The producers of the popular U.S. television drama “The West Wing”, which provides a glimpse into American presidential politics in that nation's capital as it tells the stories of the members of a fictional presidential administration, ought to consider creating a similar series in Belgium. There will be no need to concoct complicated story plots – the Diamond High Council (HRD) and prominent diamantaires will provide ample materials. If the NBC producers would have dispatched a film crew to Brussels this week, they could have started filming in the Prime Minister’s office. The real life drama that took place there involved that nation’s Premier Guy Verhofstadt – who skillfully delivered an earthquake: declaring the current board of the HRD as illegal!

Though in this saga it becomes hard to distinguish between fact and fiction, have my assurances that this is really what happened this week in Brussels. Verhofstadt, who - quite rightly - seems greatly concerned about the governance crisis around the HRD, summoned HRD Chairman Jacky Roth to the Premier’s Office so that the government, at the highest level, could deliberate how it could “intervene” to solve the problem in a manner satisfactory to the government.

To underscore the importance of the Belgian government’s Diamond Crisis Summit, the premier also invited Vice Minister President of the Flemish Government Fientje Moerman and the Antwerp Governor Paulus Camille to take part in the meeting. The Premier probably had no choice – he needed to intervene. The diamond sector is vital to the economy of Belgium and, especially, to the Antwerp region. The government has always viewed the HRD as the true representative of the diamond sector which has made the organization the government’s partner in the decision-making on diamond issues; even more importantly, the stature and professionalism of the HRD enabled the government to “outsource” some governmental oversight functions through the Diamond Office.

If the government feels that the current make-up of the Board of the HRD fails to reflect economic reality, it fails to reflect the proper composition of the industry (in terms of DTC Sightholders, Indian representations, “mega” players, etc.), the government may not be able to continue to work with the HRD. The HRD, last year, submitted a “Ten Points Memorandum” to the government detailing serious social, economic and legal issues facing the industry which require governmental assistance.  The government’s current position – that it suspends the dialogue on these and other issues – comes from a proper governance perspective. The Premier would make himself and his government rather vulnerable if agreements are made with individuals who don’t represent the true stakeholders. The legitimacy of any government action (or inaction) based on talks with the HRD could be challenged.

But the Premier is also taking a huge political risk. Whether HRD Chairman Jacky Roth is “happy” with his board is not the issue. He has a board – and, by not resigning from the HRD – he has accepted its composition and he is required to work with that board. Moreover, as chairman he cannot question the legitimacy of the present HRD board – while remaining “on-board”. The board members may rightfully argue that they were democratically elected, etc.

The board of an organization is very similar to a government of a country: people generally get the board (or government) they deserve. To question the legitimacy of a democratic process is not something one can do lightly – if at all.

It is clear that the Premier had not read the article in Tijdnet which reported on the latest appointments in the HRD’s Board of Directors and quoted a statement by the HRD that “The Board of Directors hopes that after having made the final appointments in the HRD governing bodies, tranquility in the diamond sector will return and the diamond industry can move forwards and formulate on finding the answers to the challenges of the future.” The upbeat statement by the HRD came in the wake of the election of Daniel Van Dievoet as Vice Chairman of the HRD (filling the vacancy created after Chaim Pluczenik’s resignation) and the appointment of Daniel Horowitz as a member (of the five member) Executive Committee, which is in charge of the day-to-day functioning of the organization.

Daniel Van Dievoet, who represents the Belgische Organization of Traders in Polished Diamonds (BVGD), won the Vice Chairman seat narrowly beating (8 to 7) Stephane Fischler of the Belgian Diamond Manufacturers Association (SBD). Dievoet, whom I don’t know personally, has been described to me as a very polite and friendly gentleman, though, I was told, in the film drama that is now developing, he might well play the role of an astute and calculated political operator.  Dievoet recently assumed the chairmanship of the BVGD, after the sudden resignation of Andre Gumuchdjian.

Fischler’s credentials include conscientious work as Chairman of the HRD Audit Committee and leadership roles in the IDMA and World Diamond Council. This record wasn’t enough, however, to overcome the automatic majority representing the interests of the traders which emerged as the dominant voice within the HRD Board after the recent election of Kurt Einhorn, Daniel Van Dievoet, Bahrat Shah, Daniel Horowitz and Ziv Knoll in the HRD Board of Directors. Bahrat Shah has become a member, on behalf of the traders, of the powerful Financial Committee.

Chairman Roth and Vice Chairman Dievoet – who probably don’t walk on the same side of the road – will now have to deal with the governmental intervention in the organization’s affairs.

Government Declares the HRD as “Functioning in an Illegal Manner”

Premier Guy Verhofstadt clearly doesn’t approve of the present composition of the board. One may say: “that is his prerogative” – but then, one must wonder, is it? A General Assembly (general annual meeting) of the members of the HRD has taken place. Noone – as far as I know – had argued before that meeting that it was (or would be) an “illegal meeting”. HRD Jacky Roth, if he had felt that the elections would have been illegal, should have cancelled them. He didn’t.

Instead, it is now the nation’s Premier who has found a very intriguing way to “torpedo” the continued operation of the HRD. The Premier has concluded that the current board cannot legally function!

The Premier discovered a legality that, apparently, had been overlooked by the Board. He discovered that in an organization there cannot be more directors than members. That, apparently, is the law. The HRD’s membership consists of 13 different professional and representative bodies. That means that it legally can not have more than 12 members in its Board of Directors. The present board has 20 members, thus, argues Belgium’s Premier, the board is illegal.

I find it weird and incomprehensible that after all the in-fighting within the HRD, after the elections, after everything, that the nation’s Premier walks in and says “what you guys are doing is illegal.” What the Premier now has done is what Premiers always love to do: he created a Judicial Working Committee. This, at least, assures the continuation of the saga and future deliveries of new episodes.

It is almost funny – if it wouldn’t be so dead serious. The new committee consists of eminent and prominent lawyers representing both the government and the HRD and it will have the task, according to a governmental press announcement, “to design a new legal structure which will guarantee that all involved parties will be represented in a balanced manner.” (Someone suggested that concluding a new governmental coalition in Iraq is going to be easier.)

The Belgian Premier means business: he has made it clear to HRD Chairman Jacky Roth that the Belgian government will not deal with the current board and will not consider any request made by the HRD to government until the governance crisis is solved.

The Belgian Premier finds it in the very best interest of the nation to get the HRD governance problem solved. He is now setting the tone and the time-table: Jacky Roth was told to come back in a month and report to the Premier about the results of the Judicial Working Committee. In the meantime, the Premier “calls on all the involved players not to pour more oil onto the fire” and “to prepare the needed reforms together in a serene climate”. [In Flemish: “De Premier roept alle betrokken spelers op om inmiddels geen olie op het vuur te gieten en in een sereen klimaat de hervorming samen voor te bereiden.”] That is wishful thinking – if the various factors in the diamond sector could work in harmony, the situation would never have deteriorated to this level.

What viewers love in the West Wing television drama is that all the interesting characters display humor and dedication that touches the heart while the politics that they discuss touch on everyday life of all the people. I haven’t seen much humor or dedication among the current actors of the HRD drama. The diamond business in Belgium must be bad. From almost half a century of watching the diamond sector, it always appears that when business is not good, the industry’s politicians find ample time to wage internal fights in their organizations. Suddenly, they have time to work the telephone, to climb to the fifth floor, to talk to journalists.

The next delivery of the soap opera should probably take us to the inner sanctums of the Indian diamond companies. According to published reports in Belgium, the dean of the Indian trading community, Dilip Mehta, has hinted that a new organization may need to be created, which would properly represent the Indian community. It is believed that Indian traders (by value) represent well over 60% of the total Antwerp trade. Personally – and that is my conjecture – I don’t believe that Mehta or any other Indian mega-company owner truly want the HRD to disintegrate or want to have a “new” organization. They want the HRD to represent all segments of the industry – not more, not less.

As I noted in an earlier column – the pendulum which has swung too much into an extreme direction, will eventually swing back and the desired equilibrium will be found in the middle. I am not sure whether I am “excited” about the governmental intervention. Sometimes such high level intervention may actually lift the issue well above its proper proportions. Let’s not forget that there is also a diamond industry “beyond the HRD’ (or, actually, ALL the diamond industry is “beyond the HRD”) and the task to facilitate and assist the diamond trade and industry is certainly a governmental responsibility that exists irrespective of the squabbling within the HRD.

I am not sure that it is proper for the Premier to hold important decisions (such as action on the Ten Points Memorandum) in a way “hostage” the HRD crisis. As I said before, the Premier is taking a calculated risk. Says his office: “It is in the greatest interest of the position of Antwerp as world center for diamonds that the [representational] balances within the HRD are restored, taking into the account the future evolution of the diamond sector in the years ahead.”

I am not sure what the Premier meant by that statement. What does he mean by “future evolution”? What is his vision about such evolution? No traders? Only mega-firms? No manufacturing?

 In a television soap opera it is easy to solve the nation’s most urgent problems in one or two episodes. In real life things aren’t so easy – and an active government involvement is not always a formula for better results. I assume that, with this heavy government pressure, Chairman Jacky Roth conceivably could go back to his board and get its agreement to call new elections. To work it out within the existing frameworks. The new board members may not be representative of the entire industry – but nobody will (or should) claim that they are not good board members. They have all their own characteristics (some have a penchant to sue producers), but they didn’t get themselves elected (to voluntary, time-consuming activities) to do “harm”. We should be responsible, we should assume the board is responsible, and we not imply anything to the contrary.

Let’s see what happens. At The West Wing, the television show is currently in transition between the administration of the ficticious President Josiah 'Jed' Bartlet and an unknown prospect (either some Congressman or Senator). When Jacky Roth will have to report back to the Premier within a month, the government would also like to see a HRD administration in transition. We don’t know how this saga will play out. Though the impact of the HRD drama on the diamond industry-at-large is probably minimal -- none of this is “good for business. None whatsoever.

Have a nice weekend.