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Thu, Jul 15, 2004 - Page 12 News List

De Beers pleads guilty, will pay US$10 million fine


The resolution of a 10-year-old price-fixing case clears the way for diamond giant De Beers to directly enter the lucrative US market.

De Beers has had to operate through intermediaries since shortly after World War II, when it was first charged with price fixing.

The company pleaded guilty on Tuesday, as expected, to conspiring to fix prices in the US$500 million industrial diamond market in 1991 and 1992 and agreed to pay the maximum US$10 million fine. Industrial diamonds are used to make cutting and polishing tools for a variety of manufacturing and construction equipment.

The company was charged along with General Electric Co in 1994. US District George Smith dismissed the charges against GE, saying the government had failed to prove its case.

The case was filed in Columbus because GE's industrial diamond business was headquartered in suburban Worthington, Ohio.

no probation

Smith did not order any restitution, saying a separate settlement of a civil case totaling US$26 million resolved that issue.

He also did not put the company on probation.

"The court, however, is not inclined to take upon itself the mantle of becoming a regulatory agency overseeing the worldwide distribution of diamonds," he said.

Smith said the company must operate under the regulations of the EU and will be subject to the jurisdiction of US courts if it decides to do business directly in the US.

De Beers general counsel Glenn Turner entered the plea on behalf of the company. He declined to make a statement in court but said afterward that De Beers was happy to have the case resolved.

Turner said, however, that the company has no plans to directly enter the US retail market.

Instead, the decision to enter the plea makes the company legally compliant in all parts of the world where it operates.

De Beers has stores in Tokyo and London.

renewed commitment

"The decision to resolve this matter is consistent with our continuing commitment to creating a new, modern De Beers that is fully prepared to assume its role as a responsible corporate global citizen and to provide leadership at a critical time for the diamond industry," the company said in a statement after the hearing.

De Beers had sales of US$5.5 billion and earnings of US$676 million last year.

The company spends US$180 million on advertising.

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