Diamond Scam Probe Reopens Scandal Italian Banks Want to Forget

In 2014, Massimo Balestra received a call from an employee at his bank, offering a risk-free investment “as secure as a wall safe.” The resident of a small northern Italian town ended up spending 6,945 euros ($7,876) on a diamond that he says he hasn’t seen since.

Balestra is one of almost 100,000 Italians who bought so called “investment diamonds” at the urging of their banks in a widespread arrangement that’s now the target of a criminal investigation by the country’s financial police, according to people with knowledge of the matter.

Investigators allege that Italy’s biggest banks hooked up their clients with diamond brokers who sold them stones for as much as double their market price.

Massimo’s diamond when he acquired it in 2014 the last time he saw it.

Police on Tuesday confiscated more than 740 million euros from UniCredit SpA, Intesa Sanpaolo SpA, Banco BPM SpA and one of its units, Banca Monte dei Paschi di Siena SpA as well as two diamond brokerages in connection with the case, according to a court document seen by Bloomberg.

Representatives for UniCredit, Intesa, and Monte Paschi declined to comment.

Banco BPM SpA said in a statement that the company and current and former executives including General Manager Maurizio Faroni are targets of the probe and that authorities had seized 84.6 million euros in the investigation. The bank said it is cooperating with the investigation.

A lawyer for Intermarket Diamond Business SpA, or IDB, the brokerage selling diamonds through UniCredit and Banco BPM, declined to comment. Lawyers for Diamond Private Investment SpA, or DPI, the reference broker for Intesa and Monte Paschi, didn’t respond to emails and calls seeking comment.

Ugly Spotlight

The probe reopens an embarrassing chapter for the banks as they confront challenges including unloading soured loans, boosting profitability and convincing clients to invest their savings when the euro zone’s third-largest economy is sputtering. Four of the five banks targeted in the investigation were hit by fines imposed by the country’s antitrust authority two years ago over the diamond sales.

Among the scheme’s victims is Italy’s most popular rock star, Vasco Rossi, who bought about 2.5 million euros of diamonds from 2009 to 2011, the document showed.

‘Investment Diamonds’

Italian banks went into the business of investment diamonds en masse after 2010 as they sought to boost profitability amid the country’s worst recession since World War II. Customers committed their savings, enticed by bank promotions and employees who reassured them the investment carried no risk and would provide attractive returns.
Banks acted as intermediaries, putting diamond brokers in touch with their clients and earning fees on the sales. The contracts were often signed in the lenders’ branches, giving clients the impression that the banks were counterparties to the deals.
Prosecutors will allege that the diamonds were sold at prices far above their assessed value and that the banks didn’t meet their legal obligations of informing investors of the risks, the document showed. To deceive potential buyers, the brokers took out ads in the business pages of Italian newspapers that displayed their inflated prices in a format that made it appear that they were market quotes.

Criminal Charges

About 70 people, including several top managers of the lenders, face possible charges of fraud and so called self-laundering. The banks and brokerages themselves are also suspects because companies in Italy can be held responsible if they are shown to have failed to prevent, or didn’t try to deter, a crime by their top executives.
Balestra, who’s bank is among those charged in the case, said he was told to expect an annual yield of 3 percent to 4 percent on a diamond that would be held in the broker’s vault. He said he inquired about the investment six months ago and was told by a bank employee that the diamond broker was close to failure after negative publicity about its activities in the Italian media but his investment wasn’t at risk because the diamond business was doing well in the rest of Europe.
A few months later, he was surprised to receive a letter saying that the broker, Intermarket Diamond Business, which is named in the criminal case, had collapsed and he had the right to seek custody of the diamond. “After five years, not only did I not receive any return, but I also haven’t been able to get my diamond back. I only have a photo of my diamond with a certificate from the International Gemological Institute.”
Milan-based Banco BPM said that it has made “adequate provisioning in 2018 to reimburse clients and cover risks and charges related to the probe.”

Perks, Gifts

Employees of UniCredit and Banco BPM allegedly received at least 99,000 euros of gifts from IDB, including antiquities, smartphones, trips to spa hotels and diamond rings, according to the document.
Regulators first started investigating the sale of diamonds through bank branches in 2016. The next year, the country’s antitrust authority imposed total fines of 15 million euros on Intesa, UniCredit, Monte Paschi and BPM as well as brokers Intermarket Diamond Business and Diamond Private Investment for defrauding savers by selling diamonds to them at vastly inflated prices without informing them of the risks.
While the antitrust authority was completing its investigation, Milan prosecutors opened a separate probe on the matter, digging into the practices of diamond sales between 2012 and 2016. That culminated in the asset seizures last week.
While the fines and the seizures are manageable for the lenders, the risks to their reputations may be higher. Balestra said he’s pessimistic about getting back his investment. “I don’t trust anyone at the banks anymore. In the future, I’m going to put my savings under the mattress.”

Source: DCLA

Diamond Scam Probe Reopens Scandal Italian Banks Want to Forget

In 2014, Massimo Balestra received a call from an employee at his bank, offering a risk-free investment “as secure as a wall safe.” The resident of a small northern Italian town ended up spending 6,945 euros ($7,876) on a diamond that he says he hasn’t seen since.

Balestra is one of almost 100,000 Italians who bought so called “investment diamonds” at the urging of their banks in a widespread arrangement that’s now the target of a criminal investigation by the country’s financial police, according to people with knowledge of the matter.

Investigators allege that Italy’s biggest banks hooked up their clients with diamond brokers who sold them stones for as much as double their market price.

Massimo’s diamond when he acquired it in 2014 the last time he saw it.

Police on Tuesday confiscated more than 740 million euros from UniCredit SpA, Intesa Sanpaolo SpA, Banco BPM SpA and one of its units, Banca Monte dei Paschi di Siena SpA as well as two diamond brokerages in connection with the case, according to a court document seen by Bloomberg.

Representatives for UniCredit, Intesa, and Monte Paschi declined to comment.

Banco BPM SpA said in a statement that the company and current and former executives including General Manager Maurizio Faroni are targets of the probe and that authorities had seized 84.6 million euros in the investigation. The bank said it is cooperating with the investigation.

A lawyer for Intermarket Diamond Business SpA, or IDB, the brokerage selling diamonds through UniCredit and Banco BPM, declined to comment. Lawyers for Diamond Private Investment SpA, or DPI, the reference broker for Intesa and Monte Paschi, didn’t respond to emails and calls seeking comment.

Ugly Spotlight

The probe reopens an embarrassing chapter for the banks as they confront challenges including unloading soured loans, boosting profitability and convincing clients to invest their savings when the euro zone’s third-largest economy is sputtering. Four of the five banks targeted in the investigation were hit by fines imposed by the country’s antitrust authority two years ago over the diamond sales.

Among the scheme’s victims is Italy’s most popular rock star, Vasco Rossi, who bought about 2.5 million euros of diamonds from 2009 to 2011, the document showed.

‘Investment Diamonds’

Italian banks went into the business of investment diamonds en masse after 2010 as they sought to boost profitability amid the country’s worst recession since World War II. Customers committed their savings, enticed by bank promotions and employees who reassured them the investment carried no risk and would provide attractive returns.
Banks acted as intermediaries, putting diamond brokers in touch with their clients and earning fees on the sales. The contracts were often signed in the lenders’ branches, giving clients the impression that the banks were counterparties to the deals.
Prosecutors will allege that the diamonds were sold at prices far above their assessed value and that the banks didn’t meet their legal obligations of informing investors of the risks, the document showed. To deceive potential buyers, the brokers took out ads in the business pages of Italian newspapers that displayed their inflated prices in a format that made it appear that they were market quotes.

Criminal Charges

About 70 people, including several top managers of the lenders, face possible charges of fraud and so called self-laundering. The banks and brokerages themselves are also suspects because companies in Italy can be held responsible if they are shown to have failed to prevent, or didn’t try to deter, a crime by their top executives.
Balestra, who’s bank is among those charged in the case, said he was told to expect an annual yield of 3 percent to 4 percent on a diamond that would be held in the broker’s vault. He said he inquired about the investment six months ago and was told by a bank employee that the diamond broker was close to failure after negative publicity about its activities in the Italian media but his investment wasn’t at risk because the diamond business was doing well in the rest of Europe.
A few months later, he was surprised to receive a letter saying that the broker, Intermarket Diamond Business, which is named in the criminal case, had collapsed and he had the right to seek custody of the diamond. “After five years, not only did I not receive any return, but I also haven’t been able to get my diamond back. I only have a photo of my diamond with a certificate from the International Gemological Institute.”
Milan-based Banco BPM said that it has made “adequate provisioning in 2018 to reimburse clients and cover risks and charges related to the probe.”

Perks, Gifts

Employees of UniCredit and Banco BPM allegedly received at least 99,000 euros of gifts from IDB, including antiquities, smartphones, trips to spa hotels and diamond rings, according to the document.
Regulators first started investigating the sale of diamonds through bank branches in 2016. The next year, the country’s antitrust authority imposed total fines of 15 million euros on Intesa, UniCredit, Monte Paschi and BPM as well as brokers Intermarket Diamond Business and Diamond Private Investment for defrauding savers by selling diamonds to them at vastly inflated prices without informing them of the risks.
While the antitrust authority was completing its investigation, Milan prosecutors opened a separate probe on the matter, digging into the practices of diamond sales between 2012 and 2016. That culminated in the asset seizures last week.
While the fines and the seizures are manageable for the lenders, the risks to their reputations may be higher. Balestra said he’s pessimistic about getting back his investment. “I don’t trust anyone at the banks anymore. In the future, I’m going to put my savings under the mattress.”

Source: DCLA

Higher Costs Hit De Beers Profit

De Beers’ earnings fell in 2018 due to the costs of new initiatives such as its Lightbox synthetics business.

Underlying earnings slid 34% to $349 million, as capital expenditure rose 53% to $417 million for the year, the company reported Thursday. That included outlays related to the launch of De Beers’ lab-grown jewelry brand, as well as its Tracr blockchain program, and Gemfair, which aims to help artisanal miners. It also spent more on marketing, exploration and evaluation in Canada.

Volatile conditions also negatively affected margins in De Beers’ trading unit, it added. Consumer demand for diamond jewelry was strong in the first half, but faltered from July onward amid political uncertainty, unstable stock markets, and the US-China tariff dispute. Manufacturers bought less rough as a result.

“In the second half, the low-priced-product segment came under considerable pressure due to weak demand and surplus availability, the rapid depreciation of the rupee, and a reduction in bank financing in the midstream,” De Beers explained.

Revenue still increased 4% to $6.08 billion for the year, driven by strong consumer demand in the first half, with prices growing 1% on a like-for-like basis. Sales of rough diamonds grew 4% to $5.4 billion, while the average selling price climbed 6% to $171 per carat, reflecting lower sales of cheaper goods in the second half. Sales volumes dropped 4% to 33.7 million carats.

De Beers noted an improvement in sales at De Beers Jewellers, its high-end consumer chain. Revenue from Element Six, its industrial-diamond subsidiary, dropped 5% due to lower sales to the oil-and-gas market.
The company expects some of the group-wide challenges to continue this year.

“The outlook for 2019 global diamond-jewelry consumer demand faces a number of headwinds, including the risk of a potential intensification of US-China trade tensions, the Chinese government’s ability to rebalance economic growth towards consumption, and further exchange-rate volatility,” it said.

De Beers maintained its production forecast of 31 million to 33 million carats for this year, down from 35.3 million carats in 2018. However, profitability could suffer as output from its wholly owned Venetia mine in South Africa enters a lull this year amid a transition from open-pit to underground mining. A larger proportion of production will, therefore, come from mines in Botswana and Namibia that it operates in joint ventures with governments.

Those businesses generate lower margins than it receives from deposits it owns completely.

Source: DCLA

Higher Costs Hit De Beers Profit

De Beers’ earnings fell in 2018 due to the costs of new initiatives such as its Lightbox synthetics business.

Underlying earnings slid 34% to $349 million, as capital expenditure rose 53% to $417 million for the year, the company reported Thursday. That included outlays related to the launch of De Beers’ lab-grown jewelry brand, as well as its Tracr blockchain program, and Gemfair, which aims to help artisanal miners. It also spent more on marketing, exploration and evaluation in Canada.

Volatile conditions also negatively affected margins in De Beers’ trading unit, it added. Consumer demand for diamond jewelry was strong in the first half, but faltered from July onward amid political uncertainty, unstable stock markets, and the US-China tariff dispute. Manufacturers bought less rough as a result.

“In the second half, the low-priced-product segment came under considerable pressure due to weak demand and surplus availability, the rapid depreciation of the rupee, and a reduction in bank financing in the midstream,” De Beers explained.

Revenue still increased 4% to $6.08 billion for the year, driven by strong consumer demand in the first half, with prices growing 1% on a like-for-like basis. Sales of rough diamonds grew 4% to $5.4 billion, while the average selling price climbed 6% to $171 per carat, reflecting lower sales of cheaper goods in the second half. Sales volumes dropped 4% to 33.7 million carats.

De Beers noted an improvement in sales at De Beers Jewellers, its high-end consumer chain. Revenue from Element Six, its industrial-diamond subsidiary, dropped 5% due to lower sales to the oil-and-gas market.
The company expects some of the group-wide challenges to continue this year.

“The outlook for 2019 global diamond-jewelry consumer demand faces a number of headwinds, including the risk of a potential intensification of US-China trade tensions, the Chinese government’s ability to rebalance economic growth towards consumption, and further exchange-rate volatility,” it said.

De Beers maintained its production forecast of 31 million to 33 million carats for this year, down from 35.3 million carats in 2018. However, profitability could suffer as output from its wholly owned Venetia mine in South Africa enters a lull this year amid a transition from open-pit to underground mining. A larger proportion of production will, therefore, come from mines in Botswana and Namibia that it operates in joint ventures with governments.

Those businesses generate lower margins than it receives from deposits it owns completely.

Source: DCLA

Rare 88ct. Diamond to Lead Sotheby’s Hong Kong

A flawless white diamond with a high estimate of nearly $13 million will head up April’s Magnificent Jewels and Jadeite auction at Sotheby’s in Hong Kong.

The oval brilliant-cut, 88.22-carat, D-color, flawless, type IIa stone is one of only three oval diamonds over 50 carats offered in auction history, Sotheby’s said Tuesday. The stone — which has a presale estimate of $11.2 million to $12.7 million — is the largest to go under the hammer in more than five years.

“For those who have had the chance to see the diamond, one adjective comes back: ‘breathtaking,’” said David Bennett, worldwide chairman of Sotheby’s international jewelry division. “Barely any diamonds of this weight are known to possess the same exceptional qualities of purity and perfection as this remarkable stone, which is so full of fire and blinding brilliance.”

The diamond comes from a 242-carat rough stone recovered from De Beers’ Jwaneng mine in Botswana, and took several months to cut and polish, Sotheby’s added.

Source: DCLA

Rare 88ct. Diamond to Lead Sotheby’s Hong Kong

A flawless white diamond with a high estimate of nearly $13 million will head up April’s Magnificent Jewels and Jadeite auction at Sotheby’s in Hong Kong.

The oval brilliant-cut, 88.22-carat, D-color, flawless, type IIa stone is one of only three oval diamonds over 50 carats offered in auction history, Sotheby’s said Tuesday. The stone — which has a presale estimate of $11.2 million to $12.7 million — is the largest to go under the hammer in more than five years.

“For those who have had the chance to see the diamond, one adjective comes back: ‘breathtaking,’” said David Bennett, worldwide chairman of Sotheby’s international jewelry division. “Barely any diamonds of this weight are known to possess the same exceptional qualities of purity and perfection as this remarkable stone, which is so full of fire and blinding brilliance.”

The diamond comes from a 242-carat rough stone recovered from De Beers’ Jwaneng mine in Botswana, and took several months to cut and polish, Sotheby’s added.

Source: DCLA

Graff To Unveil A Watch Paved With 60 Fancy Yellow Diamonds At Baselworld

For the upcoming Baselworld watch and jewelry trade fair, Graff will unveil an important collection of jeweled watches, each showcasing diamonds using what the company describes as “pioneering jewelry watchmaking skills.” The first watch in the collection was unveiled Tuesday with the entire piece paved with 60 fancy vivid yellow diamonds totaling more than 25 carats. The price of the watch was not released.

To add to the color theme, the diamonds are set on a yellow gold case, bracelet and dial. In order to meet this challenge of setting this many exceptional diamonds on a watch, Sam Sherry, Graff’s head of Technologies, devised a jointing system that Graff has developed over the past few years to create flexible bracelets while optimizing the natural beauty of the stones.

Graff’s London atelier worked in conjunction with Graff’s Swiss watchmaking team, Graff Luxury Watches, to create this synthesis of haute horology and diamond setting.

This is not the first time Graff has presented a statement bejeweled watch at Baselworld. In 2014, the first year the luxury brand exhibited at the fair, it was the “Hallucination,” a women’s watch covered in a kaleidoscope of 110 carats of rare fancy colored diamonds. Graff claimed at the time it was “estimated to be the most valuable watch ever created.”

The following year Graff unveiled “The Fascination,” a transformable watch covered in 152.96 carats of white diamonds that was valued at $40 million. The pear shaped watch dial on the center of the diamond covered bracelet is removable and can be replaced with a 38.13 carat D flawless, pear shaped diamond, cut and polished by Graff. When the center diamond isn’t in use on the bracelet it is placed on a shank of a ring. So a woman can wear a pure diamond bracelet, an opulent diamond covered watch with a matching ring, or wear either piece by itself.

In 2017, it was the “Princess Butterfly Secret Watch,” covered in diamonds and gemstones mounted with a an invisible setting. To view the time, the owner pushes on one of the center round diamonds and the butterfly wings slide apart to reveal the watch dial.

Source: forbes.com