Sun, Jul 11, 2004 - Page 11 News List

De Beers to plead guilty in price-fixing case

NY TIMES NEWS SERVICE , WASHINGTON

Diamond dealer Samba Sabali, 76, originally from Niger, weighs the diamonds of miners and prospective sellers, in the remote town of Koidu, the diamond-mining center of Sierra Leone last Sunday.

PHOTO: AP

De Beers, the world's largest diamond producer, has agreed to plead guilty to criminal price-fixing, a court official and lawyer involved in the case said Friday. The move ends a decadelong case and paves the way for the company to return to the US after an absence of nearly half a century.

The company is expected to plead guilty on Tuesday before Judge George Smith of US District Court in Columbus, Ohio, said Keith Mayton, a clerk in that court. He said the company faced a maximum fine of US$10 million.

"The court is set to take a guilty plea from De Beers," Mayton said.

The agreement comes after months of negotiations and will enable De Beers to re-establish itself in the US, the most lucrative market for diamonds, as it looks to new markets and shifts its business focus in response to its declining grip on the production of rough diamonds.

For much of its 124-year history as the dominant force in diamonds, De Beers, has been accused of price-fixing and other anti-competitive conduct.

The company, founded by Cecil Rhodes and other investors in 1880, came under criticism from US officials during World War II for refusing to provide industrial diamonds for the war effort and faced antitrust cases brought by the Justice Department in 1945, 1957 and 1974. Those actions forced it to leave the American market, and it had to use intermediaries to get its products into the country.

The latest case was filed in 1994 after a three-year investigation. The indictment accused De Beers of violating the Sherman Antitrust Act by fixing the price of industrial diamonds.

The government contended that General Electric, another huge maker of industrial diamond products, conspired with a subsidiary of De Beers to fix the world prices of industrial diamonds in 1991 and 1992.

The two companies were accused of exchanging price information through Philippe Lotier, a French businessman. Lotier was both a major GE diamond customer and a director of a company affiliated loosely with De Beers.

At the time, the Justice Department was unable to prosecute De Beers because its operations were overseas and it refused to subject itself to the jurisdiction of an American court.

After a five-week trial, Smith threw out the criminal charges against GE. He concluded at the end of the government's case that prosecutors did not have sufficient evidence to prove a price-fixing scheme.

The prosecution's star witness was a former GE executive who was dismissed by the company for what it said was poor performance. Other government witnesses from GE provided some helpful evidence but also damaged the prosecution's case by maintaining that they did not think there was a conspiracy. Smith said that the government had failed to prove that Lotier had been working on behalf of De Beers when he received price information from GE and provided GE with information on De Beers' prices.

The apparent weakness of the government's case discouraged De Beers from seeking a settlement even though the failure to resolve the case has hampered the company's ability to do business in the US.

Antitrust law permits the imposition of a maximum fine of US$10 million, or twice the gain or loss caused by a price-fixing scheme. The indictment does not specify how much the scheme cost purchasers of industrial diamonds.

Steven Sunshine, one of the company's antitrust lawyers in the US, did not return a call seeking comment on Friday. Nicola Wilson, a spokeswoman for De Beers in Johannesburg, where the company is based, declined to comment until after the conclusion of the court proceeding next Tuesday.

This story has been viewed 4704 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top