De Beers� sightholder affiliate in fake jewellery row
Brian Benza | Friday April 17, 2015 18:00
KGK Jewellery vehemently denies the accusations. KGK Diamond Group, which is one of the largest diamond manufacturers and Jewellers in the world, recently opened a factory in Botswana after being selected by De Beers as one of the new Botswana sightholders for the 2015-18 selling period.
According to court papers filed before the Supreme Court of the State of New York, Madison Avenue Diamonds, a retail jewellery company licensed by Ivanka Trump, the daughter of billionaire Donald Trump, to manufacture and market the Ivanka Trump Diamond Collection, is accusing KGK Jewellery of supplying fake jewellery to the retail company.
KGK was contracted to manufacture jewellery for Madison, but the retail company says it quickly grew unhappy over the workmanship and its failure to timely produce and deliver goods.
“Though KGK Jewelry LLC agreed to manufacture luxury jewelry incorporating only high quality materials for Madison to sell under the Ivanka Trump brand, the jewelry KGK provided was not to the standards ordered by Madison and expected by Madison’s customers. Instead, KGK provided shoddy jewelry that incorporated low quality or synthetic diamonds, fake gemstones, and gold so impure that it turned wearers’ skin green,” states the complaint in court papers.
“To make matters worse, KGK proposed to remediate its quality failures by incorporating slightly better quality gemstones but still not the gemstones Madison actually ordered. KGK’s egregious actions not only cost Madison substantial time and resources to remedy, but also could have destroyed Madison’s business. Madison brings this suit seeking damages for KGK’s unscrupulous and unethical conduct.”
Email documents signed by Ivanka Trump attached to the court papers also say that Ivanka Trump was personally affected as one of her necklaces manufactured by KGK fell apart during a meeting while her brother’s girlfriend ears and neck turned green after wearing earrings that were allegedly manufactured using inferior gold.
According to the court papers, sampling showed that KGK had incorporated fake stones into over 70 percent of the Trump-branded jewellery using white agate. “In addition, Madison learned that KGK had used onyx instead of more valuable black spinel as ordered, and was using lower quality diamonds than required. Madison also suspected that KGK was mixing synthetic diamonds into settings,” says the Amended Complaint before the New York court.
Apart from allegations of supplying them with fake gemstones, Madison is also accusing KGK of breaching intellectual property right through secret use of Madison’s designs to manufacture and sell counterfeit Madison jewelry based on those designs.
“Our investigation has uncovered information suggesting that KGK had a pattern and practice of engaging in that type of illicit scheme with the intellectual property of other companies, that KGK targeted Madison with the intent to do the same, and that KGK in fact carried out that scheme both before and after the Agreement was signed,” states an affidavit filed by Madison Lawyer David Scharf.
In a response to the court, KGK fervently denies Madison’s accusations and accuses the retailer of trying to deflate attention from the original dispute between the two firms. At the filing of the first court cases in December 2012, the two firms were involved in a financial dispute over the settlement of $2.3 million debt owed to KGK.
“KGK disputes the allegation that it is ‘in agreement’ that it ‘substituted fake stones’. Madison has repeatedly admitted that the Settlement Agreement resolved the alleged ‘quality’ issues regarding the jewelry manufactured by KGK and is ‘irrelevant’.
“These alleged ‘facts’ are no more than an attempt to create the specter of the presence of ‘material facts’ in order to defeat the Court’s grant of summary judgment in KGK’s favour and bolster the claims in Madison’s proposed amended complaint. KGK further objects to the references to alleged ‘malfeasance’ on the part of KGK as improper, intended to harass and irrelevant,” states the lawyers on behalf of KGK.
Reporting on the court case in the Diamond Intelligence Briefing, renowned diamond industry journalist Chaim Evan-Zohar conjectures that the consequences of unsubstantiated allegations on synthetic diamonds could potentially be quite harmful for KGK. “If the Ivanka Trump brand jewelers fail to provide hard evidence, this will undoubtedly set off a legal tsunami.
“However, one cannot help but wonder whether the Madison people are embarking on a “fishing expedition.” Are they “bluffing” for negotiation purposes, or do they know something that they have not disclosed yet? They admit – or imply – not knowing everything,” wonders Even-Zohar in his authoritative DIB. The KGK diamond and jewelry group, whose core business is manufacturing of polished diamond and jewellery as well as retailing, is listed on De Beers website as a as company operating in 14 countries over 4 continents with over 100 years experience in the diamond industry. The jewelry division reports to the founder’s son Sanjay Kothari, while the diamond manufacturing and trading side is managed by his brother Sandeep Kothari. De Beers is expected to officially announce the new list of 84 sightholders for the period 2015-2018 in the first week of May