De Beers' advertising slogan, "A Diamond Is Forever," embodied an essential concept of the diamond invention. It suggested that the value of a diamond never diminishes and that therefore a diamond never need be sold or exchanged. This precept, of course, is self-fulfilling: As long as no one attempts to sell his diamonds, they retain their value ( assuming the cartel controls the supply of new diamonds). When, however, an individual is forced to defy this principle by attempting to sell diamonds, the results can prove illuminating. Consider, for example, the case of Rifkin's Russian diamonds.
In the fall of 1978, a thirty-two-year-old Californian computer wizard named Stanley Mark Rifkin discovered an ingenious way to become a multimillionaire overnight. While working as a consultant for the Security Pacific National bank in Los Angeles, he had learned the secret computer code that the bank used to transfer funds to other banks telegraphically at the end of each business day. With this information and his mastery of the bank's computer, he realized that he could transfer tens of millions of dollars to any bank account in America. The problem would be withdraw the money from the system. In early October, he devised a plan for siphoning this money out of the bank and converting it into Russian diamonds.
The first step was establishing an alias identity. Under the pseudonym "Mike Hanson," Rifkin opened a bank account at the Irving Trust Company in New York, arranged a phony passport and other. documentation and retained a respected diamond broker, Lou Stein, to acquire for him a multimillion dollar consignment of diamonds from Russia. The Russian diamond organization, Russ Almaz, agreed to sell "Hanson" at its fixed wholesale price 115,000 perfectly cut, round, brilliant stones for $8,145,000. For arranging this low price, the broker took a standard 2 percent commission, or $162,000. For the deal to be consummated, Rifkin only had to wire the money to Zurich.
On October 25, Rifkin coolly entered the bank's transfer room under the pretext of inspecting the computer. He picked up a telephone connected to the computer and dialed in the necessary digits. Instantly, the computer withdrew $10,200,000 from a non-existent account and transferred it to the account of "Mike Hanson" at the Irving Trust Company in New York. Rifkin then had the New York bank transfer $8,300,000 to the Zurich account of Russ Almaz.
A few days later, using his phony passport, Rifkin flew to Switzerland, took delivery of the diamonds, which weighed under five pounds, and smuggled them through customs into the United States. He then began contacting dealers in Los Angeles, but none was willing to buy the diamonds.
Meanwhile, the Security Pacific National Bank discovered that more than ten million dollars was missing. It was one of the largest bank robbery in history. The FBI, investigating the loss, received a tip about Rifkin, and arrested him in Carlsbad, California and found on him the Russian diamonds, as well as the remaining cash.
Initially, bank officials assumed that most of stolen money prudently invested in diamonds would be easily converted back to money. Only a few weeks earlier Newsweek had reported in a cover story, "The Diamond Boom," that diamonds were "the ideal asset" and that quality diamonds were soaring in price. While the diamonds that Rifkin had bought were commercial-grade stones used in jewelry. the London-based Economist Intelligence Unit had such diamonds, which had increased by at least 50 percent that year, were still increasing in price. Independent appraisers estimated that the diamonds, which Rifkin had bought at a low price, were worth at least $13 million at the retail level, and so the I bank foresaw that it might make a profit of some $5 million with the reported appreciation in value of the diamonds. In anticipation of this windfall, they agreed to pay the ten percent custom tax on the diamonds which Rifkin had evaded, as well as part of the cost of the FBI investigation. Before this expected profit could be realized, the bank had to await the outcome of the trial, since the diamonds were important evidence.
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