By Robert Genis

At one time colored gemstones were marketed with very loose definitions. If a ruby looked Burma to a dealer or jeweler, it was sold as a Burma or Burma look-alike. About 20 years ago, a new trend emerged; auction houses, certain dealers and consumers wanted definitive information regarding country of origin. The gem trade divided into two camps; those who stated a fine stone is a fine stone irrespective of country of origin vs. those who wanted proof of country of origin. Although the battle rages, a majority in the trade now want country of origin reports. Many consumers and large collectors now demand independent verification for important colored gemstones. Dealers and retailers receive a premium for their top goods with independent grading reports. This does not mean that all colored gemstones must come with origin reports. Most inexpensive and low quality stones are still traded at all levels without paper.

The first to enter this arena in 1976 was C. R. "Cap" Beesley of the American Gemological Laboratories (AGL) of New York. We asked the AGL a few important questions regarding country of origin.

Gemstone Forecaster: For which specific gemstones does the AGL give country of origin designations?

Beesley: "The majority of the work we do at the lab regarding country of origin is in ruby, sapphire, and emerald. There is a growing population interested in alexandrite and a few isolated cases, such as pink topaz. We do the countries that are relevant to value issues, so you have to stay current to the total population of gemstones. We specialize in Burma goods and make a distinction between Classical Mogok and Mong Hsu material. (Note: Mong Hsu is a new source of Burma ruby and tends to sell for a discount to Mogok material.) We also identify Thai and African ruby. Sapphire is primarily Kashmir, Burma, Ceylon and the new material from Madagascar, some which looks like Ceylon or Burma. We also provide country of origin reports on emeralds. The main issues are primarily Colombian vs. African or Brazilian."

GF: How does the AGL determine county of origin?

Beesley: "Similar to studying the distinctive qualities of human DNA, the process of origin determination requires the interpretation of the unique signatures encapsulated in the chemistry of gemstone structures formed during their developmental growth. In many cases, the entrapped evidence results in distinctive optical, physical, chemical and inclusion characteristics that provide highly reliable conclusions which can be drawn by skilled observers utilizing standard gemological instruments. However, the chemistry altering impact of high temperature enhancements and an increasing number of new locations has complicated origin analysis. As a result, AGL has found greater application for UV, visible and infrared spectroscopy, X-Ray fluorescence and microprobe analysis to meet these challenges. In 1981, AGL supplemented these basic techniques with more sophisticated analytical tools like Raman analysis and PAS (photoacoustic spectroscopy).

Over the past twenty years, AGL has explored the pivotal elements of origin science through foundational research utilizing high level techniques such as laser ablation to understand the building blocks of gemstone chemistry. Central to all AGL's origin determinations is a comprehensive collection of reliable reference materials, currently in excess of ten thousand samples, which are used to characterize numerous locations. Collaboration is an essential element in our pursuit of origin science. For over ten years AGL has functioned as the gem science consultants to the United Nation's Mineral Development Branch. This association has given us access to many primary gem producing deposits worldwide reinforcing the validity and importance of AGL's sample collection and analytical procedures."

GF: What percentage of gemstones submitted for country of origin designations to AGL can be absolutely determined?

Beesley: "I would estimate 80% of all gemstones submitted to the lab receive a positive identification comment (based upon available gemological information, it is the opinion of the laboratory that the origin of this material would be classified as, for example, Classical Mogok Burma)."

GF: How to you keep current with country of origin issues?

Beesley: "The first major problem is getting a reliable population of sample stones that stay current. Assume you had the best sample population of Ceylon sapphires in the world 20 years ago. Today, the sample may well not be valid. You must track changes that occur as properties go deeper and wider because of the structure of the actual deposit. The chemistry of the deposit gets altered or depleted or changed as the material develops.

Secondly, all labs are vulnerable during transition periods when new material is coming into the market. With sapphire, for example, today you have numerous new sources such as Laos and China and a whole host of African locations. Each time a new location comes on stream, it throws some of the other population into turmoil. Another example is Viet Nam stars. I bought some so I can differentiate between Burma and Viet Nam stars. Now I understand there is a new source in India that produces material that is very similar. Keeping on top of this is a full time task and a constant battle."

NGC wishes to thank the AGL for this interview.

The Laboratory
American Gemological Laboratories
580 Fifth Avenue, Suite 706
New York, NY 10036
Phone: 1-212-704-0727
Fax: 1-212-764-7614


The Players
Russian Andrei Kozlenok started Golden ADA in San Francisco in 1994 with Armenian brothers Ashot and David Shagirins. ADA were the first name initials of the three partners. The brothers got 20% each of the company and Kozlenok 60%.

Seeking political influence, Kozlenok gave a Russian Kamov Ka-32 helicopter to the San Francisco Police Department as a gift. Golden ADA had ties with San Francisco Mayor Frank Jorden and posed for photographs with Al Gore and Hillary Clinton.

The business apparently was part of an effort to circumvent Russia's contract with the DeBeers Cartel. Australia has already left the cartel and this new firm terrified the diamond cartel. Instead, the enterprise became the way for a handful of well-connected Russians to enrich themselves.

"The Closet" is where Russia stores her national treasures. Rumors say it is in a location deep under the Ural Mountains, or that the stockpile lies 30 feet below the streets of Moscow. These deposits hold diamonds, emeralds, silver, platinum and 140 tons of gold in rare coins and jewelry. The key to opening "The Closet" was Yevgeny M. Bychkov, head of the Russian Committee on Precious Metals and Gems, and Kozlenok's mentor. Bychkov was a powerful Russian politician despite being investigated in 1990 due to a loss of $22 million worth of secret diamonds sales.

The Scam
Bychkov's plan was to ship $500 million worth of goods to Golden ADA. Soon, 26,000 carats of diamonds reached Golden ADA and fetched $20 million. Besides diamonds, crates arrived with gold rare coins: francs from pre-revolutionary France, hundred year old English pounds and American dollars, and Czarist Russian coins. Gold arrived by the ton. A California wholesaler melted down and sold 5.5 tons for $50 million. Massive crates contained silver tableware and antique plates. Other boxes arrived with emerald, amethyst, and topaz. Some crates contained faberge-like eggs studded with gems, ivory elephants, an angel with diamonds and assorted jewelry.

What did Golden ADA do with the money? Kozlenok and his associates paid $10.6 million for a building near downtown San Francisco valued at $6 million. They built a state-of-the-art, high-security diamond cutting facility. In a three-day period in the fall of 1993, they bought three luxury yachts for more than $1.2 million. Soon after, they paid $3.8 million for three homes in San Francisco. Then they bought more boats, five Lake Tahoe condos, a helicopter for $1.7 million, a Rolls Royce and two Aston Martins for more than $1 million, some 15 other vehicles and a Gulfstream jet for $20 million. All in all, they bought 18 pieces of property for $4.4 million, including 12 gas stations.

Millions were wired back to Bychkov where they disappeared into real estate-including a new dacha for Bychkov. Golden ADA also wired funds to Belgium, Liechtenstein and Israel.

The next shipment literally filled the new Gulfstream corporate jet. The plan was for diamonds to be cut and polished at Golden ADA's headquarters. Instead, the diamonds were hauled to Antwerp and sold to companies controlled by DeBeers! These sales brought $77 million which were wired to Switzerland.

At this point the partnership dissolved. Kozlenok offered the brothers $5 million to leave or else accept a "bullet to the head". The Shagirins flew to Moscow and begged Bychkov to fire Kozlenok. A Bychkov aide flew to Golden ADA and stated Golden ADA was looting the Russian treasury. Finally, Andrei Chernukhin, "the cleaner" was sent in to fix the situation. Kozlenok claims he was kidnapped and taken to Mexico and forced to sign over control of Golden ADA. Some believe he was paid off and sent packing. In 1995, he went to Belgium because Russia and Belgium have no extradition treaty.

US Intervention
Meanwhile, the FBI was learning a great deal about Golden ADA through wiretaps and informants. The FBI amassed evidence of theft, racketeering, and money laundering. Golden ADA was also involved with other groups in stealing timber, oil, and precious metals from Russia. The various scams were approaching $1 billion. Wires of $40 million were traced and some led to Boris Yeltsin. Some believed this situation could become a major political scandal. Washington feared it could throw the re-election of Yeltsin to the communists. The FBI feared political interference since the staff of Vice-President Gore had been briefed on the situation. At this point, the IRS raided Golden ADA and the criminal investigation was halted. The IRS placed a $63 million lien on the company for unpaid taxes. This forced Golden ADA into bankruptcy and the IRS seized about $40 million in assets. Russia will receive $25 million and the IRS $10.5 million, with the balance going to creditors.

The End
Kozlenok decided to fly to Greece from Belgium when he discovered he was not on Interpol's wanted list and there was no international warrant for his arrest. While he was in the air, Moscow asked that he be arrested, and he was seized at the Athens airport.

Kozlenok was recently charged with stealing $180 million in gold and gems from the Russian government and four counts of fraud, illegal currency transactions, arms possession and forgery. Kozlenok has stated he will be killed in prison because of what he knows about high-ranking Russian officials. Kozlenok, 38, has repeatedly proclaimed his innocence. "I am being charged with something that I have practically never ever done," he said in a jailhouse interview published in Izvestiya.

Kozlenok recently explained in a written statement to the Moscow Times that the extravagant purchases were needed to project a "solid financial image". They also were to be used to provide vacations for miners working in the difficult conditions of Russia's Far North. In 1996, the Russian government settled a lawsuit with Golden ADA giving it control of the company's remaining assets.

Some speculate that the diamond deal could not have taken place without the approval of high-level government officials. The scandal forced President Boris N. Yeltsin to fire his old friend, Yevgeny M. Bychkov, in February, 1996. Bychkov was later charged with abusing his official position and violating hard currency laws, but was pardoned under a general amnesty. Today, he is the head of one of Russia's largest banks and still remains a power in the diamond industry.

Chernukhin, "the cleaner", is said to be hiding in Switzerland or Cyprus. Ashot Shagirins was extradited from the Caribbean and recently pleaded guilty to tax evasion. His brother, David, is believed to be hiding in Europe.


By Andrew S. Hubbard
132 Pages-1998
Review by Robert Genis

This is the first gemstone investment book to be published since David Marcum's "1986 Dow Jones-Irwin Guide to Gems and Jewelry". These books are not similar in any manner. Marcum's book was analytical and included important information, such as how to read grading reports, price charts, and in depth information on gemstones. Although the credentials of the author of this book were never given, I assume he is a gem dealer who specializes in lower quality gemstones. We strongly disagree with many of the opinions and statements in this book, but the author also makes some good points.

Let's discuss some of the points in the book:
The author properly advises people to stay away from buying overseas. Since gems represent portable and hard to trace wealth, you should store your gems in a safe deposit box, a good safe, or in detergent boxes, toilet paper rolls, planters or Bibles at home. You should not insure your gemstones due to the 2 1/2% annual premiums on their value, but safely store your goods from prying eyes.

Ruby and Sapphire
Hubbard accurately states the best rubies come from Burma and sapphires from Kashmir. He discusses how rare, expensive, and valuable "pigeon blood" Burma rubies are and that they can cost more than diamonds over one or two carats. He then writes only a dozen pigeon blood rubies of any quality hit the world market yearly! (How could anyone in the gem business make this ludicrous statement? ed.)

Here are his tips for buying corundum:

  1. Make sure the gem is natural.
  2. Make sure the stone is cut properly.
  3. Color is the single most important consideration in gemstones. He states with blue sapphire, the darker the color the better, up to where the stone begins to show extinction (blackness). (Perhaps "the bluer the color the better" would be a more accurate description. ed.) He accurately states rubies are prized with deep color saturation.
  4. The author states rubies under one carat can be considered as having investment potential. We strongly disagree with that statement!
The author mentions how diamond grading and pricing are better organized than colored gemstones and premiums are paid for diamonds with GIA grading reports. He briefly discusses the 4 Cs of diamonds. He recommends investing in F and G colors and VVS and VS clarities over one carat.

Fancy Diamonds
Hubbard seems uncomfortable with colored diamonds and maybe the prices scare him. He states deep canary yellow, one carat diamonds of average clarity can cost $15,000 per carat. Blue, pink, and green diamonds are so rare they only fit the budget of the most affluent connoisseurs and prices are documented at $500,000.

Hubbard believes you should only invest in really fine emeralds with an independent lab report. You should look for a pure green and inclusions are to be expected.

How to Buy a Colored Gemstone
Here are Hubbard's tips:

  1. Clean the stone.
  2. Look at it in a white parcel paper, if it "talks to you", you should probably buy it.
  3. Examine the cut and symmetry.
  4. View the stone in different lights with the stone between your fingers.
  5. Look for a window or extinction.
  6. Examine the stone with a loupe.
  7. Compare the stone to master gemstones you own.
Gem Treatment
A natural stone is more valuable and preferable to a gemstone that is treated. About 75% of all gems are treated and this issue is the largest ethical skeleton in the jewelry industry's closet. Hubbard contends you should always ask if a stone has been treated and only pay more for a stone if it has been documented as unheated by an independent gemological laboratory. Excellent advice from a gem dealer!

Inexpensive Stones
If you are on a tight budget, according to Hubbard, you can collect; smoky quartz, citrine, amethyst, garnets, and blue topaz. He also likes chrome diopside, tourmaline, rhodolite garnet, and yellow sapphires.

Investing in Gems
Hubbard believes gems are an excellent investment if bought shrewdly and held for a considerable time. Gems are a buy-and-hold investment, not a get rich quick scheme. He believes you should only buy good to better goods and leave the top qualities alone. (Interesting theory! ed.) He recommends you privately and quietly buy gemstones. He considers gems a long term investment because they are relatively illiquid. Your money should go into savings and the stock market before considering buying gems. His ideal portfolio is: 33% "blue chip" diamonds, 33% expensive "growth" gems like emeralds, rubies, and sapphires, and 33% "speculative" gemstones.

If you are already a serious collector, you will find little in this publication to assist you. However, if you have never collected gemstones, you might find this primer an interesting place to begin. The book has very large print and appears designed to be read in an hour and a half.

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Revised and Expanded Edition
by Walter Schumann
Review by C. Chang, a long time subscriber to the Gemstone Forecaster.
Thank you.

Gemstone books have come a long way since the standards were drawn in the 1960s. But then again, so has the industry. This revised edition has helped me as a collector and investor expand my views on the most vital issues facing both buyers, collectors, and sales people today. This book answered many of my questions about the gem market.

The table of contents references the best known gemstones as well as the lesser known gemstones. It also deals with cutting, properties, production, and descriptions of gemstones. The best part is "Gemstones for Collectors".

The introduction starts with gemstones and their historical influence. It features the picture of the English Imperial State Crown. The introduction leads into the "Terminology of Gemstones" and the "Nomenclature of Gems". These sections are well stated and clear.

The next section is on the origin and structure of gemstones and overviews crystal formations and crystal systems. I was not aware there were 7 different crystal systems until I read this book. This section is informative for the beginning to advanced collector.

"Properties of Gemstones" reviews specific knowledge about gemstones to the cutter, the setter, the jewelry wearer and the collector. It explains hardness on a relative and absolute scale. Selected gemstones are ordered by Moh's Hardness. The next part of "Properties of Gemstones" relates to cleavage and fracture, density and specific gravity, and gemstone density.

As I read the book, I gained knowledge in the sections on weight used in the gem trade, optical properties, color streak, and refraction of light. I discovered the importance of absorption spectra and pleochroism as well as luminescence. The part about inclusions was most interesting and discussed how it relates to the value of gemstones.

The next section discusses the types of deposits and mining methods. This is an interesting part to all newcomers in the trade. "Cutting and Polishing of Gems" explains the engraving on stones, cutting and polishing of agate and colored stones, ball and cylinder cutting, and the drilling of gemstones and diamonds. Types of cuts are pictured in this chapter.

The "Description of Gemstones" uses scientific classifications and mineral classes. It starts with the best known gemstones and ends with the lesser known gemstones. Other sections in the later part of the book reference organic gemstones, what's new on the market, gemstone imitations, and ends with the symbolism of stones.

I found this book to be an outstanding volume. While this is probably not the last book to appear on the subject, this is one of the best in current memory. It may set a new standard for future reference books and deserves congratulations on a job well done. It reflects the author's devotion to gemstones as a collector/investor.

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