A Red Notebook, A Secret Bank, and of course…Diamonds

Life has taught me that if you sign in a lawyer’s office and everything’s backed up by documents, if the other guy is a crook, in the end, he won’t pay and there’s nothing you can do about it.

http://www.totpi.com/55m-fraud-case-reveals-cracks-israel-exclusive-diamond-exchange-club/

0202122-6-1500x844

$55M Fraud Case Reveals Cracks In Israel Exclusive Diamond Exchange Club

http://www.totpi.com/55m-fraud-case-reveals-cracks-israel-exclusive-diamond-exchange-club/

“The police discovered that an illegal bank had been operating within the IDE building, in which diamantaires exchanged notes attesting to deals done in cash (dollars).

The underground bank also converted currency and cleared “checks” really, notes about diamond deals.

The core activity, amounting to more than a billion shekels, was fictitious deals ostensible purchases of diamonds from overseas, but in practice the only thing exchanged was invoices and notes.

The purpose: to dodge the tax authorities and launder money.

Secret bank


A red notebook containing the names of diamond traders was also found at the illegal bank.

The Channel 10 news show “The Source” reported that the names included big ones, like Lev Leviev, Beny Steinmetz, and Shmuel Schnitzer, former president of the IDE. All denied any connection with the illegal bank.

The police and prosecution elected not to pursue that angle.

A source, Menahem Magen, a central figure in the underground bank who cooperated with the investigation, claimed the top IDE people knew about the bank.”

At the court hearing at which diamantaire Meir Ohana was convicted, the judge criticized the evidence given by Schnitzer and another top diamantaire, Amiram Gertler.

The two appeared in the book and had appeared as witnesses for the defense, on behalf of Ohana. Judge David Rosen ruled that their testimony had not strengthened the case for the defense.

Ohana was sentenced to 10 years, Magen to four (in a plea bargain). Talking with Channel 10, other diamantaires claim the IDE still houses underground banks.

Nonsense, claims Dvash, whose name also appears in the red book.

On his name being listed, he says, “Sometimes notes with the names of decent people doing real deals also reached the underground bank. My note wound up there from another deal. I never did deals with the underground bank. Remember that Magen and Ohana worked small scale.

It’s a drop in the sea compared with the giant turnovers on the exchange.

The affair made headlines, but it ended five years ago.”

Maybe the lesson is to abolish the notes, which open the door to another underground bank.

Dvash: “After the affair exploded, a new regulation came into force, under which invoices may only be issued by the person who received the note.

It was a flaw in the system and we fixed it.

True, there are cases here that shouldn’t have happened, but it can’t become the norm, as though that were how the diamond industry operates. The people who were partners in the underground bank are in jail.

What happened with the notes happened, we pushed restart, and moved on.”

Maybe the Abramovich affair shows that the system of notes and handshakes has to be changed?

“I don’t think so. This system works in Israel and the rest of the world too. We all still do deals by shaking hands.

The little note is our tradition, but two or three days later an invoice is issued like in the rest of the State of Israel.

Life has taught me that if you sign in a lawyer’s office and everything’s backed up by documents, if the other guy is a crook, in the end, he won’t pay and there’s nothing you can do about it.” The whole industry is based on trust, he says: “Even if I do a deal with somebody in Malaysia, we say ‘mazal and bracha’ and he sends the money and I send the goods.

To read the article in its entirety: http://www.totpi.com/55m-fraud-case-reveals-cracks-israel-exclusive-diamond-exchange-club/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s