By Albert Samaha
By Steve Weinstein
By Devon Maloney
By Tessa Stuart
By Alison Flowers
By Albert Samaha
By Jesse Jarnow
By Eric Tsetsi
"When I originally sought money from Maple Trade as a backer, the arrangement was not merely professional, but friendly," Kalisch said in a 2005 affidavit. "The financing was certainly entered into by everyone in good faith. . . . Jim and I—we all believed that this business opportunity had the potential for enormous success."
That collegial environment would eventually fade into recrimination, bitterness, and litigation. Lots of litigation.
Despite its dull name, Maple Trade was no minor player. The New Jersey firm was a subsidiary of the Maple Finance Group, Inc., a $20 billion Toronto-based company that was the second largest residential mortgage lender in Canada.
That meant that the National Bank of Canada, the Ontario Teachers' Pension Fund, and a large Hong Kong investment company were about to, indirectly, get into the business of smuggling diamonds out of an Indian reservation in Brazil. Whether they knew it was illegal or not was a matter of great contention much later.
"Marco's attitude was kind of like he was hanging with the big boys," Mayralater testified.
Kalisch prepared a business plan that would entice Maple Trade to loan him money so he could buy the diamonds. "Since March 2003, M-3 has been working with state and local authorities and elected leaders of the Indian bands to devise mutually beneficial ways to exploit these resources," the business plan said. "After much work and roughly $400,000, M-3 is in a position to buy from the Indians their monthly production of rough diamonds."
Kalisch wrote that between August 27 and October 2, 2003, he and his partnershad purchased 3,600 carats of diamonds from the Cinta Larga for a total of $650,000.
He claimed that he could accelerate the process, buying up to 3,000 carats a month for up to $400,000, and earn a net profit of 15 to 20 percent. That meant that Kalisch imagined he could earn $4.3 million a year from Cinta Larga diamonds in gross revenue.
In the business plan, Kalisch didn't indicate that the venture was technically illegal under Brazilian law, but he did note that he had a "silent partner who was a Brazilian government official." Whether that hint should have made Culver aware of the venture's black-market nature became a major issue when the whole thing soured.
A simple Internet search, however, should have made it clear that exporting diamonds from the Cinta Larga was a subject soaked in controversy that had received much attention in the international media.
But, at least according to Kalisch, Culver didn't ask many questions: "I explained to Culver what the function of M-3 was, and he accepted that explanation, apparently, because he didn't ask me any further questions," he testified.
Kalisch explained that he would hand-carry the diamonds to the U.S. because they couldn't use a commercial carrier, like the security company Brink's, until the process was "officialized." Once he was through U.S. customs, the diamonds would be shipped on to Antwerp, where they would be sold on the open market.
Lastly, the plan noted: "The prospect of the Bonus Stone (large gemstones, fancy colored diamonds, etc.) is a prime motivator in this process. These stones represent potential windfalls."
While Culver and other Maple Trade officials liked the project, the company's Patriot Act compliance officer expressed some concern.
In September 2003, Maple Trade committed to loan up to $3 million to the Kalisch venture.
On November 7, 2003, Kalisch met with Culver. Kalisch, in his 2005 affidavit, claims Culver told him, "I expect to make good money on this."
"It was somewhat cloudy to me whether to consider Maple an investor or a lender," Kalisch would say later in an affidavit. "The money was critically important to me," he added. "It was needed to use for operations in Brazil, and because of the nature of the enterprise we were attempting to get started, timing was enormously important."
Maple Trade, though, needed time to make a decision. On December 17, 2003, the firm cut its loan offer of $3 million back to $1.5 million.
Culver wrote an e-mail to Janovich, which said, in part, "We were making it up as we went along."
"I got the impression that the business would grow dramatically," Culver later testified. "Because this was a new source . . . there was probably lots of opportunity."
Two months passed, but Kalisch was not idle. He continued to travel to Brazil and buy diamonds.
Already owning 20 percent of possible profits and the option of becoming a direct partner in the scheme, Culver and Maple Trade insisted then that Kalisch add additional guarantees that he could pay them back.
The main remaining asset Kalisch owned was the sprawling apartment at 2 East 12th Street. He and his wife had slowly purchased and combined three ground-floor apartments into one, giving it a value of well over $500,000. He added the apartment as loan collateral, but he hid this fact from his wife.
"The financial pressure of starting this business required me to lease out the apartment so I could take a cheaper place and live off the income," he said in his affidavit. "Despite the pressure I was under, I certainly did not intend to defraud anyone. If I intended to keep secrets from anyone, it was an intent to keep a secret from my wife that I had signed papers concerning our apartment."