Giving Thanks at the Diamond Dealers Club

This issue was not an advance agreed official agenda item for the November 18 Board Meeting. Most of the rank and file members of the Club were not aware of this gift. They are now. At the relevant board meeting, one week before Thanksgiving, a member – spontaneously -- brought up the payment to Banda. “Was it really spontaneous?” wondered one board member. In a business in which confidence, ethics, principles, good governance, trust etc. are of paramount importance, the position of the President of the Diamond Dealers Club raises some intriguing questions.

A lengthy and heated discussion followed in which different amounts, up to a maximum of $100,000, were mentioned as the appropriate level of gift to Banda. One participant made the suggestion that Banda should excuse himself and not be present at the discussion. Jacob Banda refused to move from his seat. He was present during the entire deliberation.

At some point – after it was clear that Banda was going to get money – it was decided to have a “secret” vote. The vote was not on the principle involved, but rather on the amount. Moreover, a “zero sum” was not an option, even though one board member elected not to participate in the vote. The board members were given the choice to indicate whether Banda should receive $50,000, $75,000 or $100,000.

“If the vote would have been open with hands needing to be raised, I would have left the room,” Banda said to us last night, in reply to our question why he didn’t leave the room during the entire discussion. Out of the 18 board members present, Banda says there were only two DDC board members who were against giving money to the President.

As to what happened next the reports are not unanimous. Before going into further details we want to disclose that the DDC President had been the subject of an earlier IDEX article that we had spiked (i.e. decided not to publish) – but it is relevant in the present context. In April 2004, we had drafted an article about Diamdel’s “Banda” boxes. For those readers unfamiliar with the term, this refers to a multi million dollar annual Diamdel allocation that has been secured (by Banda from the DTC in London) for New York diamantaires and is being sold through the Antwerp office of Diamdel.

Ten times a year, a group of New York buyers, selected by Jacob Banda, go to Antwerp where they can purchase both regular DTC, and also earmarked “Banda” goods, at Diamdel. So a regular New York buyer, who has come to Diamdel for many years, may find that he is offered a few boxes and on some of those the name “Banda” appears in black ink. When purchasing these boxes, the New York client takes into account that commission is due to Jacob Banda.

At the request of WDC Chairman (and ex-DDC President) Eli Izhakoff – who is close to Jacob Banda -- we refrained from publishing the story, as Izhakoff argued that this was a proper commission business for Jacob Banda to be involved in, and we, as journalists, would be intervening in normal customary business transactions. We disagreed – but gave Izhakoff and Banda the benefit of the doubt. However, we didn’t think it was proper for the elected President of a diamond bourse, who, as part of serving his constituency, was able to secure additional rough diamonds from the DTC for his members, should be financially benefiting from doing what a bourse President is elected to do. But we let it go. We were wrong for not publishing the story then – and we sincerely regret this now.

As Diamdel doesn’t comment on clients, De Beers spokeswoman Lynette Hori confirmed to us that “Diamdel in Antwerp does supply some of its clients represented by Jacob Banda, but Diamdel tell us that these clients are considered in exactly the same way as all their other clients. We understand from Diamdel that there is no benefit to these clients in being represented by Banda insofar as allocation of goods by Diamdel is concerned. We also understand from Diamdel that there is no commission or favored status accorded to Banda,” concludes Ms. Hori.

The concern in the market isn’t with Diamdel but rather on the dividing line between the public duties of an elected official and his private business. Getting $50,000 for being part of the organizing committee of the World Diamond Congress turns the “Banda-box aberration” into a “Banda-trend.” To quote an eminent DDC bourse member: “If the DDC President, in 2004, received 1% commission on the Banda boxes at Diamdel plus $50,000 on Congress surpluses, that comes to a total revenue of almost $300,000, depending on the size of the Diamdel allocation. [Which is much lower than perceived in the market. CE-Z] If this becomes the norm, how can we avoid that people will become motivated to run for public office because of the financial rewards? This is not right and not in accordance with the principles and traditions of the Diamond Dealers Club.”

Another DDC member expressed concern about conflicts of interest. “It may well be that either present or aspiring Banda-box clients are among the board members voting to give Banda money. That cannot be correct.”

At the Antwerp Diamond Conference held last month, the HRD proudly announced that the surplus earned was being donated to six different charities. At the gala dinner, the names and the causes appeared on slides for all to see. In New York there are plenty of charities that could benefit from the Congress surplus.

When we started to ask questions (by e-mail) about the $50,000 bonus to Banda, Eli Izhakoff – who is not a member of the present DDC board – immediately informed us that “Indeed, the board of directors voted to give Jacob Banda $50,000 as appreciation for what he did and other reasons. He [Banda] has informed the officers and most of the board members that he does not intend to take the money and that the club can distribute the money to several charities. You can get in touch with the officers to verify that this was done before your e-mail was sent.”

The first alleged “talk” about charity took place days after the “bonus” was decided upon – and it doesn’t change the fact that the Board of the DDC did not intend to give to charity – they gave to Banda.    In a telephone conversation with us, Jacob Banda confirms that he plans to give the money to five Yeshivas (religious schools) in New York. “Schools with broken chairs, attended by the poorest students. In the past the DDC would give a lot to charity but that was stopped some years ago because of budgetary reasons. Now they have given me a nice gift and I have a chance to give this to these worthy Yeshivas,” he said. Banda later specified that the money would be transferred directly from the DDC to the Yeshivas.

There are different views on when and why the decision was made to give the $50,000 to charity. Banda said to us that he had told a few officers of the board of this decision on the Monday morning following the Thursday vote. What we found was that, as of last night - some two weeks after the vote -- some board members were not aware that he had made such a decision, Banda shrugged that off by him “not being responsible for what they know or don’t know.”

There are anecdotal reports about arguments between Banda and bourse members, in which Banda tried to explain why he deserved the money and why he was angry that there were those who wanted to deny him the gift. Banda explained to us that “when we [i.e. the DDC] thought that there would not be enough money to cover the costs of the Congress, and when the bourse was thinking about canceling the event, I guaranteed that I would cover the losses out of my own pocket.” Apparently, the DDC board members reasoned that as there were profits, it was only right that Banda should also get a share from these. One board member remarked to us that “Banda had made similar magnanimous promises also in the past, but when there indeed was a loss it was subsequently covered by the Club. Moreover, the board would never allow a President to assume personal liability for the loss occurred in the organization of a bourse event” he said.

The exact timing of the decision to turn the Banda “bonus” into a “charity gift” is not really relevant – and we don’t wish to dwell on it. The disturbing fact remains that a Board of Directors meeting of the DDC decided to financially reward its President for his work in making the Congress a success; that the President of the DDC did not immediately stop such deliberations in a board meeting over which he himself presided.

What is even more disturbing is that the only “secret” vote was on the amount to be given to Banda. If anyone had thought then that the money would go to charity, there would have been no reason for a secret vote. And the amount might have been higher – and it would have been unanimous.