Flawless: Inside the Largest Diamond Heist in History (41 page)

De Beers keeps settling cases. In 2006, it settled two more class action suits for an additional $45 million. Combined with an earlier settlement for an industrial diamonds case for $26 million and the $5 million it claimed for settlement costs, De Beers has recently spent $325 million to settle cases. As Andy Bone, De Beers’s spokesperson, said in reference to the company’s desire to negotiate settlements to its outstanding default judgments, “It is part of our general strategy to put all of these things behind us.” Rob Bates, “De Beers Settles Some Suits, Still Has Others,”
Jewelers Circular Keystone
, February 1, 2006.

Antitrust problems continued to plague the company though. In July 2005, a group of Antwerp diamond dealers, Belgium’s Polished Diamond Dealers Association (BVGD), alleged that De Beers was still engaged in anti-competitive actions. They filed their complaint with the European Commission Competition Authority. Rosie Murray-West, “Diamond Dealers Attack De Beers’ Supply Strategy,” the Daily Telegraph (London), July 18, 2005.

The commission ruled against De Beers in an unrelated case, ordering De Beers to eventually stop buying rough diamonds from Alrosa, which controlled the Russian production of diamonds and was the biggest producer of diamonds after De Beers itself with a quarter of the world’s output. This ruling though was overturned on appeal. Mike Gordon, “EU Diamond Ruling Rejected,”
Wall Street Journal,
July 12, 2007.

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Oppenheimer’s descendants still run De Beers:
De Beers went private in 2001 with ownership of De Beers Société Anonyme (DBsa), the holding company for the De Beers Group, divided into 45 percent for Anglo American, 40 percent for the Oppenheimers, and 15 percent for the government of the Republic of Botswana. “The Family of Companies—The De Beers Group,” available online at
http://www.debeersgroup.com/en/Inside-De-Beers/Family-of-Companies/
(accessed October 2, 2009). However, the Oppenheimers still own a significant number of shares in Anglo American, which was founded by Ernest Oppenheimer in 1917. Antony Sguazzin, “Oppenheimers Sell a Third of Stake in Anglo American,”
Bloomberg,
November 10, 2006.

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rough diamonds in a vault in London:
This stockpile allowed De Beers to control the flow of diamonds of different kinds into the marketplace to prevent a collapse of prices. But more than that, by retaining a huge stockpile of rough diamonds, De Beers could potentially destroy any large mining companies that threatened its interests. Like a nuclear option, these diamonds sat in a vault and could be unleashed by De Beers to flood the market and depress diamond prices. De Beers could ride out this storm while its competitors would go out of business. This could even be done in a targeted strike, as only certain stones that resembled what a given mine produced could be released, thereby depressing the prices for that mine’s output.

Rhodes actually used his stockpile early on to depress diamond prices and the shares of diamond mining companies. He then was able to gain control of Barnato’s Kimberley Central Diamond Mining Company and through it, the Kimberley Central Mine.

De Beers sold its stockpile when it decided to give up its role as “market custodian.” It was valued at $5.2 billion dollars in 1999; since then, De Beers has aimed to sell its diamonds on an intake only basis. Instead of stockpiling, it now cuts down on production. With diamond prices having fallen as much as 40 percent at the time of this writing, De Beers cut its first-quarter 2009 production by 91 percent to try to limit supply. Carli Lourens, “De Beers Diamond Production Plunges 91%, Anglo Says,”
Bloomberg
, April 30, 2009.

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between one hundred and two hundred:
The DTC has drastically reduced the number of Sightholders in recent years: around 120 in 2003 went down to 84 in 2004. For 2008–2011, there are 79 Sightholders (including the four who only have access to the Botswana/Namibia Sights). Rob Bates, “De Beers Trims Sightholder List,”
Jewelers Circular Keystone
, February 1, 2008.

It used to be that there was only one location for a Sight—London—but now there are additional Sights in Kimberley (South Africa), Gaborone (Botswana), and Windhoek (Namibia). The DTC divides its Sightholders into six categories: DTC UK Sightholders, DTC SA Sightholders, DTC Botswana Sightholders, Namibia DTC Sightholders, DTC Canada Sightholders, and DTC Industrial Diamonds Sightholders. “Directory of Diamond Trading Company Sightholders,” available online at
http://www.dtcsightholderdirectory.com/Sightholder/Welcome.aspx
(accessed October 2, 2009).

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$500 million to $700 million:
Philip Claes, interview with author, via telephone, April 10, 2009.

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Internal flaws usually dictate this:
The shape of the rough stone is another major factor, as a polisher wants to minimize how many carats he loses while retaining the largest polished diamonds possible. With a fancy stone, he would be even more loath to lose carats in cutting and polishing. How many gems are cut out of a rough stone and their shape can be a high-risk decision, especially for large, valuable stones. Dealers with such stones know that Antwerp is the leading place in the world for handling this.

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even for professionals:
Cubic zirconia is a cheap imitation of diamond; more expensive imitations, such as moissanite, are even harder to tell apart from a diamond. Man-made diamonds are impossible for a dealer to detect without machinery, as they are in fact diamonds, just ones with a different history and internal structure.

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a diamond’s weight:
Technically this is a unit of mass. The full name of this measurement is the metric carat, which was set a century ago at 200 milligrams. Each carat is made up of 100 points, so for diamonds below a carat, the trade refers to how many points a stone has. One point then is 2 milligrams, and such small stones are called pointers; thus a 0.70-carat diamond would be a 70 pointer. Reaching a full carat is an important distinction; the difference between a one-carat diamond and a 97 pointer is much bigger than that between a one-carat diamond and a 1.03-carat one.

This measure was once based on the carob seed, not because carob seeds were standard in weight but because it was easy to remove outliers and thus roughly standardize the weight of these seeds.
See
Turnbull et al., “Seed Size Variability: From Carob to Carats,”
Biology Letters,
(September 22, 2006): 2(3):397–400.

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in terms of value:
Fancy stones have a description of their color instead of the values used for white diamonds. While a yellowish hue is bad for a white diamond, a dark yellow color is valuable, as that makes it a fancy canary diamond. Different scales exist for fancy stones; there is not a single uniform standard as there is for white diamonds.

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judge a loose, polished diamond:
Certificates used by diamond traders, such as those of the HRD, do not state a monetary value or financial estimate of any sort. Instead, traders can use their own knowledge of the marketplace or consult the
Rapaport Diamond Report
. These certificates differ from the so-called “Appraisal Reports” or “Identification Reports” that some retailers provide to perspective clients. Think twice before trusting any document that places a monetary value on a stone someone is trying to sell to you. These often contain inflated values to create the illusion of a bargain. Plus, to add insult to injury, if you insure a diamond based on such a report, you will pay premiums based on this figure, but when it comes time to pay out on the stone, insurance companies will often cite a much lower number as the replacement value. Besides the inflated values, the actual grading done by labs used in appraisal reports may not be all that reliable, as
Dateline NBC
found out in a 2005 investigation called “Diamonds: Is There Such a Thing as ‘A Deal’?”

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requested the certificate in the first place:
This person’s name is not on the certificate nor available even if a member of the public calls up the HRD. Only law enforcement can request this name from the HRD, and then it may likely quickly lead to a dead end, as tracing the diamond’s path takes a lot of luck in terms of each subsequent buyer recording the certificate number and who he in turn sells it to. Plus each buyer has to be willing to share that information with the police, who are not all that popular in the diamond world.

Chapter Five: The Plan

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  “
Obviously crime pays, or there’d be no crime
”: G. Gordon Liddy. Quoted in Ted Goodman,
The Forbes Book of Business Quotations: 10,000 Thoughts on the Business of Life,
(New York: Black Dog & Leventhal Publishers, 2007), 143.

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the garage doors operated. . . . electronics retailer:
Barry Wels, interview with author, Amsterdam, September 21, 2008.

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kill the power to the entire city:
“The pinch,” as they call it, could not exist in the size and power they depict. It even violates a fundamental principle of physics. Ben Stein, “The Con-Artist Physics of
Ocean’s Eleven
: Hit Movie Plays Fast and Loose with Nature’s Laws,” Inside Science News Service, January 8, 2002.

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“torch and drill resistant layers”:
Pieter De Vlaam, Manager of Testing and Certification of LIPS/Gunnebo, e-mail to author, May 2, 2009.

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Drilling even a small hole would take days:
More modern doors are equipped with a clever anti-drilling countermeasure; between the lock and the outer surface of the door is a glass plate. The glass is laced with wires connected to heavy steel tension rods called relockers. They’re best described by imagining several pinball plungers that are drawn back and hooked into place, eternally waiting to be released so they can slam into the machine to set the pinball in motion. If a drill shatters the glass, it would release the wires and these rods would fire into their receiving holes and further bar the vault door. Not even the right combination would open the door then. The Diamond Center’s LIPS door was too old for this better-mousetrap technology though. Paul De Vos, interview with author, in his home, Heist-op-den-Berg (Belgium), October 3, 2008.

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the vault was equipped with seismic alarms:
Patrick Peys and Jean-Charles Verwaest. Quoted in
Mega Heist
.

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the person who knew the vault door the best:
The material about Paul De Vos in this section comes from an interview with author, in his home, Heist-op-den-Berg (Belgium), October 3, 2008, as well as from numerous phone calls in April and May 2009.

Chapter Six: Safeguards

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Always keep in . . . the lock completely:
Mark McCloud, Gonzalez de Santos,
The Visual Guide to Lockpicking,
3
^rd
ed. (Champaign, IL: Standard Publications, 2007), 9.

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his involvement in a string of robberies:
“Otto Miliardi con 3 Soli Colpi,”
Corriere della Sera
(Milan), September 26, 1992. The conversion rate around the time of this article was roughly 1,300 Italian lire to one U.S. dollar.

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The concierges kept the two pieces attached together in the lock box
: Patrick Peys, interview with author, in his office, Antwerp, September 23, 2008.

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only explanation for this security lapse . . . the outside
: “If the door contact was not installed with the vault door, it would have been much easier and less expensive to place the sensor on the outside. Putting this sensor inside would have required a penetration in a thick concrete or steel vault wall to run the security monitoring wire. Security sensors inside are usually wired and installed when the vaults are built.” David P. McGuinn, Safe Deposit Specialists, via e-mail, May 16, 2009.

Chapter Seven: My Stolen Valentine

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No pressure, no diamonds:
This proverb is commonly attributed to Thomas Carlyle or to Mary Case, but it appears to be a proverb that was not created by either Carlyle or Case.