The press release published the day after the conclusion of the World Diamond Council’s 10th Annual Meeting last week should become a case study about the length and width in which supposedly ethically, responsible, transparency, accountable, honest organizations deceive their stakeholders.

When WDC President Edward Asscher next week addresses the KPCS Plenary in China, he will undoubtedly give an inspiring, politically appropriate speech and relay some important KP-related decisions made by the Annual General Meeting – the highest governing body of the organization.

What the press release does not state is that the WDC has lost its legitimacy. That it faces a what now appears to be an unbridgeable governance conflict which will lead the WDC either to wither away or to the emergence of other more truly representative bodies – as foreseen by the founding fathers of the KPCS and as needed by the KPCS.

The KPCS plenary should reflect on the “enormity” of what happened:

The WDC meeting was held in Antwerp, but the presidents of each of the four Belgian diamond bourses boycotted the affair. That’s unprecedented.

The Indian industry wasn’t there. [The GJEPC invited Asscher to come to a meeting in India just before the KP Plenary, to see if can explore ways to salvage some of the lost legitimacy. The President had no time available on his travel itinerary.

From the business as usual press release, the KP Plenary participants would not realize that the Israeli diamond industry – including IDE president Schmuel Schnitzer and former WDC Chairman Avi Paz – weren’t present at the WDC Annual Meeting. No, it’s worse – Schnitzer (like quite a few other WDC members) were already in Belgium, but flew home before the WDC event.

No South African industry was present either. Neither was the New York diamond bourse or the Dubai Diamond Exchange or the Russian diamond bourse.

The world’s jewelry confederation CIBJO, which holds singular recognition from the United Nations, did not attend. CIBJO is a global NGO representing millions of retailers through their representative organizations.

IDMA President Maxim Shkadov didn’t show up either.

Understanding the Nature of the Schism
What the WDC chair ought to relay to the KP Plenary is that this isn’t personal. It truly isn’t. The WDC members are all colleagues within the value chain. They work with each other, they socialize, and many are mutual friends. The rupture – which, we believe now, is the outcome of a meticulously planned, orchestrated and amazingly professionally executed game-plan by specific political and corporate interests with a well-defined agenda.

I will go a step further: prima facie their objectives may be well intended: the fastest and most expeditious way possible to force the KPCS into adopting a wide range of far-going reforms. It wants to widen the KPCS mandate to cover human rights, ethical, money laundering, and a range of other issues confronting the value chain to be covered by the certificates. In the grand design, they even may want to extend 'coverage' to include polished diamonds as well.

The strong association of leading members in the group with synthetic diamonds may even want them to impose the KPCS on these man-made diamonds as well. This would force the disclosure of origins of every synthetic stone – something that would be enormously beneficial to the value chain, for maintaining consumer confidence, and for avoiding their use for money laundering or terrorist financing purposes. Many of the reform objectives by themselves are quite desirable – and may even well be overdue.

But they can never be achieved without the involvement and support of the very same organizations – such as the WFDB – which through the membership structures of the bourses not only provide the WDC with legitimacy but also deliver acceptance and total compliance and enforcement. Well before the 'hijacking', as some members have called the recent events, the WDC went on record supporting KPCS reforms, so that isn’t the issue. But this is something the KPCS Plenary already knows.  

The New WDC: Buying Votes
The new WDC – which has fewer than 40 members – has now become an organization in which any commercial company for $10,000 can buy membership which gives your vote the very same weight in the annual meeting as an organization where the leadership is elected by tens of thousands of diamantaires. Just reflect on this. One can simply buy membership and get a place at the annual meeting for as little as $10,000 the same voice as the President of the WFDB, the Chair of the GJEPC, the presidents of individual bourses.

Allegiance to the “cause” has become the main membership criterion. Apparently, no due diligence was done. [I was startled to see that even a recent temporary suspension of DTC Sightholder status for serious matters was no reason to question a membership application as long as it brought the vote. One even might be an instrument for government implementation of the KPCS – such governmental affiliation is alright, if it is with the right government. No, don’t look too much for ethics at the new WDC.

It is probably just a coincidence that those companies which earn the greatest part of the industry profits are the ones that dominate the 'new' WDC. Money speaks.

So who is the “New WDC”?
In the oligopolistic supply chain, a few main consumers have an extraordinary influence over their rough diamond customers. No need to dwell on this. No DTC or Rio Tinto client will take the commercial risk to run against the wishes or interests of their suppliers. It is no coincidence that in the less than 40 members of the WDC, almost half hold some form of Sightholder status.

The members select a board. The president is elected by the Board. The commercial interests driving the new board agenda is set by a few major diamond miners and major (mostly US) retailers. So if sufficient individual companies that support the miners and retailers become members, they will control the board.

This is an oversimplification – there are some organizations which are always represented on that level and there is also a complex systems of “sectors” in the board.

The bottom line is that WDC President Edward Asscher, whose membership was carefully parachuted in at the eleventh hour, was elected by a board of 20 members – 11 in his favor; 9 against. If there had been one vote less, Avi Paz would have continued the consensus-based governing tradition of the organization.

Each and every article, e-mail or communication I have written on the WDC since the ascendency of Edward Asscher had one theme in common: I strongly believed that Edward has the diplomatic and political skills, the potential to galvanize the different views, to reconcile and heal, and to unite the WDC.

As late as last week, on the eve of the WDC meeting, I expressed those beliefs in the Diamond Intelligence Briefs. Of course, I knew he was handpicked by specific interests to implement a specific agenda – that’s legitimate, that’s why there are elections – that wasn’t problematic. But given the razor-slim majority that elected him, I believed that he would rise beyond these narrow interests of those who parachuted him in and become a WDC president for all members. Somehow I expected that at last week’s meeting, Edward Asscher would surprise us all – and show that he has become “his own man”.

Now I realize that I had been wrong – and nobody regrets that more than I. The WDC doesn’t really have a board anymore in the classic sense. Just to give two examples: the President has hired an Executive Director. The first Executive Director in the history of the organization. Apparently there were some 33 candidates; there was a shortlist and an appointment was made – someone with a background of serving U.S. retailers communication needs. A few days before the annual meeting there was a board meeting (by phone). The fact that such an appointment was made wasn’t even mentioned. Or another example: Gemdax was hired to organize a brainstorm and conduct a highly controversial and contentious survey. After the survey had been completed, the board was asked to approve the survey and the expenditure.

Those who are believed to have opposed the selection of Edward Asscher as president find themselves basically ignored on the board. No wonder that they saw no need to bother to attend the annual meeting.

Then there is another group: a few major producers which cover their first sale with a certificate, but are not on the “buying” side. And then there are the retailers who most likely have never seen a real KP certificate (as opposed to a specimen) in their entire careers. In any event, they are not burdened with any of the expenses and troubles. Their goods are never held up.

The Nature of Legitimacy….
The KPCS government representatives need to understand that in the diamond value chain, it is the large miners (not the alluvial diggers) and the large retailers which are the most profitable sectors. The midstream consists of the “less fortunates”, squeezed between too high rough prices and too low polished prices.

In light of this fallout, it is really a question for the KPCS to decide whether it would really want to partner with the legitimate elected voices from the midstream industry – those who are the consumers of the rough product that they regulate - or feel more comfortable dealing with a “privatized” WDC – and working with a delegation to the plenary which consist of very good people who basically represent limited private commercial interests and has clearly lost the legitimacy and wide-support of the industry that it enjoyed in the past.