Friday, October 23, 2009

End Notes Chapter PROLOGUE

The idea of a book about the diamond invention began in a casual meeting with Ben Bonas in June of 1978 at a resort in St. Tropez. Bonas was an intermediary between De Beers’ diamond trading company in London and diamond dealers all over the world. Brokers were necessary to maintain the fig leaf that De Beers did not directly deal with US diamond companies, and therefore did not come under the purview of its anti-monopoly laws. Bonas, in this capacity, handled about one-third of the world's uncut diamonds. When I heard that he was in the diamond business my initial response was to assume that it all was part of a very ancient trade. "Not at all," he said. "The diamond business was only really invented in the last hundred years." He pointed out that although the diamonds had been precious gems for centuries, the business of mass-marketing them as engagement rings, and controlling the price, was a comparatively recent phenomenon. The "invention" was the system for restricting the supply of diamonds and maintaining the price in the world market.

It was, in brief, a complete monopoly. The possibility that the value of diamonds was artificially, sustained' by a conspiracy intrigued me, and I decided to look further into this mechanism. My investigation took two and a half years.

The success that the diamond cartel had in creating a market in Japan was explained to me by Hugh Dagnell, one of the chief marketing strategists for the Diamond Trading Company in London. The statistics on the Japanese and other markets come from a private study done by the Diamond Trading Company ,called The Retail Diamond Market for Nine Marketing Countries (1978). 1 also interviewed advertising personnel at N. W. Aver and J. Walter Thompson who were working on a diamond account. The series of full-color advertisements were supplied to me by the Diamond Trading Company in London.


The Rise and Fall of Diamonds began as a project for the German magazine, Geo, which in 1978 was planning an American edition. The editor, Harold Kaplan, wanted a long report on the mining of diamonds, and he offered to finance a trip to the world's diamond mines. I first went to the offices of the De Beers Diamond Trading Corporation in London at Number 2 Charterhouse Street on November 28, 1978. After receiving an initial briefing on diamond production from Richard Dickson, the public relations officer in charge of visiting journalists, I flew directly to Johannesburg, South Africa. From there I proceeded to diamond mines in Botswana, Lesotho, Namibia and Kimberley. Then I went to the diamond cutting centers in Antwerp and Israel, and back to De Beers' headquarters in London. The trip took eight weeks.

The section on New York was logistically the easiest, since I live in New York and have many friends in the diamond business. The magazine Jewish Living (which lasted only three issues) arranged many of the interviews that I had with Jewish diamond dealers on the New York Exchange. I interviewed the president of the Diamond Dealers Club, William Goldberg, in his office in the Diamond Exchange. Fred Knobloch described his trips to Moscow to buy Soviet diamonds. The articles in the Jewelers' Circular Keystone that detailed the concern for the diamond market were written by David Federman.

In Johannesburg, I spent a good deal of my time at the offices of the Anglo-American Corporation at 44 Main Street. I was especially struck by the genteel and very English atmosphere that prevails here in this part of South Africa. At lunch, for example, the service begins with an English butler serving drinks. Then everyone is ushered to a long table with fine china and crystal glasses. A wine steward pours French claret while a chef, standing at a side board, carves roast beef to each guest's taste. After the meal Cuban cigars are passed around the table. It is much more like dining in a private club in England than at a South African mining company.

Anglo-American executives who explained De Beers' diamond mining strategy included Peter J. R. Leyden, the manager of Diamond Services, L. G. Murray, the chief geologist for De Beers, Barry R. Mortimer, the chief public relations consultant for De Beers, and Ivor Sanders, the public affairs officer at Anglo-American.

The interview cited in the chapter with Harry Oppenheimer took place December 4, 1978, in his office. It lasted for about an hour. I was greatly impressed by the ease with which Oppenheimer could discuss the geopolitics of diamonds.


One journalistic advantage I had in flying to the diamond mines on De Beers' airplanes was that I had the opportunity to meet en route a number of consulting engineers. Kenneth J. Trueman was, for example, seated next to me on the flight to Botswana, and his insights into the diamond mine there proved very helpful. In all, I flew on a dozen of these mining flights. I was shown around the Orapa mine by Jim Gibson, the chief geologist at the mine.


The section on the Lesotho mine is based entirely on interviews that I had on December 6, 1978, during my tour of the mine. Keith Whitelock, the general manager of the mine and Rogan MacLean from the Diamond Trading Company in Lesotho helped me understand the problems.

CHAPTER FOUR Because Namibia was in the throes of a political crisis, I arranged to have briefings with the South African General Staff on the guerrilla war with SWAPO in Namibia and with a number of prominent businessmen in Windhoek, the capital of Namibia and Olga Levinson, who writes on politics there. I also read the internal reports of Anglo-American were, which helped illuminate the unique mining operation.


In Kimberley I did see the entire history of the diamond cartel laid out before my eyes. There was the original open pit "Big Hole" filled with water. On one side of it, there was the Mining Museum in which De Beers had put together much of the original equipment and buildings used in the mining rush of the nineteenth century. Then there was the De Beers headquarters, which had originally been the headquarters of Barney Barnato, and the De Beers club, where many of the big deals had been struck. "De Beers is Kimberley, Kimberley is De Beers," George Loew, the public relations man for De Beers in Kimberley, observed.


De Beers generally controls the diamond trade through indirect levers. The most notable exception where a De Beers subsidiary, the Diamond Trading Company, directly exerts pressure on diamond wholesalers and manufacturers is at the London sights. I was in London for two of these occasions: in December of 1978 and September of 1980. Most of the information for this chapter comes from dealers and manufacturers who are regular customers of De Beers. For obvious reasons they requested anonymity.

While the Diamond Trading Company was extremely cooperative in showing me through their headquarters in London and explaining the sorting and distribution procedures, I did not have an opportunity to interview a number of key executives there, including Monty Charles. The policy of De Beers, and the Diamond Trading Company, is to allow journalists access to their public relations department but not to the actual executives outside of that department. The description of Monty Charles comes from interviews with diamond dealers who attended sights regularly and knew him well for a long time. A number of major diamond brokers proved extremely helpful to me in articulating the rules of the game, including Ben Bonas and Richard Hambro and Vivian Prince of I. Hennig.


The section on Cecil Rhodes is drawn from a number of biographies, including J. G. Macdonald, Rhodes: A Life, published by Chatto and Windus London 1940; Andre Maurois, Cecil Rhodes, Collins, London (1953) Much of the detail of Rhodes' competition with the other diamond magnates in South Africa during this period is taken from Brian Roberts, The Diamond Magnates, Charles Scribner's, New York (1972). The quote from Rhodes comes from the book, Old Kimberley, by Anthony Hecking, published by the Kimberley Museum in South Africa. The section on Barney Barnato is drawn from Thurley Jackson, The Great Barnato, published by Heinemann, London (1970), and Brian Roberts, The Diamond Magnates.


The primary source on the life of Sir Ernest Oppenheimer is the book by Theodore Gregory, Ernest Oppenheimer and the Economic Development of Southern Africa, Oxford University Press, Capetown (1962). This biography was commissioned by the Anglo-American Corporation, and the author had access to the letters of Sir Ernest and the records of De Beers and the Anglo-American Corporation The letters quoted from Sir Ernest Oppenheimer in this chapter are taken from this book. Other sources Oppenheimer and Son, McGraw-Hill, New York 0973); Edward Jessup, Ernest Oppenheimer: A Study in Power, Rex Collings, London 0979); and Godeherd Lenzen, The History of Diamond Production and the Diamond Trade, London (1970) The section about the Jews in the diamond trade comes from the Jewish Encyclopedia. The section about Oppenheimer's plan to jettison several tons of diamonds into the North Sea comes from documents I obtained under the Freedom of Information Act, which pertained to the United States government's antitrust suit against De Beers. This historical research was supplemented with interviews with a number of officials at De Beers, including Harry Oppenheimer.


The question of how nations at war acquire the strategic materials they need from their enemies remains an especially difficult one to research. Throughout the Second World War, Germany was entirely dependent for its supply of industrial diamonds on its British enemy. There were no synthetic diamonds in those days, and the only source for many important types of diamonds were the mines and fields in the British Empire under the control of the diamond cartel. Despite embargoes and intensive policing by intelligence services, Hitler managed to acquire his diamonds.

The source of research for this chapter is a document I acquired under a Freedom of Information request. I had initially learned of the United States government's interest in the strategic smuggling of diamonds through a former attorney general named Bruno Schachner. When he had originally joined the Justice Department in 1939, he had been assigned to one of the least interesting tasks it had to offer: investigating private competition to the United States postal service. If such a case was brought against any offender, the maximum fine was fifty dollars. For months he labored in the legal doldrums, searching for an escape. Then, early in 1940, the Coast Guard arrested a German soldier whom they suspected of being a spy. The only grounds that could be found for detaining him was that he was carrying a letter, and this could be construed as violating the prohibition against competing with the post office.

Schachner found that the letter the German sailor was carrying was encoded. Calling in a team of code-breakers from the Treasury Department, Schachner set about deciphering it. The message concerned a shipment of gem diamonds consigned to a firm in New York. The diamonds, moreover, came from European areas that had been recently overrun in the Nazi blitzkrieg.

Schachner, himself a refugee from the Nazi pogroms in Austria, suspected that these diamonds had been seized from interned Jewish diamond cutters. For this reason he took "a very personal interest in the case." He began his investigation by visiting the various diamond cutting factories in New York and learning the style or "signature" of the different diamond cutters. It turned out that the diamonds that the firm in question was importing had the "signature" of Dutch and Belgian cutters who had been shipped off to concentration camps by the Nazis. Schachner then began tracing the provenance of these diamonds through import licenses and records of money transfer. By 1941, he had established that they had all come from Germany. As a result of this investigation, an owner of the import firm was prosecuted for trafficking in stolen diamonds and sent to prison.

Schachner had further learned that the Nazis were involved in a triangular diamond trade whereby the records of the diamonds sold in New York were used to buy industrial diamonds in Brazil, which, in turn, were shipped to Germany through Switzerland. The category of industrial diamonds that the Germans seemed most interested in was boart (which is a form of powdered diamond dust used for diamond grinding wheels). Even as early as 1941, Germany had a critical shortage of this boart.

Since Schachner recalled being consulted during this period about the status of the De Beers stockpile in London, by the FBI and Justice Department officials, he suggested that somewhere in the justice Department archives there existed a file on the diamond investigation.

I called an assistant attorney general at the Justice Department who told me that most of the government's files on the diamond monopoly were in the antitrust dossier on De Beers, and suggested that I file a request under the Freedom of Information Act for the entire antitrust action against the diamond monopoly.

Within a matter of weeks, batches of formerly classified files began arriving. They soon totaled more than 2,000 pages of legal memoranda, FBI reports, embassy cablegrams, intelligence briefings, economic analyses, financial records, interviews with individuals in the diamond industry, and mail intercepts of correspondence between members of the diamond cartel, including Otto Oppenheimer (which were apparently read by military censors in Bermuda).

The file obtained under Freedom of Information contained only a few references to any actual investigation of the smuggling of diamonds by the cartel to the Nazis. There was, however, one reference to an OSS investigation. This led to the summer report, cited in the chapter, which strongly implied that De Beers was impeding Allied intelligence investigations-if not actually engaged in smuggling itself. To find the field reports I went to the National Archives and consulted the military historian, John E. Taylor.

Without access to these field reports, it was not possible to assess the quality of evidence on which the OSS predicated its almost incredible charge that the diamond syndicate dealt with the enemy. In an attempt to find agent Teton, I placed advertisements in the journal of the retired officers of the OSS and the New York Times Book Review, but I had no success.

The letters on the Belgian Congo cited in this chapter came from Sir Theodore Gregory's book on Oppenheimer, previously cited.


The description of the cartel's attempt to suppress the production of South American diamonds, cited in this chapter, comes from the autobiography of Sir Patrick Hastings, Cases in Court, Pan Books, London (1949), especially part three, "A Case for the Diamond Syndicate." Sir Patrick had the unusual opportunity to cross-examine Otto Oppenheimer and to take testimony in pretrial motions.

The section on John Thornburn Williamson is drawn from a two-part series in Indiaqua magazine (9:10-21 and 10:15-17) which provides a biography. The material on the British Colonial Office comes from the public record and documents obtained under the Freedom of Information Act. Financial details are given in Edward Jessup's book,, previously cited. Ronald Winston, whose father Harry Winston dealt with Williamson, also provided personal recollections of Williamson. At one point Harry Winston had contemplated taking over Williamson's mine, and negotiated with him, but decided against it out of concern for jeopardizing his relations with De Beers.

The section on Harry Winston comes from interviews with Ronald Winston, now president of Harry Winston Inc., and Nick Axelrod, the chief diamond buyer for Harry Winston Inc.


The International Diamond Annual, a review of the world's diamond industry and trade, published by De Beers in two volumes in 1971 and 1972, furnishes a comprehensive picture of a diamond pipeline from the diamond mines to the cutting center to the retail business. They were published by De Beers as a service to the diamond industry. The quotation about keeping track of the market in this chapter comes from volume two of these books. Other trade publications, including Indiaqua, Jewelers' Circular Keystone and Diamant, illuminate the diamond trade.

I was shown around Antwerp by Ivor Sanders, who flew over from London to take me to various diamond cutters. Most of the diamond dealers I visited, therefore, had a close relationship with De Beers. Raoul Delveaux, the director general of the Diamond High Council in Antwerp, was also helpful in arranging interviews in Antwerp. The history provided in this chapter is drawn in part from the 1978 Year Book of the Diamond High Council.

In Israel, I was assisted in making contact with diamond dealers by James J. Angleton, the former CIA counterintelligence chief, who had served as a liaison between American and Israeli intelligence. I met Angleton in the course of researching my book, Legend: The Secret World of Lee Harvey Oswald, and he put me in touch with a number of his contacts in Israel. During a week in Tel Aviv, I was able to see independent diamond dealers, diamond dealers with a sight at De Beers in London, former diamond smugglers, diamond bankers and even diamond speculators. They all shared a conspiratorial view of De Beers. They believed that De Beers was artificially restricting the flow of diamonds, both by stockpiling diamonds in their vault in London and by manipulating the open market so as to drive up the price. Most of these dealers and individuals in the diamond business also believed that the De Beers cartel was attempting to undercut Israel's preeminent position in the business of cutting small diamonds.


The letters cited in this chapter come from Sir Theodore Gregory's biography of Sir Ernest Oppenheimer. Oppenheimer filled in some of the gaps and motivations in an interview he gave me on September 4, 1978. Before I was ushered into his office that morning, I had viewed a video tape of a special hour-long documentary about Oppenheimer that had been prepared by South African television to commemorate his seventieth birthday. Throughout this televised interview, Oppenheimer was treated with the sort of somber respect reserved for the most exalted royalty. In hushed tones he was asked about the economy, the nation and the state of the world. This program was then followed on videotape by a second program, called "A Family Affair," that showed various aspects of Harry Oppenheimer's personal life. There were scenes of his arriving in Johannesburg in his own blue and white Gulf Stream jet, followed by his aide-de-camp and security police. Other scenes showed him at his palatial home, surrounded by his Goya paintings and greyhound dogs. There were also scenes of Oppenheimer at his stud farm outside of Kimberley with his championship racehorses.

Aside from Oppenheimer, I also gained some insight into how he operated from his executives, whom he had treated as members of "one big family" as one of them put it. For example, Richard Wake-Walker, a young executive with the Diamond Trading Company in London, told me how he had been invited to Oppenheimer's game farm during weekends in South Africa. He recalled that Harry Oppenheimer would sit in his shirt sleeves on the terrace surrounded by various members of his family, executives of Anglo American and De Beers and a few friends. Everyone would drink beer. When an elephant or a rhinoceros would trudge up to the barrier in front of the terrace, a servant would throw a floodlight on it, and everyone would admire the wildlife.

Kees Schager of the investment firm of Arnhold and Bleichroeder helped me through the corporate labyrinth of the Anglo-American and De Beers. The antitrust documents obtained by me under the Freedom of Information Act provided further clues to the interrelations. I also received some help from the Anglo-American corporation.

CHAPTER THIRTEEN I got files of the N. W. Ayer Company, the advertising campaign for De Beers. From my Freedom of Information request. Prosecutors in the antitrust division, attempting to show that De Beers had an agent in the United States, had subpoenaed all of the Ayer records. These archives contained the material reviewing the strategy research and ambitions of De Beers.

N.W Ayer provided me with volumes of campaign books. These included not only the advertisements used by N. W. Ayer in its campaign, but also the strategy it presented to De Beers. I also interviewed a number of executives at the advertising agency who preferred not to use their names.


Ian Fleming, who invented James Bond, also wrote probably the best book on diamond smuggling, The Diamond Smugglers, Cape, London (1957). He had extensive interviews with Percy Sillitoe's staff, who set up De Beers' intelligence system, and considerable access to De Beers itself. It is his only nonfiction book. Fred Kamil, the Lebanese mercenary who hijacked a South African aircraft in order to extort money from Harry Oppenheimer, has also written a book about smuggling called The Diamond Underworld, Allen Lane, London (1979), which is of great interest since Kamil was one of De Beers' diamond soldiers. The section in this chapter on Percy Sillitoe and the organization of De Beers intelligence is drawn mainly from Fleming's account. The section on Kamil is drawn mainly from his autobiographical book.

The section on Sierra Leone is based on interviews I conducted with Maurice Tempelsman, Ronald Winston and Michael Samuels, the former American ambassador to Sierra Leone.

The section on Zaire is based on personal interviews with a former CIA officer stationed in Zaire who prefers that his name not be used. Other sources include New York diamond dealers who do business in Zaire. The section on Angola is based on interviews with Albert Jolis, a New York diamond dealer.


The story about Sir Ernest Oppenheimer rejecting the proposal to develop synthetic diamonds was told by Richard Hambro, an investment banker who worked in the industrial division of De Beers in South Africa.

The section on General Electric is partly based on documents I obtained under the Freedom of Information Act. In its 1973 lawsuit, the Department of justice looked into the possibility that De Beers had conspired with General Electric to fix the price of synthetic diamonds. The prosecutors found no substantive evidence of such collaboration, but the documents they turned up in their search provide a useful overview of the economic and political considerations involved in General Electric's development of synthetic diamonds.


The section on the origins of the Israeli diamond industry comes from interviews I had with Ovi Ben Ami while I was in Israel in 1978 and Vivian Prins, whose father had been the broker for Ben Ami in the Israeli diamond deals.

The section on Goldfinger is based on my interview with Israeli dealers who had known his work before his death. Vivian Prins, whose firm had brokered diamonds for Goldfinger, provided details about the dealings between Goldfinger and De Beers.


In Kimberley I was seated at lunch at the Kimberley Club next to Barry Hawthorne, a geologist who works for De Beers. He had recently returned from the Soviet Union, and told me about the enigma of Soviet diamond production.

The section on the history of Soviet production is drawn from the Industrial Diamond Annual (1971, 1972) and Indiaqua ( issue 5, pp. 1416; . 6, p. 15; 11, p. 18;. 15, pp. 8-1 1 and 16, P. 20) and John Massey Stewart account in the magazine Optima, which is published by the Anglo-American Corporation (No. 2, 1976, p. 8). The section on Aikhal comes from"Red diamonds from Siberia." in the International Diamond Annual 1971 (p. 79) as does the quotes from Victor Tikhonov. The data on the Finch mine was provided by L. G. Murray. The description of the diamond sorting was given to me by a former diamond sorter for the Diamond Trading Company in London who prefers that her identity be kept secret. The section describing Sir Philip's trip to the Siberian mines comes from Barry Hawthorne in 1978. Dr. Henry Meyer provided the account of the Soviet synthetic diamonds in an interview I had with him in New York in 1980. Joseph Bonroy gave his account of Soviet synthetic diamonds in the Belgian trade magazine Diamant (November 1970 The section on the silver bears is based on interviews I had with dealers in Antwerp .


This chapter is drawn almost entirely from the documents I obtained under the Freedom of Information Act and interviews with prosecutors involved with the case. The biographical details on E. T. S. Brown are derived from an interview with him in Indiaqua (1980) p 55.


The section on Sam Collins is based on interviews I had with Francois Lamparetti, a geologist who worked for the Marine Diamond Corporation. Background information concerning the attempt to smuggle diamonds from the forbidden zone comes from Ian Fleming's The Diamond Smugglers and Indiaqua (nos. 12 and 13). The account of Collins' organization of his marine diamond. Indiaqua, no. 6 .

The section on Albert Jolis is drawn mainly from interviews I had with him in New York.. He appeared before the grand jury investigating the diamond cartel in 1975, and the reference to his dealings in the Central African Empire come from documents I obtained under Freedom of Information. I also discussed the story about the Angolan concession with Chipanda, the former minister of natural resources for Angola, who confirmed Jolis's story.

The section on Harry Winston is based mainly on interviews with his son Ronald Winston, and Nick Axelrod.


The section on Stanley Mark Rifkin is based on interviews with executives of the Security Pacific National Bank in Los Angeles.

The investigations of the Dutch Consumer Association and the London magazine, Money Which? were reported in the gemstone section of the Jewelers' Circular Keystone magazine in January 1977.

Susan Rosenberg, who was commissioned by the exchange to study diamond trading, provided me with the data and documents involved in the earlier failure. William Goldberg, the president of the New York Diamond Club, allowed me to witness a diamond transaction in his office in April 1979

The section on Empire Diamonds comes from interviews in 1980 with Jack Braud, its president, and some of his diamond buyers. Diane Rossant, an assistant district attorney in New York City, provided information about fencing diamonds.

The section on Elizabeth Taylor's diamond is based in part on the article by Kenneth Schwartz Are a Girl's Best Friend" which appeared in the Washingtonian , January 1980. The section on the Bokassa diamond comes entirely from interviews I had with Albert Jolis.


On the subject of investment diamonds, David Birnbaum, a New York diamond dealer who writes on investment diamonds, provided details about the investment diamond business in America and Diana Motmans, a diamond journalist in Antwerp, on the international diamond investment business.


The quote from N. W. Ayer comes from the material provided to me under the Freedom of Information Act. The quote from Harry Oppenheimer is taken from a statement Oppenheimer made to Anglo-American shareholders.

The section on the Israeli overhang is drawn from David Meadow, "Checkmate," Jewelers' Circular Keystone, September 1979 and from interviews with Israeli diamond dealers and bankers.


This book was originally published by Simon&Schuster in 1982 under the title "The Rise and Fall of Diamonds." I am indebted to June Eng for designing the cyber book and thank Rebecca Fraser and Marjorie Kaplan for their research assistance.

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