By Albert Samaha
By Amanda Dingyuan
By Anna Merlan
By Anna Merlan
By Albert Samaha
By Tessa Stuart
By Anna Merlan
By Roy Edroso
With his apartment on the line, and a major North American company on the hook, Kalisch headed south to move diamonds with his own hands.
Then, on January 12, 2004, Kalisch suffered a setback. He had just flown back from Brazil with another shipment mined on the Cinta Larga lands. He had been in Brazil for six days.
In his suitcase, he carried 1,170 carats of rough or uncut diamonds inside a plastic bag sealed with tape. At John F. Kennedy Airport, he declared the diamonds during a customs inspection, and claimed they had a value of $165,000. He also turned over a piece of paper that claimed to "guarantee" that the diamonds had been purchased from "legitimate sources not involved in funding conflict."
Inspectors, though, seized the diamonds because Kalisch was not carrying a so-called Kimberley Process Certificate, which formally vouches that the gems are not "conflict diamonds"—a phrase for black-market gems used to finance civil war, largely in Africa.
The Kimberley certification process was created in 2002 to prevent export and import of rough diamonds that have not been vetted by a national authority. Congress adopted the measure as part of the Clean Diamond Trade Act in 2003.
Brazil began officially complying with the Kimberley Process Certificate in 2003, records show. But the system has been plagued with problems. "It is a system fraught with systematic leaks and failures in oversight, a system that encourages smuggling and contraband," writes Ian Smillie, a researcher with Partnership Africa Canada (PAC), a nonprofit that has written several reports on the illegal diamond trade. "Despite the government's good intentions, it actually hides the source of Brazil's diamonds."
Initially, Kalisch tried to persuade customs inspectors to allow him to take the diamonds back to Brazil, or on to Antwerp without formally entering the United States. The inspectors refused.
Subsequently, federal prosecutors in Brooklyn filed a lawsuit to force Kalisch to forfeit the diamonds. In a case that took more than three years to resolve, Kalisch fought to reclaim the diamonds.
Kalisch argued in court papers that he had declared the gems in good faith, and the diamonds were from Brazil—not Africa—and, as a result, did not need a Kimberley Certificate. He also claimed he had done his best to determine whether a certificate was needed, and concluded that it was not.
He also argued successfully that his deposition in the forfeiture case should be sealed, because it would expose him to criminal prosecution. Federal prosecutor Laura Mantell argued against that motion, because Kalisch had already voluntarily disclosed damaging information in bankruptcy court.
In 2008, a federal judge ruled for the government. The diamonds were donated to the Smithsonian Institution for research. But Kalisch was never charged in criminal court.
As the forfeiture case began winding its way through the courts, Kalisch returned to Brazil to obtain another shipment of diamonds from the Cinta Larga lands.
But Kalisch did not tell Maple Trade about the seizure of the diamonds at Kennedy. And he became increasingly desperate to get the seed money from the company. He was deeply in debt and unable to pay for more diamonds. The couple had already moved out of their beloved apartment, and were sub-letting it to make enough money to pay their bills. He wrote Janovich to say he was "drowning in quicksand."
On February 3, 2004, responding to unease from another Maple Trade employee, a company official named Pablo Marino wrote, "No offense, but we're all pretty grown up here. . . . I thought that we all understood what the key of the transaction is, and I absolutely think we are trying to do everything to mitigate the risk."
Two weeks later, Maple Trade entered into a loan agreement for up to $1.5 million with Kalisch, and provided $950,000 for the venture.
On February 24, Kalisch sent a $600,000 invoice to Maple Trade for the sale of 2,400 carats of diamonds to a São Paulo–based seller named Lapidacao Estrela Do Sul. Kalisch admitted later in court that that venture never existed.
Instead, Kalisch gave the money to Glikas and Suarez, presumably to buy more diamonds from the Cinta Larga. That money later disappeared.
In March 2004, Maple Trade advanced Kalisch $400,000 to pay off his Merrill Lynch loan used to buy the mining equipment for the Indians. The company loaned him another $500,000 to buy rough diamonds.
Kalisch wired the money to Brazil and then flew to São Paulo to pick up the diamonds. Almost as soon as he arrived in the country, however, his partner, Glikas, and 15 other people were arrested in connection with the diamond smuggling ring. In addition to Glikas, a Cinta Larga leader, three police officers, and several officials from the Bureau of Indian Affairs were arrested on illegal mining and money-laundering charges.
News coverage referred to the group as "one of Brazil's top diamond smuggling rings." The investigation took a year and involved 100 police officers. Federal police uncovered one transaction in which Glikas sold $1.85 million worth of diamonds to a Belgian buyer.
"We've got the leaders of the gang, those that had the funds to finance the crime," Brazilian Federal Police Agent Marcos Pereira in Rondônia told reporters at the time. Cassol, the governor of Rondônia—the state that includes the reservation—also fell under investigation for his ties to illegal mining on the reserve.