Winsome, Lose SomeJanuary 16, 14
Winsome Diamonds has successfully rubbed many people in the diamond industry up the wrong way. That is no easy accomplishment; however in some circles, namely the rough trading, manufacturing and wholesale sections of the diamond pipeline, meeting some basic ground rules are so important that it is very rare that someone breaches them. When these rules are breached, the response is harsh.
Winsome, formerly known as Su-Raj, was considered for many years to be a very innovative company. A leading company. One of the first companies in India’s diamond industry to go public, the firm was a large diamond polisher and jewelry manufacturer. A few years ago, the family that formed the company bought in stages Florida-based Gemesis, a standout maker of lab-grown diamonds. It is not clear to anyone where and how it started, but the years of prosperity hit a snag.
In July 2012, Chaim Even Zohar named Winsome as the company allegedly behind selling a parcel of more than 600 lab-made diamonds as natural diamonds. The case raised a storm in the industry and serious concerns that some goods traded as natural may have actually been lab-made diamonds.
This was source of concern, the point when folks in the industry started to get extremely annoyed. One of the issues this created was that innocent traders might have been inadvertently involved in fraud – selling one product as another, misleading their clients against their better intentions. Retailers must have wondered about the product they sold.
Were there any retailers which bought diamond-set jewelry from the company’s jewelry firm and wondered if they were set with low-cost lab-made goods instead of full priced natural diamonds? It would not surprise me at all. The legal implications of selling consumers mislabeled jewelry are horrendous.
The next stage of this saga was defaulting on more than $1 billion of bank financing. A number of banks which are owed money turned to the Gem & Jewellery Promotion Council (GJEPC), the umbrella organization of India’s diamond industry, seeking advice, if not outright help. According to a source at the GJEPC, they pressured the banks to pursue legal steps against the company and its principal, Jatin Mehta. The source called these defaults “a shameful act.”
The banks want Winsome and its sister company Forever Precious Jewellery to be declared "wilful defaulters," defined as a borrower that is able but unwilling to pay, according to the Indian press. The banks, according to this, have information that the money was not lost by Winsome. They believe that the company has the money and simply refuses to pay back its debts. That is a very serious accusation.
Many in the diamond industry call the company’s owners ‘frauds’ for allegedly taking the billion dollars and leaving India for Singapore. Were they fleeing justice? The company claimed that they fell victim to clients not paying them. To this, an insider responded with a single word: “Bullshit.” It is a harsh word, especially uttered by this otherwise very calm and polite gentleman.
Everyone Stands to Lose
Several banks lost a lot of money and naturally the bankers who feel duped are likely very unhappy. Their reputation is also on the line. It will cost them and in turn will cost the diamond industry, which has now lost some more of the dwindling trust banks have in the diamond industry. The lost money, the resulting shrinking credit to the industry, the constant concerns over the possibility that undisclosed lab-made goods are mixed with natural diamonds, the worries that jewelry coming from India may contain lab-made diamonds, investors that bought Su-Raj/Winsome shares played, the good faith, suspicious consumers, even tax payer money – together, all this amounts to colossal harm.
There are two additional aspects to this story. Many in the diamond industry are wondering why anyone is continuing to do business with this group of companies. They view this as a form of tacit support if not actual encouragement, which many feel should not be provided.
The other point is pure cynicism: The Gemesis website calls their lab-made goods “conflict free.” As opposed to naturals? Are they implying that natural diamonds are conflict riddled? There are plenty of issues associated with mining diamonds, but a blanket allegation against everyone is obnoxious and patently inaccurate. Attacking natural diamonds, on a moral basis, by a company whose very integrity is being called into question is low. And less than credible.