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U.S. v. CRAWFORD TECHNICAL SERVICES

United States District Court, S.D. New York


April 6, 2004.

UNITED STATES OF AMERICA Plaintiff -against- CRAWFORD TECHNICAL SERVICES, MICHAEL ROBINSON, as Administrator of THE ESTATE OF CHRISTINE ROBINSON, CHALANO & CO., DANIEL MILLER, and UNKNOWN PERSONS (IF ANY) WHO HAVE OR CLAIM TO HAVE AN INTEREST IN A 5.03 CARAT DIAMOND RING Defendants

The opinion of the court was delivered by: HAROLD BAER, JR., District Judge

OPINION & ORDER

I. BACKGROUND

Throughout the ages, diamonds have sparked references to the heavens, the human spirit, love, good fortune, invincibility, poison, and curses. In this case, an interpleader action to determine which of two remaining claimants is entitled to a 5.03 carat, emerald cut, internally flawless diamond ring, there are glimpses of all the associations with the gemstone that has held our fascination for centuries. The first claimant, Crawford Technical Service, represents Lloyd's of London, who paid a claim for the diamond when it was stolen from an insured diamond merchant hi 1994. The second claimant is Charles Cohen of Chalano & Co., another diamond merchant, who purports to be a good-faith purchaser of the diamond in 1996.*fn1 Both claimants and the Government have agreed that the Court, after reviewing the papers presented, should decide the lawful owner. For the reasons set forth below, I find that Crawford Technical Services is entitled to the diamond. A. Crawford Technical Services' Claim

  Since the very beginning of their existence, diamonds have been associated with the divine. Diamonds were first discovered in India around 800 B.C.,*fn2 where they were referred to a "vajra," or "thunderbolt" and "indrayudha," or "India's weapon."*fn3 In the Vedic scriptures, which form the foundation of Hinduism,*fn4 India was the god of war, thunder, and storms, the greatest and strongest warrior, the defender of gods and humankind against evil, the god who wielded the celestial weapon — a thunderbolt — whose name later became synonymous with diamond.*fn5 According to the Ratnapariksa, a 6th century era Indian text on gems, diamonds were created from the bones of a powerful king, who conquered three worlds and then voluntarily sacrificed himself at the request of the gods, who were jealous of his might and valor.*fn6 The gods descended to earth and swept up the gems, but in their haste, some of the stones dropped from the sky and fell back to earth.*fn7 A diamond therefore was believed to have the power of gods and was used as a talisman against dangers of "serpents, fire, poison, sickness, thieves, flood or evil spirits."*fn8 This belief in the heavenly qualities of diamonds was shared the Greeks and Romans, who thought diamonds were the "tears of the Gods and splinters from falling stars."*fn9 Indeed, Plato believed that diamonds were alive and possessed celestial spirits.*fn10 Unfortunately, diamonds over the centuries have failed to live up to their advance notice. Instead, they have inspired greed and thievery, and as such, bring us to the not unfamiliar odyssey now before this Court. Beauty provoketh thieves sooner than gold William Shakespeare (1564-1616), As You Like It Act I, Scene III, Line 98.

  In 1994, the diamond at issue was owned by Cora Diamonds and was insured by Lloyd's Jeweler's Block Policy number J94/5021/059. On March 3, 1994, Yves S. Ringler, the manager of Cora Diamonds, consigned the diamond to one Baruch Torenheim, the founder (in June 1993) and sole owner and employee of BGI Gems. Torenheim was recommended to Ringler by an associate approximately six months earlier, and over that period Ringler consigned several stones to Torenheim, each of which he successfully sold. On May 5, 1999, the diamond at issue here was stolen from Torenheim while he was in Las Vegas, Nevada making sales calls. Torenheim reported the theft to Cora Diamonds, who in turn reported it to its insurance company, Lloyd's of London. Approximately one week after the robbery, Michael Tocicki, an insurance adjuster with Crawford Technical Services,*fn11 went to Las Vegas to investigate the incident on behalf of Lloyd's of London.

  Tocicki's investigation revealed that on May 3, 1994, Torenheim — who was traveling with approximately $500,000 worth of loose diamonds, including ours — flew from New York to Los Angeles to meet with several customers. The next day he flew from Los Angeles to Las Vegas and checked into the Continental Hotel. On May 5, 1994, after making several sales calls, he returned to his room in the early afternoon and began to watch television. At around 2:00 p.m. a maid entered his room to clean up. Approximately an hour later, someone knocked on his door and announced "housekeeping." When he unlocked and opened the door, a 6'3", 200 pound African-American man, who may have been accompanied by a second individual, reportedly forced his way into the room, demanded the diamonds and the money, and then hit Torenheim on the head and continued to do so until he lost consciousness. Torenheim regained consciousness some time and realized that he was bound and gagged. He started making noise, which was noticed a short time later by hotel guests in the adjacent room, who assisted him and summoned the hotel staff. Torenheim had several bloody gashes on his head and was taken to a hospital for treatment. Based on interviews of hotel guests and staff, as well as police, hotel, telephone and other records, Tocicki concluded and reported to Lloyd's that this was an actual theft covered by the policy.

  On June 7, 1994, Tocicki informed the Gemological Institute of America ("GIA") of the theft of the diamond. On August 9, 1994, Ringler submitted a Proof of Loss on behalf of Cora Diamond to Lloyd's, who insured the 5.03 carat diamond and another diamond not at issue here. The value of the 5.03 carat diamond was placed at $69,162.50, while the second diamond was valued at $26,088.30, for a total of $95,250.20. On September 2, 1994, Cora Diamond received a payment for $85,250.80, which represented the value of the two diamonds, less the $10,000 deductible. The thief was never apprehended. Ringler did not hear from or see Torenheim after the theft, although he later heard rumors that Torenheim had stolen diamonds in Brussels. Tocicki reported that after the insurance claim was settled, he learned that Torenheim was reportedly involved in a variety of illegal activities. The insurance claim and payment were never contested. According to Crawford Technical Services, Lloyd's of London became the last legal owner of the 5.03 carat diamond upon payment of Cora Diamond's claim.

  B. Chalano & Co.'s Claim

  On a more sanguine note, diamonds have over the years also become tokens of love and devotion. The Greeks believed that diamonds reflected love's eternal flame.*fn12 According to myth, Cupid or Eros used diamond-tipped arrows to cast his lover's spell.*fn13 Diamonds were traditionally uncut and unpolished;*fn14 indeed, in India it was taboo to make a diamond crystal into a gem.*fn15 Nevertheless, this custom faded over time and diamonds began to appear in European jewelry in the 13th century and the earliest diamond-cutting industry is believed to have started in Venice in 1330.*fn16 The diamond engagement ring was first introduced in 1477 when Archduke Maximilian of Austria gave Mary of Burgundy such a treasure to win her heart.*fn17 The traditional placement of an engagement ring on the left ring finger has roots in the "early Egyptian belief that the `Vena Amors,' vein of love, runs directly from the heart to the tip of the third finger."*fn18 And in 16th century England, diamond rings — termed "scribbling rings" — were used to etch romantic verses into windowpanes.*fn19

  Stories surrounding the Hope Diamond, including its origins and the fate of its owners traverse the centuries. The stone has decorated statutes of gods and adorned sultans, kings, and nobles, it has been worn as an everyday amulet, as well as a token of love, status, and power. It has been bought, sold, stolen, and traded, cut and re-cut It is both mysterious and elusive, much like the precious stone at issue in this case, which was stolen, mounted into a ring, and purportedly given as a token of love before it was passed off to the second claimant, Chalano & Co.

  A fool and his money are soon parted.

 

Thomas Tusser (1S15-1580X Five Hundred Points of Good Husbandry
  Charles Cohen owns Chalano & Co. and has approximately fifty years of experience in the jewelry business. Cohen came into possession of the diamond in July 1996, when one Christine Robinson reportedly traded the stone, which at that time was in a platinum setting, for several items in Cohen's store. Robinson's and Cohen's accounts of this exchange differ in several respects.

  Robinson reported to Federal Bureau of Investigation ("FBI") Special Agent Timothy Dinnan ("SA Dinnan") that she visited Chalano & Co. on two or three occasions in June 1996. On June 12, 1996, Robinson met with Cohen at his store (although she did not recall him using the name "Cohen"), and gave him two or three diamond rings and a check for $5069. Robinson obtained no receipt, but she picked out several pieces of jewelry for a later exchange. Robinson explained that she left her jewelry with Cohen because she trusted him and she was leaving soon for Europe. Robinson never received anything in return for her rings. Robinson initially told SA Dinnan that the jewelry she left with Cohen was given to her by her late husband; however, she later produced an invoice that indicated that she purchased the 5.03 carat diamond ring for $79,000 at Donna del Sol, a jewelry store in Southampton, New York, on July 7, 1996 — several weeks after her dealings with Cohen. Robinson has since passed away, but her son, Michael Robinson, the administrator of her estate, was one of the original claimants here. He has since joined in a stipulation of dismissal as to him dated November 17, 2003.

  Cohen relayed a different version of his transaction with Robinson. According to Cohen, Robinson came into his store on several occasions during a week in early July 1996 to purchase and/or exchange certain items. On her third visit, she brought the 5.03 carat diamond ring and other pieces of jewelry to trade for other items at Chalano & Co. Cohen was only interested in the diamond ring, but was unsure of its value and Robinson did not have any documentation, i.e., no invoice, as was produced to the FBI, so he took it to a nearby store where it was appraised at $30,000 to $35,000, approximately half of what she apparently paid for the diamond at issue here. Robinson and Cohen then agreed on the items to be exchanged and Cohen put the ring into his safe. Robinson left the store without a receipt or any of the items she selected for the exchange. Cohen explained that no one signed anything because it was a very "friendly atmosphere." The following day, Robinson returned and told Cohen she was interested in purchasing a sapphire bracelet, which Cohen agreed to sell her for $5069. Robinson then wrote a personal check in that amount payable to "R Cohen"*fn20 and left with three or four other items pursuant to their agreed-upon exchange. Other than this check, there is no documentation of this transaction.

  Cohen did not cash the check for some time — Robinson apparently had asked him not to cash it right away and then there was construction at the store — nor did he do anything with the diamond until September 1997 — more than a year later — when he agreed to sell it to Moritz Goldfeier of Moritz Gold. Apparently, when Cohen finally did attempt to deposit the check, he was informed by the bank that there were insufficient funds to cover the check. In December 1997 Cohen again attempted to deposit Robinson's check, but the bank returned it because it was outdated. Cohen attempted to contact Robinson via telephone, both before and after he deposited the check, but to no avail. Cohen finally did reach Robinson on an unspecified date and informed her that her check had bounced, but she hung up on him. When Cohen called back, a man stated that Robinson no longer resided there and that he would notify the police if Cohen continued to call.

  Moritz Goldfeier, the president of Moritz Gold, while not paying for the ring, reported that he entered into an agreement with Charles Cohen of Chalano & Co. on September 17, 1997, in which Goldfeier took possession of the 5.03 carat diamond ring, which he believed to be valued at approximately $35,000. Goldfeier submitted the diamond to the GIA for a grading report, but the GIA confiscated the ring because it had been reported as stolen. The FBI then investigated the ownership of the ring and the Government instituted this interpleader action.

  II. DISCUSSION

  In an interpleader action the Court must first determine if the requirements of 28 U.S.C. § 1335 are met. If so, the Court may relieve the plaintiff stakeholder from liability and then adjudicate the adverse claims of the defendant claimants. See Am. Int'l Life Assurance Co. of N.Y. v. Vazquez, No. 02-CV-0141 (HB), 2002 WL 31059296, at *2 (S.D.N.Y. Sept. 16, 2002). As a threshold matter, I find that the requirements of the interpleader statute are satisfied because the claim involves property worth more than $500 and there are at least two adverse claimants. See id. While the parties here are not diverse, 28 U.S.C. § 1345 provides that district courts shall have original jurisdiction in all civil actions commenced by the United States, and thus jurisdiction is proper in this case. 28 U.S.C. § 1345; see also United States v. Benitez, 779 F.2d 135, 137 (2d Cir. 1985) (finding that the district court had subject matter jurisdiction under 28 U.S.C. § 1345 in an interpleader case instituted by the Government). Accordingly, the Government is relieved of all liability with respect to the diamond ring at issue in this case.

  On December 10, 2003, the Court held a conference call with the Government and the two remaining claimants, Crawford Technical Services, and Chalaco. & Co., and all parties agreed that the Court should decide the matter on the basis of the existing pleadings and other submissions without a formal motion for summary judgment. In this posture, I have reviewed the evidence to determine which, if any, of the claimants has established its claim to the diamond ring by a preponderance of the evidence. Midland Ins. Co. v. Friedgood, 577 F. Supp. 1407, 1411-12 (S.D.N.Y. 1984). For the reasons set forth below, I find that Crawford Technical Services is entitled to the ring.

  It is firmly established under New York law that a purchaser of stolen property does not have clear title, even if the purchase was made in good faith. Solomon R. Guggenheim Found, v. Lubell, 77 N.Y.2d 311, 317 (1991) ("New York case law has long protected the right of the owner whose property has been stolen to recover that property, even if it is in the possession of a good-faith purchaser for value."); Newton v. Porter, 69 N.Y. 133 (1877) ("The purchaser from a thief, however honest and bona fide the purchase may have been, cannot hold the stolen chattel against the true proprietor, but the latter may follow and reclaim it wherever or in whosoever hands it may be found."). A good faith purchaser simply cannot obtain title to stolen property because a thief has no title to give. Silsbury v. McCoon, 3 N.Y. 379, 383-84 (1850). It is therefore incumbent upon a good faith purchaser to inquire about the validity of title before completing the transaction. A.F.T. Corp. v. Pathe Exch. 172 N.Y.S. 364, 365 (1 Dep't 1918) ("[A] purchaser of personal property is bound to satisfy himself as to the title of the vendor, and deals with stolen property at his peril. . . .").

  Here, Cora Diamond's original title to the 5.03 carat diamond and the theft of the diamond from Torenheim while he was in Las Vegas is uncontested. Although the manager of Cora Diamonds and Crawford Technical Institute's insurance adjuster have suspicions of regarding Torenheim's potential involvement in the theft, no one has seriously argued that the theft did not occur or that Lloyd's payment of Cora Diamond's insurance claim was improper. In contrast, the circumstances surrounding Chalano & Co.'s acquisition of the gem are far less clear. Putting aside the conflicting accounts of the transaction between Robinson and Cohen, it is difficult to believe that Robinson would have left her diamond ring — valued at approximately $70,000 — in Cohen's possession without any receipt or other documentation when she only met him earlier that week, regardless of how friendly the exchange may have been. It is also curious that Cohen, who had nearly fifty years of experience in the business, would believe that the ring was worth only half of its actual wholesale value. Even if these details could be overlooked, the Court cannot ignore the fact that Cohen did not ask for a bill of sale or other documentation for the ring. Had he inquired, he would have realized that Robinson's receipt (at least the one she produced to SA Dinnan) was dated July 7, 1996, which, according to Robinson was nearly one month after her exchange with Cohen, and according to Cohen, some days after Robinson had left the ring in his safe at Chalano & Co.*fn21 In short, if Cohen had inquired after Robinson's title, it would have been quickly apparent that she had none. Moreover, Cohen's delay in depositing the check and his lackadaisical attitude in collection of payment from Robinson or her estate, even after the ring was confiscated by the GIA undermine Cohen's claim that he was, in fact, a good faith purchaser for value. Clearly, Crawford Technical Services' claim to the diamond is superior to that of Chalano & Co.

  Nevertheless, this does not end the inquiry. The Court must also analyze the original title to the property and the post-theft behavior of the original title holder. United States v. Fireman's Fund Ins. Co., 99 Civ. 2622, 2001 WL 88226, at *2 (S.D.N.Y. Jan. 31, 2001); Solomon R. Guggenheim Found. 77 N.Y.2d at 321 (holding that the post-theft conduct of the true owner and the good-faith purchaser for value to investigate the provenance of a stolen item is relevant to the defense of laches). Here, the May 1993 theft of the diamond was reported to Las Vegas Metro Police Department and Crawford Technical Services, both of whom investigated the incident. Crawford Technical Services then informed the GIA of the diamond's theft and the GIA recorded the stone as stolen in its database. These steps seem appropriate and sufficient, particularly since the GIA database is what led to the stone's recovery. On the other hand, as discussed above, Cohen conducted no investigation into Robinson's title to the diamond. Indeed, Cohen never even attempted to obtain a grade report from the GIA, verifying the quality and price of the stone until over a year after the transaction with Robinson. Had he done so, the GIA would have promptly informed him of the ring's status. Therefore, I conclude that Crawford Technical Services acted appropriately and has established that it is the rightful claimant to the ring. III. CONCLUSION

  For the foregoing reasons, Crawford Technical Services shall be awarded possession of the 5.03 carat diamond ring and the Government is released from all liability associated with said ring. The Clerk of the Court is instructed to close this case and any remaining open motions and remove this case from my docket.

  THIS CONSITUTES THE DECISION AND ORDER OF THE COURT.


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