IDE Considers Involving Police in Bankruptcy Cases

“The arbitration institution for bankruptcies went bankrupt,” asserts a frustrated Israel Diamond Exchange (IDE) director. As dissatisfaction among diamond traders grows regarding their bankrupt colleagues, the IDE is starting to look for ways to battle the problem with new tools, including turning investigations to the hands of police and bringing criminal charges against companies and individuals.

According to the director, a long time diamond trader, a change must be made in the way the Exchange handles bankruptcies. “If the next one, two, three cases will be investigated by the police, it will prevent cases four, five, and six,” he says.

These thoughts are echoing a growing sentiment in the Exchange – that many of the insolvency cases are not honest financial failures. One idea that is circulating is to set up a meeting between the head of the National Fraud Unit at the Israeli police and the heads of the Exchange to start a process that will lead all bankruptcy cases to be investigated by the Fraud Unit.

A group of traders have already tuned to the police in a recent such case, after collecting information with the help of a private investigator. They wanted to prove that criminal charges, rather than civil, should be brought against the company, which owes several million dollars.

Some say the arbitration institution at the Israeli exchange is good for resolving issues of terms of payment or complaints that a stone in a parcel was replaced. For the bigger, more complicated issues, it should be turned over to the authorities.

Not just that, members of the IDE are starting to demand that companies and individuals involved in bankruptcies will have their membership revoked. According to Willy Rotti, President of the Diamond Club of Antwerp, one of the city’s diamond exchanges, usually that is how it’s handled in Belgium.

“Normally the involved individual is expelled,” says Rotti. “An accident in business can happen – but it has to be an accident,” he says about cases that don’t end in expulsion. This also requires that there are no creditors among the diamantaires. In any case, decisions are made on an individual basis, “but usually they are expelled from the exchange.”

Naturally, IDE members want to see the Antwerp model adopted in Israel. Rotti wants to see this implemented at all the exchanges.