Diamdel: “Banda Goods’ Concept Is Unfounded, Inaccurate and Highly Misleading”
December 09, 04No article ever published on IDEX Online received as many online and offline reactions as last week’s disclosure on the $50,000 gift to New York Diamond Dealers Club President Jacob Banda, on the commissions taken on Diamdel’s “Banda Boxes”, on the “secret vote” deciding the amount of the gift (choice between $50K, $75K, or $100K), and, in general, the decision-making process at New York’s diamond bourse. Readers voiced their views on the Diamond Dealers Club and on Diamdel/De Beers. On the “Banda Boxes” the confusion seems to be great. As one club member wrote: “The possible answer is contained in the lawsuit of David & Co. against De Beers and others. In the publicly available court papers it reads that …. in exchange for Banda and/or the Diamond Dealers Club from refraining to commence litigation against, among others, DTC and Diamdel, Diamdel agreed to provide $250,000 worth of rough diamonds per sight, ten times a year, to each of ten specific U.S. rough diamond manufacturers and dealers chosen and listed by Banda. It further states “upon information and belief, Banda receives a 1% commission on all rough diamonds purchased by the ten U.S. rough diamond manufacturers and dealers on Banda’s list. If the information in the David & Co. complaint is true, then, apparently, “a deal” was made and the DDC is part of that deal. In that case, shouldn’t the DDC be entitled to most or all of the 1% commission? If no such deal was made, this is certainly the right time for De Beers to publicly explain the true reason behind the ‘Banda box’ scheme.”
Realizing the importance of setting the record straight, James Nicholson, the London-based spokesman for Diamdel, agreed to reply to any specific question we asked and, consequently, we submitted seven questions on the Banda boxes. Nicholson replied to them all – not all replies were full replies, but, in the circumstances, we can only say that Diamdel has gone the extra mile to be forthcoming. To avoid any misinterpretation we present here our questions and the Diamdel responses in full:
Question: Banda has been allocated a monthly amount of Diamdel goods which he, at his option, allocates for sale to hand-picked clients. Is there any other situation within worldwide Diamdel where an individual has been given an allocation to hand around at his sole option?
Reply: Diamdel does supply clients from the U.S., some of whom are represented by Mr. Banda. These clients are supplied on the basis of normal supply arrangements. Banda is not paid any commission from Diamdel for this brokerage service: there is no Diamdel concession / special service as a result of his being chosen personally by these clients to represent their interests. Mr. Banda himself is not supplied by Diamdel.
Question: Diamdel takes pride in its client selection - and broadly follows the Supplier of Choice model. Why would it deviate from that model, and in a way discriminate against others, by accepting Banda's selection?
Reply: To be clear, there is no discrimination in favor of Mr. Banda as stated above. In addition, I must point out that Diamdel is not part of the SoC strategy. Although to the extent that SoC is designed to be a fair and objective means of allocating goods from De Beers, Diamdel's supply arrangements share the same principles. We do encourage customers to operate efficiently and progressively however the means to which this is achieved varies in its demonstration. Diamdel therefore does not operate a SoC process; it does however remain a pre-requisite that all customers abide by Diamond Best Practice Principles - ethical values that we are proud to promote throughout the industry.
Question: Does Banda himself meet the client criteria?
Reply: See above.
Question: What did De Beers mean with the statement: "We also understand from Diamdel that there is no commission or favored status accorded to Banda." Nobody has suggested that he takes a commission from Diamdel; he takes the commission from his people. But the fact that he is getting an allocation-to-hand-out, isn't that by itself "favored status"?
Reply: As stated above, there is no favored status in respect of any Diamdel client or their broker representative. Mr. Banda is no exception to this rule.
As regards commission payments, the brokerage service (including any value added proposition associated) that Mr. Banda offers to his clients remains the business of Mr. Banda and said clients: Diamdel therefore cannot comment on this area. We are glad to see that you are not suggesting that Diamdel might be paying a commission to Mr. Banda. This would indeed be absurd.
Question: You say: "Diamdel in Antwerp does supply some of its clients represented by Jacob Banda but Diamdel tell us that these clients are considered in exactly the same way as all their other clients." Since when does one need a "broker" to approach Diamdel? Who are other brokers? Isn't it weird that some people get at the same occasion pure Diamdel goods and Banda-Diamdel goods? These people surely do not need Diamdel if they already have an established relationship with Diamdel.
Reply: First of all, at no point has Diamdel stipulated that clients should receive goods through brokers. While globally some clients favor this approach there is no need to do so. Secondly, there are no "Banda goods”.
Question: In some of the Internet comments a "deal" was suggested that Banda was getting this allocation in return for certain favors to the DTC (like not joining lawsuits, etc.). It is clear that there is some kind of deal (though the lawsuit thing is probably totally untrue). What is the quid pro quo that De Beers, the DTC or Diamdel gets from this very unusual deal?
Reply: Best Practice remains the very foundation to the way that we, as an integral part of the De Beers Group, do business. There is no "deal". Equally, De Beers does not defend any matters calling its practices into question in the manner alleged. We have sufficient confidence in the integrity and defensibility of our business practices not to contemplate resorting to such an approach. Speculation concerning a "deal" is purely the result of rumor and gossip and is totally unfounded.
Question: Finally, would a client getting X amount of Diamdel goods and Y amount of Banda goods, not be able to get X+Y from Diamdel without Banda? If "yes", why does he need Banda? And if "no", do you still stand behind your statement "that there is no benefit to these clients in being represented by Banda insofar as allocation of goods by Diamdel is concerned"?
Reply: Once again, the 'Banda goods' concept is unfounded, inaccurate and highly misleading as we have very clearly explained above.
The replies do certainly raise additional questions. At this point, however, I think that as journalists we have completed our task of bringing as much information as possible to our readers. We are also not ignoring that, indeed, this issue is also part of an ongoing lawsuit and we appreciate that there are limits to what the involved parties wish to disclose. The clients who are getting these apparently non-existing “Banda goods” will most likely get additional explanations from their broker. To us, this is the end of the issue – and we can only express gratitude to both James Nicholson and Lynette Hori in London.
Good Governance at the Diamond Dealers Club
That gets us back to the other issue: good governance and public money at the Diamond Dealers Club. We were rather encouraged when, as a result of our article, we learned that the DDC decided to send each member of the club a personal letter. Some New York members expected an announcement to rescind the gift decision, or a response to the call to invite an audit on the club’s financial affairs, or a general membership meeting to discuss the chain of events, or a refund to the sponsors who had given money for a specific purpose – as the diversion of sponsors’ money to a gift for board members or for general club activities was neither the reason for accepting sponsorship nor for paying high prices for support advertisements in the Congress Journal.
However, the December 3, 2004, letter, over the signature of Sylvain Ringer, the Secretary of the Diamond Dealers Club and the Chairman of the Congress Organizing Committee, turned out to be somewhat disappointing – it was merely a three paragraph confirmation of everything written in last week’s article, albeit with a different emphasis. Says Ringer:
“It is with great pleasure that I inform you of the outstanding success of the organization of the World Diamond Congress in New York, October 17-20, 2004, reported at our last Board meeting. The outcome was a memorable achievement and financially positive for the Club. These funds will contribute to necessary future improvements and essential activities.” [Emphasis added.]
“Members of the Board thanked and applauded the work done by the organizers and wanted to particularly thank President Jacob Banda for his involvement and determination to raise the extra necessary funds through the Journal promotion. The Board unanimously proposed that Mr. Banda be extended a special award to mark the recognition of his timeless effort in finalizing the advertisement subscriptions.”
“However,” writes Ringer, “Mr. Banda decided that the award presented to him be distributed to five schools of his choice. We would like to express our thanks to Mr. Banda for his gracious decision to fund these schools. We are also grateful to our sponsors and contributors for their marvelous contributions to make this Congress event an unforgettable success.”
Whether Sylvain Ringer’s letter to members settles this issue within the Club is not for us to say. As we said last week, we are glad to see that part of the profits go to charity – and would recommend to the club members to do the same with the balance of the amount, after obtaining the sponsors’ consent. We do salute the DDC for making efforts to explain their decisions – post facto – to their members.
I wish all of us a pleasant, quiet and peaceful weekend.
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