined cooperation. If there was an infringement, it happened in Swiss territory and was carried out by Swiss organizations.

Unless someone printed bogus certificates, something I doubt, it seems that somehow uncertified rough became certified in Switzerland. That doesn’t make the certificates “fake” – they are genuine, but may not have been issued in good faith. Anyone involved in issuing these certificates ought to be held responsible and, if laws were broken, put to trial. A good-faith purchaser of rough accompanied with a genuine Kimberley certificate can hardly be faulted.

But to suggest that suddenly over half-a-billion dollars worth of blood diamonds suddenly entered into the markets is ludicrous, especially since the source of the stones involved are believed to be non-African. Is it possible that the heavily loaded term “blood diamonds” was introduced to get a court to agree to order the release of documents? Has the traffic violation become a murder charge?

Though there are several investigations taking place simultaneously and sometimes it is hard to know what facts are associated to each case, the Belgian investigators apparently have concluded that some of the historic (and widely reported) cases involve transfer pricing and tax evasion. These are “white collar” crimes, which can (and most likely will) be settled by paying some fines. This has nothing to do with atrocities in Africa.

Those attending this week’s Antwerp Diamond Conference must have heard Alrosa’s president Sergey Vybornov expressing concern about rough diamonds being used for speculation or for collaterals in “hawalah” transactions. Vybornov feared that the demand of rough for non-industry related purposes impacted the price and triggered unwarranted price movements, which is a point I have been making for some time. Coming from Vybornov, the statement represents a most authoritative confirmation and reiteration of these undesired practices.

When rough diamonds, which had been smuggled into Switzerland, possibly after having been used as substitutes for financial transfers, are diverted to the legitimate trade, there comes a point where the rough legitimizes itself by getting a Kimberley certificate. This warrants first and foremost an investigation “upstream” – who did what to the rough before it reached the Swiss Kimberley certification people? Who requested the certification?  

I find the wire-service article on these $525 million worth of “blood diamonds” extremely disturbing, as, clearly, someone was seeking to use inflammatory terms to serve his/her purpose. What we don’t know is whether these words were used in a court to imply heinous crimes instead of a lesser infringement of tax evasion. Would the Swiss highest court have instructed the release of documents if the case before it was presented as a tax evasion or even a simple smuggling case?

In an orderly society the breaking of laws has its consequences – and investigations and court trials are part and parcel of the system. But when paper-less smuggled rough are simply dubbed “blood diamonds,” great damage is inflicted on the entire industry. I wonder whether AP could justify the use of these words – and if they came from court papers, one ought to be able to understand and verify the context in which the term appears.

I find it hard to swallow that in 2007 one could find half-a-billion worth of blood diamonds. If the court case focuses on Russian smuggled goods, someone or some institution is being manipulated here. It makes it exceedingly hard to convince the consumers that conflict diamonds are basically part of the past.

Have a nice weekend.