In a Memo two weeks ago, we published a letter by South African Mineral Resources Minister Susan Shabangu addressed to the Secretary General of the OECD in which she made it clear that her government “cannot accept unilateral initiatives and policies supported by the OECD which bypass sovereign governments, discredit international agreements like the Kimberley Process and last but not least impact on minerals from Africa without proper representation from Africa.”

This time we were, apparently, too fast in getting the word out, as it was through Diamond Intelligence Briefs (DIB) that the OECD’s Tyler Gillard first learned that the South African government was putting the OECD on notice of their strong objections to the so-called Precious Stones Multi-Stakeholder Initiative Working Group (PSMS-WG). Gillard is legal expert in the OECD’s Investment Division. He served in the past as a key drafter of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Presently, Gillard serves as one of the OECD’s points of contact for the PSMS-WG.

The PSMS-WG’s Study
As its main activity over the past year, the PSMS-WG has commissioned a “Study on Responsible Supply Chain Management in the Precious Stones [including Diamond] Sector.” This study draws heavily on the aforementioned OECD Due Diligence Guidance co-authored by Gillard regarding minerals from conflict areas. The OECD will host a meeting in Paris next month to “discuss the study and consider how approaches including the OECD’s Due Diligence Guidance, might be applicable to the precious stones [and diamond] sector.” In the invitation to the meeting, it says that “The Study is intended to inform a consultative process with all interested stakeholders.”

Deeply concerned about the South African minister’s position, which might seriously erode the OECD’s support for the entire exercise, Gillard immediately called a key official of the Working Group in New York who put him somewhat at ease. We are not overly concerned about what he was told (also about me), but rather about what Gillard wasn’t told – and what we believe he and his OECD colleagues should know. The African Minister’s letter is just the tip of the iceberg.

Rebellion from within the Working Group
Gillard should have been told about Dana Schorr, a member of the PSMS-WG’s communication committee, who wants to fight what he calls “a bogus unprofessional study that is being railroaded by Signet and Jewelers of America and a small group of supporters including [JVC’s] Cecilia Gardner and a few diamond people.”

The cause of Schorr’s fury is a draft of the PSMS-WG study that he had been asked to review. According to Schorr, this is supposed to have been a study commissioned “to determine whether additional due diligence measures appear to be feasible or necessary within the precious stones supply chain and, if so, identify how such due diligence measures might be applied to precious stones supply chains.” [In plain English the study says what regulations should be adopted so that every consumer buying a diamond knows precisely where it comes from, what journey it has traveled and what has happened to it on each and every level of the value chain – the chain of custody from raw material to consumer product.]

The authors of the study were expected to be conscious of the PSMS-WG’s concern that existing industry systems should not be replicated or undermined – thus, no replacing the Kimberley Process but, rather, complementing it. Any new guidance developed as a result of the feasibility study (i.e. study of additional regulations) should be in harmony with and complement existing systems for the precious stones sector. Moreover, to specify the study’s Terms of Reference, “the authors of the study are expected to provide objective and independent advice in this regard following completion of the study.”

We don’t know what the study’s findings are, but, apparently, it seems to have generated some opposition within the ranks of those who were seen as strong active participants in the initiative.

An Insider’s Opinion
Schorr, a precious gemstone dealer, and one of the ten selected stakeholders chosen to comment on the draft, fired off a letter to other stakeholders (including the boards of directors of AGTA and ICA) to warn them about “what has been discovered. This is not a broad-based study. I believe this group intends to promote new laws, protocols and licensing for all levels of the colored stone [and diamonds] trade in the US and internationally. The study is designed to promote this intent. They are scheduled to present this study to the OECD, FATF, US Congress and EU legal bodies.”

Continues Schorr: “Reservations have been made, invitations have been sent to present this study to the OECD in Paris on May 26! The study will not be available till April 29th - this leaves no time for the trade to review, comment and propose corrections as we were promised. Remember the 20,000 people who lost their jobs because of a fabricated study written by two rogue Wall Street Journal reporters about tanzanite ... and how long it took to correct,” he warns.

“Remember the damage caused by the US-led embargo against jade and rubies. It is widely acknowledged to have done nothing to improve the lives of the citizens of Myanmar. Like the present study, a small group drafted it largely in secret. While corporations like Chevron and Total were allowed to trade and profit in Myanmar, gemstone traders were punished. Let’s not allow this to happen again. No more back-room deals,” writes Schorr to his colleagues (and leaders) in the precious stones trade.

Complaints about the Study
Cecilia Gardner should have told Tyler Gillard and his OECD colleagues that Schorr has started a petition drive, collecting signatures to be presented to the boards of directors of associations that are believed to be able to influence Jewelers of America (JA) and Signet, the initiative’s chief promoters. He is giving his opinion about the study [details of which he cannot share because of the secrecy imposed], and he identifies some major concerns. However, as he is a member of the committee that set and approved the study’s terms of reference, that was involved in selecting the companies that were commissioned to do the study, and as one of the few souls in the industry who has actually reviewed the draft, his opinions have the greatest credibility and validity. He knows what he is saying – and Tyler Gillard and other OECD officials had better take notice.

Says Dana Schorr:

·         “The study is cloaked in secrecy. All data is from confidential interviews; thus there is no way to judge its veracity.

·         Lack of transparency. JA has contracts [for the study] with three different organizations. These contracts are secret. Supposedly “independent” researchers were actually sourced from their own JA staff.

·         Not broad-based. Of the 91 ‘participants,’ [in the PSMSI-WG] only six are from the colored gemstone trade (and none are willing to put their names or organizations behind it). 99 percent of our trade – both domestic and international – has no knowledge of the study.

·         Authorship team does not meet its own guidelines. Guidelines state authors will be ‘highly experienced, [with] widely respected expertise in the precious stones supply chain across all elements of the chain from mining to retail.’

·         Short two-week review period for all ‘stakeholders’ around the world before final publication.

·         Improper use of ‘participants’ list to promote support for study. Most are observers; just ten (out of 91) have shown enough conviction to put up money.

·         Once public, it will be difficult to correct. Remember the damage done by the Wall Street Journal article about a connection between the tanzanite trade and Al-Qaeda? Even though it was later proven false, much of the public still believes there was a connection.”

Continues Schorr: “A study of this scope cannot be created in six months and should never be rushed or drafted in secret. There is a critical need to verify that the Signet/JA ‘Gap’ study is well researched, fair and valid – to make sure that the conclusions are supportable and any recommendations are in fact needed and implementable. A good study will do good… a bad study can do nothing but harm,” concludes Dana Schorr.

Tyler Gillard should have been told that these are reactions from a member of the Working Group, not an external viewpoint such as the ones expressed by the South African government or by Diamond Intelligence Briefs. [Dana Schorr’s recommendations appear later in the editorial.]

Independent Views: All in the Family!
By today, the study should have been reviewed by some 10 people, and their comments are now in the hands of John Hall of Signet. The ex-Rio Tinto corporate director plays a central role in the study’s drafting and completion. Outside experts who wanted a chance to be considered for the $60,000 study had to submit their expressions of interest to Hall. What apparently (and rather belatedly) disturbed Dana Schorr is that it all seemed orchestrated by JA and Signet – that the study was done by the very same people that established the PSMS-WG to begin with.

DIB tried to find out who were the academically skilled and highly qualified companies finally selected (in October 2013) to conduct the study. The winners were two different British organizations: Sustainable & Responsible Solutions Ltd. (SRS) and Estelle Levin Ltd. A third Norwegian human rights research institute, FAFO, was selected to review the study prepared by the two former companies.

Who are the owners, directors and staff of SRS? According to U.K. company records, this company is owned by James-Nicholas Evans Lombe, who also serves (since 2011) as the Director of Ethical Initiatives of Jewelers of America! [It may be remembered: Evans Lombe had to apologize last year for derogatory remarks about the CIBJO president in his efforts to deny him an invitation to April 30 PSMS-WG meeting Paris.] The company secretary of SRS is James’s wife, Mrs. Rosamund Lucy Evans Lombe, herself an accomplished financial professional. Shareholders are James and Lucy and three others, presumably their children.

Whether it is ethical that Jewelers of America’s Ethical Initiatives Director’s privately owned company is also entrusted with drafting and managing the “independent and objective” study is not for us to say. One might wonder, however, why the organization went through this elaborate commissioning process if the outcome appears to have been clear from the outset. But there is more.

Fictitious Independence? Conflicts of Interests?
The study was commissioned on October 31, 2013. However, according to public records, on October 1, 2013, Signet’s John Hall was appointed a Director on the Board of Directors of SRS, the lead company selected to conduct the study. Is it indeed conceivable that the very same individual who had been collecting the “expression of interests” of candidates to do the study then joined the “winning party”?

What about Estelle Levin Ltd (ELL)? This Cambridge-based company was established in 2010 and is fully owned by Estelle Levin-Nally. The company provides research, advisory, training and facilitation services to businesses and interested stakeholders along mineral value chains. From all available information, Estelle is a highly skilled and successful professional. What are her ties to the diamond and jewelry business? Estelle serves on the 36-member Standards Committee for the Responsible Jewellery Council, together with Signet’s David Bouffard, Cecilia Gardner and Jewelers of America’s Susan Thea Posnock.

And who are some of the associates working for Estelle Levin Ltd.? The names and credentials of each and every one appears impressive. Remarkable, however, is the name of Brad Brooks-Rubin, the dynamic ex-Conflict Diamonds Coordinator at the U.S. State Department. Brad is now in private practice at a Washington legal firm. DIB has credited Brad as the architect of the Precious Stones Multi-Stakeholder Initiative Working Group – and, somehow, we had not expected him to be associated with one of the two independent objective companies that were selected to conduct the $60,000-plus study. It cannot be just a coincidence that his smiling photograph appears among Estelle Levin Ltd.’s associates on the company’s website. 

Brad Brooks-Rubin informed DIB that Estelle Levin Ltd.’s (ELL) authorship selection for the PSMS-WG study came well before he joined as an ELL associate. Brad says that he provides the British company with advice about Dodd-Frank Section 1502, the rule on conflict minerals, and that he has not been involved with her or her company on any aspects of the PSMS-WG study. “As for the rest of the work to be done [by the Multi-Stakeholders' Initiative] and what should come next, that's up to the authorship team and the PSMSWG. Neither of which includes me in any way, shape, or form,” clarifies Brad.] The coincidence nevertheless remains.

Time for a “System Reset” by the PSMS-WG
The protest letter by the South African government to the OECD evoked many comments. Allow me to quote an e-mail from Brad Brooks-Rubin, who clearly remains fully engaged with the process: “Chaim, I write because I am glad you now seem to see the benefit of this effort and exploration. Which is all it has been from the beginning – an exploration. Not a hijacking or an answer looking for a question or anything along those lines. Rather, an effort to ask a question and take the time to research [emphasis added] and attempt to answer it in a forum where similar questions are being asked in other industries. And so does Minister Shabangu, apparently, see the benefit, which was why I take it she felt the need to send a note like that,” writes Brooks-Rubin.

“She [the Minister] is wrong on several fronts, from the consistent effort to include African governments in the process, including her and the KP/SADPMR team (that they failed to respond does not mean it never happened), to the goals of the effort to its possible dislodging of the KP from any level of legitimacy, which it had no intention of doing and couldn’t do even if it was the goal,” concludes Brooks-Rubin.

 

No More ‘Back Room Deals’...
To Brad Brooks-Rubin, we pose the following questions:

·         Can you recognize the possibility that stakeholders, including myself, perceive this entire exercise as a carefully orchestrated predetermined “set up” by a few well-meaning individuals, one NGO, and three governments that see it as their mission (or corporate task) to steer the entire diamond value chain into a specific direction?

·         Is it just a coincidence that the “leaders” of the group have all, in one way or another, declared the Kimberley Process to have become meaningless, superfluous and outdated?

·         Is it a coincidence that the very same people who are the architects of “KP-plus,” or whatever you called the various (multiple tier) Chain of Custody initiatives of the past, are the same architects of the current PSMS-WG?

This initiative is presenting itself, constantly and repeatedly, as “an open, non-exclusive coalition of companies, associations, NGOs and governments representing the whole value chain interested in exploring how to advance and at the same time harmonize responsible sourcing and supply chains for precious stones.” It must be clear by now, Brad, that the credit which the initiative still may have had a year ago, is quickly eroding. But it can still be salvaged. 

Last year, many of those who went to the Paris meeting had privately (bitterly) complained about the group’s heavy handedness. They said that they felt like they were given “no choice” – and feared commercial repercussion if they didn’t go. There were good reasons for their anxiety – but it also created considerable resentment. That resentment seems to be growing.

DIB is a strong advocate of greater transparency and improved chain of custody measures – provided the requirements are feasible, are economically and commercially implementable, and don’t cause havoc and disruption to some segments of the value chain. The South African Minister is right: the current PSMS-WG leadership will find it difficult to convince all industry stakeholders – including the miners – that its initiative is truly an “open process.”

The Way to Proceed: Listen to Dana Schorr
Santa Barbara-based Dana Schorr is actually a very positive and constructive stakeholder. He doesn’t want to “kill” the initiative but rather have it channeled into a more positive direction. He has urged the boards of a number of trade associations to get the PSMS-WG and OECD to accept the following suggestions:

·         Extend the Review period(s) of the Study to a minimum of three months per review. Two weeks is insufficient.

·         Extend the study timetable to one year to allow for genuine broad-based discussion.

·         Post study drafts online for review and comments in real time. This will allow all “stakeholders” around the world to have the opportunity to provide input.

·         Develop a genuine broad base that includes all stakeholders; currently colored gem artisanal miners, dealers, cutters, African, Asian and Latin Americans are poorly represented, if at all.

·         Verify the existence of that base by requiring written approval for the use of participants’ names or organizations. The current “participants” list is being used as proof of broad-based support, but most are simply observers.

·         Add to the authorship team one or more contributors/researchers that are knowledgeable about the colored gemstone trade.

These are not the words of someone who wants to “kill” the project. He wants it to succeed in the gemstone sector just as we want it to succeed in diamonds. He deserves our support. Stay tuned – it is still a long road to Paris.•

 Follow The Money: Financing The Study
Though the “lists” of the initiative’s Multiple Stakeholders contains tens of names, it seems that – so far – only a dozen participants have actually paid anything to the initiative. About 75 percent of the budget comes from three or four retail jewelers. If unpaid pledges are ignored, then well over 85 percent of the PSMS-WG revenues comes from these retailers. This is quite worrisome. Furthermore, an independent study should be paid by the entity that commissions the task.

In the relevant budget document, it states: “It is expected that resources [for the study] will be contributed by all three sectors of the PSMSWG – business, government and civil society – and may constitute cash or in-kind contributions.” An “in-kind contribution” is for an author to donate his own time or works while being paid a salary by an employer. “Allowable expenses and other details related to the budget will be negotiated with the author(s) after their selection,” says the document that initially thought that $30K would be sufficient, though, in the end, it apparently came to double that amount. How can a company that “volunteers” time be truly expected not to have some additional agendas?

Who are the dozen donors to the project? Out of the $68,000 pledged so far, Sterling Jewelers Inc. paid $35,000, followed by Tiffany & Co. with $10,000. Cartier contributed $5,000. The one additional jeweler is Fred Meyer Jewelers with $500. NGOs contribute symbolically: Global Witness contributed $1,600 and Partnership Africa Canada $1,000. Industry trade associations aren’t too impressive either: Jewelers of America supports the initiative with $2,000; the Diamond Manufacturers and Importers Association of America are good for $2,500; and the American Gem Society donated a symbolic $500. The British Foreign and Commonwealth office has pledged some $8,500 but hasn’t actually paid it yet, according to the best possible (unofficial) information available to us at press time. The OECD should recognize that a study that has been 85 percent financed by a few retailers can hardly be considered as a joint effort of all stakeholders in the value chain.