Facing The Grand Jury

Not so long ago, smoking a cigarette in a restaurant or referring to your secretaries affectionately as ‘the girls’ were perfectly acceptable practices even though one might argue over each of them. Today these girls are ‘staff persons’, and smoking is out - period. When time-honored practices carried out in good faith and with no ulterior motives suddenly become issues for Grand Jury investigations it certainly comes as a shock. For a parcel of diamonds that can pass through many hands it isn’t unusual, or let’s say it wasn’t unusual, to pay for the goods with a post-dated check received from a third party. These things happened frequently and certainly not in a secretive manner. It is what one would call ‘customary trade usage’. But, just like the smoking and the secretary persons - the times have changed.  

A New York Grand Jury has subpoenaed over 35 diamond traders (mostly very small players) and reportedly no DTC sightholders, who, allegedly, used the services of some kind of private clearinghouse of checks and cash. If the term would not have such a bad connotation I would almost call these services ‘houses of convenience’. Nothing evil, no bad intentions. That’s probably what the Grand Jury will hear from those appearing before it. It is most probably, in the majority of instances, the truth and nothing but the truth. The question is, will the Grand Jury see it in this way?

The answer to this is most probably no. In the post 9/11 climate and with a tremendous suspicion of any movements that takes place in cash, a lot of persuasion will be needed to avoid indictments. Changing cash into checks or the other way around on the secondary non-banking market runs counter to contemporary bookkeeping norms. Even if tax evasion was not intended, it will be up to those appearing before the Grand Jury to make the case.

At the end of the day, even a Grand Jury should realize that it is acting on the information provided by one disgruntled informer with quite a history. Looking at the list there are quite a few companies with an impeccable reputation in the industry. I remember that a few decades ago, the Federal Trade Commission investigated DTC sightholders in New York. The investigation started with a lot of noise, questionnaires, demands for documents etc. In the end nothing happened, the industry got a clean bill of health. Let’s hope that history will repeat itself.