Gem Scams—Where Are They Leading?

(via Gem & Jewellery News, Vol.9, No.1, December 1999) Harry Levy writes:

Since man first discovered the beauty of gems and pearls, and found he could find favor in the eyes of women by giving these as gifts, he has been faking it. He has been filling in the cracks in stones, oiling and staining them, bleaching pearls and waxing turquoise and lapis, anything to improve their appearance.

The discovery of glass was god send to such people and much ancient jewelry is found to be adorned with glass. These were cut to resemble gems and many were undoubtedly sold as gems to the rich and famous. It seems inconceivable that any royal person would have bought a piece of cut glass, but I have seen royal collections of loose stones containing many glass imitations.

When one buys a beautiful Georgian antique piece of jewelry everyone in the trade assumes that the gems could be foiled. Pale stones are cut in closed settings over a layer of colored silver foil to intensify the colors of the stones. I wonder how many of the original owners knew or where found that the stones were foiled and not valuable as they seemed at the time.

Traffic lights
Selling glass as gems is still practiced today. One amusing story (although not so amusing to the victims) is that often one sees smashed traffic lights in gem producing and gem cutting centers. The police eventually discovered why they were being smashed when they caught people selling broken pieces as ‘rough emeralds and rubies’ to the tourists.

Gem scams take many forms. The most obvious one is to sell a fake—a piece of glass or plastic—as real gem. A less obvious method is to sell a synthetic stone (one that has all the chemical and physical characteristics of its natural counterpart) as a natural gem, or to sell a genuine stone at a highly inflated price or to try to sell it as another type of stone. In this last category yellow quartz was marketed as ‘topaz’ confusing the unwary—the practice became so common that the trade introduced the term ‘topaz-citrine’ as being more truthful than simply ‘topaz’ for the yellow quartz. The correct description is yellow quartz or citrine, but never topaz with or without qualifying terms. To sell genuine topaz, the trade now uses terms such as ‘real topaz’ or ‘precious topaz’.

Iolite was sold as ‘water sapphire’ making the unwary think they were buying a variety of blue sapphire—not realizing they were buying a much softer and cheaper stone. Rubellite is used for a variety of red tourmaline to confuse the unsuspecting into thinking that is a variety of ruby. White stones have been sold as diamantine, CZ-diamond, diamonair and so on, again making the buyer think he is buying a type of diamond.

Synthetics
Colored synthetics are often sold as genuine gems, one of the most popular being the synthetic color change corundum imitating alexandrite. We often get calls from jewelers claiming that their client has a large alexandrite and they think it might be worth a lot of money. A good 1 carat alexandrite can fetch up to $10000 in the trade, and stones of 5 carat and above can run into hundred of thousands of dollars. So when we are told that the stone in question is large and very clean, we ask if it is 12mm or 15mm round, or 16 x 12 oval or octagonal. They are surprised when we can quote the size over the phone without seeing the stone. This is because the stones are synthetic and are cut in the calibrated ring sizes—worth but a few pounds. Their customer often insists that they are real stones bought in the markets in Alexandria.

Synthetic alexandrite is now available originating from Russia and being offered for sale in Sri Lanka and Brazil as a genuine alexandrite. Many in the trade are fooled by such stones as the color change and appearance is far more convincing than the synthetic corundum counterpart.

Mixed parcels
Itinerant dealers coming to London from the Far and Exotic East, show parcels of rubies and sapphires. Whilst the majority is real, the best few stones in the parcel are often synthetics. One does not know whether the dealers are doping the parcels or if they are duped themselves when they acquired the goods. Such stones circulating in the upper echelons of the trade are hard to spot, as the rubies are heated to reduce the visible zoning and curved lines, while sapphires are cut from the top parts of the boules to give striation of color and patches of blue resembling genuine Ceylon stones.

Usually one thinks that synthetics will generally be used as a substitute for expensive stones. Several years ago a dealer from the sub-continent came into my office with a parcel of cheap rubies calibrated into 9 x 7mm and 10 x 8mm ovals. They were reddish pink color, somewhat opaque and roughly polished. One often sees such goods, but only up to size of 7 x 5mm. The stones seemed cheap for their size. It was perhaps experience and instinct that made me look again before buying. I then realized that they were synthetic rubies; they had been heated and cooled rapidly to produce a cracking effect and then tumbled to rub the surface and produce the effect one sees in cheap Burma rubies. The seller claimed he knew nothing about the origin of the stones and had been given them by an ‘uncle’ to sell in Europe.

One can see other dealers coming in from that part of the world with cheap native cut stones. Sometimes there may be a parcel of, say, larger cut peridots. The price looks tempting until one looks again to discover that they are peridot color glass—native cut to resemble natural stones.

Genuine stones at inflated prices
The most common gem scam nowadays is to sell genuine stones, but at highly inflated prices. The stones may be in transparent sealed boxes, or loose, nearly always accompanied by a certificate. The certificate purports to come from a gemological institution or a government body with titles such as the “The State Gem Corporation’. The certificate will give accurate measurements of the stone, its weight and a statement to the effect that it is a real or genuine stone such as a ruby or sapphire, and sometimes the origin of the stone. Always these statements will be true. In some cases there will be a grading with words such as ‘fine’, ‘high quality’, etc. Potential buyers are targeted by researching credit card companies to find high spenders. They are approached through telephone calls or enticing literature offering a portfolio of stones with copies of the certificates, literature about the uniqueness and beauty of gemstones and graphs showing steep growth of prices over the past few years. These are often accompanied by promises, usually verbal, of buy-back opportunities as the value of the stones increases.

To add insult to injury, such buyers will still in their state of euphoria at the bargains they have purchased, and again approached by their sellers, with good news that they have found a buyer for their investment earning them a very healthy profit. The only condition is that the new buyer needs another stone to complete the portfolio before the deal can be completed. They promise to try to locate such a stone as they sold one to another investor in his portfolio and hope they can persuade him to sell. They of course come back with good news that he can purchase this stone and this stage of the negotiations the ‘profit’ shown on his portfolio will more than pay for the additional stone, but after paying for taking delivery the deal is never realized. But the consolation to the investor is that they shown him his stones are now worth much more than he paid for them originally and in a short time they will find another buyer and by then his stones will be worth even more.

Shamefaced
Whenever such stones are offered for sale by the ‘investors’ they say that they think they overpaid for the stone but would like to recoup their money or the best they can get. They are often prepared to take a small loss. Invariably such stones seem to be overvalued by a factor of ten, i.e. a $1000 stone is worth $100 in the trade. The owners are often shamefaced to state the true price they paid, but are shocked when they learn the true value. There is often an element of disbelief at the price they are told and it is only by being sent to several offices and shops that they actually realize the extent to which they have been overcharged.

All such stones I have seen would not be called ‘fine’ and are often difficult to sell even it at the correct market value. They usually are stones which have some defect, be it even in size or shape that makes them unsuitable for jewelry.

At the other end of the scale, captive audiences, such as those on cruise, are told that they have won a gemstone—usually a garnet or topaz. It is again accompanied by a certificate extolling its beauty and value. To make the win truly memorable they will have to pay a small amount—usually tens of pounds or dollars—to have the stone set in a ring or pendant. The ‘sting’ is in the amount they pay for mounting and setting of this stone; they could in many cases buy a similar article in their local High Street jewelers at a much cheaper price.

Moissanite
The latest masquerader is moissanite. No suggestion is made that those who are selling it are involved in any sort of scam. The producers, while they control the rough, have set their price and the prices their agents should charge and as long as these conditions prevail there will be a stability—and possibly increases—in the price. You may remember that when CZ first appeared

Large department stores often set aside a whole section for the sale of CZ jewelry. The stones often came with certificates, and grading reports were issued for the larger stones. They sold in the hundreds rather than the ten of dollars or pounds, whereas today a 6.5mm CZ (one carat diamond spread) sells for a few pence in the trade.

There are already rumors that moissanite is being manufactured in Eastern Europe and China where patents are hard to enforce. As the supply increases, so the prices will tumble. But in the case of moissanite the scam will come not from the producers or the jewelers—they will disclose it for what it is, a synthetic stone—but from the spouse or lover. With all the media publicity he can at last buy a ring with a stone that few can distinguish from a diamond. He will present his beloved the ‘diamond’ ring he always wanted to give her but could not afford. It will be years later, well into next millennium, when this jewelry will come back on the market by widowed spouses (or as family heirlooms) as authentic diamond jewelry. By then, hopefully, all jewelers will be able to spot a moissanite as being different from a diamond. They could then be accused, as the harbingers of bad tidings, of having cheated the original buyer by selling him a synthetic moissanite as a real diamond. The real culprit would not the actual jeweler in such a case but would bring the trade into disrepute.

I have not covered all the scams but jewelers and tourists who seek bargains from the gem cutting centers are often surprised that what they have bought may not sell at a profit back home. And this brings me round to the disclosure dispute—are we all committing a scam when we do not make the appropriate disclosure when selling a gemstone—by withholding information we are letting the buyer believe that the stone he is purchasing is not what it appears to be?

Disclosure
A thought that has bothered me for many years, as I have debated and presided over meetings devoted to disclosure of gemstone treatments and enhancements, that I as a dealer do not treat—sorry, handle—all my stones in the same way. My expensive emerald and ruby is carefully handled, placed in a special safe, unwrapped carefully, perhaps insured separately, while my small third-rate emeralds and rubies are put together with no cotton wool so that they rub and scratch each other. I have no second thoughts if I leave them out of the safe, for after all they are worth a few pence or at most a few pounds each. Yet when it comes to disclosure I have to apply the same rules to them as I apply to my truly precious gems. There is no disclosure problem with costume jewelry and this lower popular end of the trade now has many resemblances to the costume jewelry trade—people buy it for themselves, they are not given to them as gifts. They are worn a few times then thrown to the back of the drawer and forgotten—almost for ever. Should the stones in such jewelry be subjected to the same strictures of disclosure?

I do not know how I can draw a demarcation line but with the proliferation of jewelry set with cheap gemstones, often treated or synthetic, and the sale of such jewelry moving away from the traditional outlets such as jewelry shops into supermarkets and market stalls, should they become exempt from the need for disclosure? After all, who really cares if a 2mm round emerald selling in a ring for a few pounds has been oiled or resined or infilled with a colored substitute? Yet the trade can suffer prosecution every time this article is sold if the full facts have not been disclosed.

What for the future?
I mentioned the millennium a little earlier. It would be interesting if the trade could set up a panel to come up with their projection of the jewelry trade in, say, a hundred years time. With the advent of synthetics and ever improving treatments, I think a large part of jewelry will be sold for its appearance rather than its value. The traditional jeweler will move up market and hopefully those who buy the cheap items will develop a taste and move on to the more expensive individual jewelry where they will want to know exactly what they are buying.