Flawless

by Scott Selby

  In June 2004, the company pled guilty in the United States to the criminal price-fixing of industrial diamonds and paid a $10 million fine. In December of 2006, De Beers settled a major class-action lawsuit that had been filed against it on behalf of U.S. consumers, jewelry makers, and retailers who bought diamonds from the start of 1994 to the settlement date. The complaint alleged that the company had artificially boosted the price of diamonds through false advertising and restraint of trade though control of the supply of rough diamonds. The settlement did not come cheap, though: the price tag added up to $250 million—roughly twice the low-ball estimate of what the School of Turin had stolen from Antwerp three years before. De Beers also agreed to follow U.S. federal and state antitrust laws.

  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.

  70 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/] 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.

  71 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.

  71 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] http://www.dtcsightholderdirectory.com/Sightholder/Welcome.aspx (accessed October 2, 2009).

  74 $500 million to $700 million: Philip Claes, interview with author, via telephone, April 10, 2009.

  74 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.

  75 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.

  75 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.

  75 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.

  76 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 l
ower 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’?”

  76 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

  78 “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.

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

  84 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.

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

  86 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.

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

  88 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

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

  92 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.

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

  99 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

  104 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.

  104 Elio D’Onorio strode toward the Diamond Center: The description of D’Onorio’s activities in the Diamond Center on February 10, 2003, is based primarily on the following: The police deduced this from the fact that (1) the CCTV videotape of that day was stolen as well as on the night of the heist, indicating that one of the thieves had been inside that day; (2) they found the work order (with D’Onorio’s business card), leading them to believe it was D’Onorio who snuck in on that day; and (3) the work done to the magnetic alarm was time consuming, leading them to believe that that was the point of recon, to fix the magnetic alarm and place a video camera. Patrick Peys, interviews with author, in his office, Antwerp, September 23 and 26, 2008.

  105 the stairwell door into the vault foyer: One person contacted for this book believed that the stairwell door on the vault level had a doorknob only on the foyer side, not on the stairwell side, in order to prevent people from using the stairs to get to the vault. Others couldn’t recall if this was the case; the stairs weren’t regularly used to get to the vault level. The authors could not independently determine whether the door could be opened from the stairwell at that time. If it’s true that there was no doorknob on the stairwell side, it would not have been difficult for Notarbartolo to use tape to secure the latch so that the door could simply be pushed open from the stairwell side. Because the door was beyond the range of the video camera on that level, he would simply have needed to wait until there were no other tenants in the vault before making the modification. In investigators’ minds, there is no question that the thieves used the stairs and not the elevator.

  105 dutifully recording the dark foyer: This was another security flaw. The lights were off on the vault floor after hours, so even if someone was watching the monitors or video, unless the thieves turned on the lights before covering over the CCTV cameras he or she would see nothing but darkness.

  107 used heavy-duty double-sided tape: The tape was still there along with the shortened bolts when the police examined the magnets after the heist was discovered.

  109 he went to the vault twice daily: Since the video was stolen for that Monday police don’t know if Notarbartolo went to the vault that day, but they do have him on video going there twice a day that Tuesday, Wednesday, and Thursday. On Friday, he went three times. From the Court of Appeal of Antwerp judgment in this case on May 19, 2005.

  109 he removed an aerosol bottle . . . and sprayed the lens: Police are split on their theories about this; a minority of them believe Notarbartolo wouldn’t risk the spray being discovered and that the School of Turin waited until the heist was underway to mask the motion detector. Most of the police officers we spoke with believe that the more likely explanation is that he sprayed the lens before the heist.

  110 the early winter start to Friday prayers: The Jewish Sabbath begins on Friday night, whenever the sun sets on that particular day. In winter, this takes place earlier in the day, meaning that the Diamond District empties out earlier on a Friday in winter than on one during the summer. On Friday, February 14, 2003, sunset was a few minutes before 6:00 p.m., although different groups calculate nightfall slightly differently. Candle-lighting time is generally eighteen minutes before sunset. That Friday, religious Jews lit candles at 5:37 p.m. according to Chabad’s Web site. Various Jewish groups had candle-lighting times that varied from this by a small amount.

  112 through the tight aisles: The description of the Brico in Mechelen is based on a visit by authors on October 3, 2008.

  113 the hand of a dead man was an invaluably lucky talisman: The thought was that candles held in the hand of a dead man couldn’t be seen. Havelock Ellis,The Criminal, 3rd ed. (London: Walter Scott, 1901), 184.

  113–114 a study of two hundred Italian murderers: Ibid. at 185–187.

  114 known to snort cocaine: Turin reporter Lodovico Poletto, who had covered crime for La Stampa newspaper since the late 1980s, said that using cocaine was a common practice among the city’s thieves. It gave them th
e illusion of invincibility. He was quick to add that there is no evidence this was the case with the men who robbed the Diamond Center in 2003. Lodovico Poletto, interview with author, in the La Stampa office, Turin, January 16, 2009.

  According to Antonino Falleti, Notarbartolo was notoriously antidrug, and it’s hard to imagine that he would tolerate the risk that his accomplices be caught and arrested with drugs after meticulously planning a heist like the one at the Diamond Center. Antonino Falleti, interviews with author, various locations in Turin, September 2008.

  114 they destroyed the phones: An example of how disciplined thieves were about their phones can be found in a highway robbery that took place on the motorway between Turin and the Brenner Pass in 2005. About a dozen thieves assaulted two vans transporting cash from Italy to Austria. Investigators identified eleven telephones and corresponding numbers used by the thieves that were only used to call each other. Police put the numbers—both the phone numbers and the cell phones’ unique serial numbers that were transmitted with each call—on an international watch list. For two years, there was nothing. But then one of the phones began making calls in Morocco. Investigators tracked down the phone’s owner, and found a common merchant, not an elusive cell of Italian thieves. The merchant explained that he had bought the phone used in the market from a vendor who sold them by the tens of dozens. The criminal who used it as part of the heist probably donated it to a charity similar to the Salvation Army or Goodwill. As for the others, they may well have been thrown in a lake. Interview with confidential source, a member of Italian law enforcement with knowledge of this case, September 2008.

  Chapter Eight: The Heist of the Century

  115 “Smash-and-grab job . . . than that”: Ocean’s Eleven, directed by Steven Soderbergh, screenplay (based on the 1960 story) by Ted Griffin (2001).