Contrarian Pundit

Have you heard about the shocking allegations against Macy’s West—that the store has been passing fake gems to unsuspecting customers?  It seems that none of the local newspapers has covered the story.

Two lawsuits have been brought in San Francisco superior court, claiming that Macy’s has been defrauding its jewelry customers. The first is by a purported whistleblower, Cortney Balzan, a longtime San Francisco gem appraiser who had contracted with Macy’s since 1983 to oversee the quality of its jewelry and value its merchandise. The Macy’s contract, according to Balzan, generated 90 percent of his business; confronting Macy’s would come at an enormous price.

In 2007, Balzan’s lab started receiving gems that weren’t what they were reported to be:

Gems that were supposed to be natural “rubies” were in fact heavily glass filled and often heavily lead glass treated.  This created a disclosure problem if passed onto the customer, because the heavy content of lead in many of the “ruby” stones was in violation of regulations in the United States for the content of lead in jewelry.

Stones were being passed as untreated “green amethyst” when in fact this stone is in reality Praseolite (a heated and less expensive form of quartz);

Sapphires that arrived in plaintiff’s lab were also fracture filled with glass;

Black sapphires were being passed off as black diamonds in the diamond jewelry department;

Diamonds were irradiated or heated to induce color and then represented to be natural black diamonds.

Balzan warned Macy’s management of its responsibility to disclose the true nature of the gemstones to customers.  The glass-lead composite rubies, for example, were worth $15 per carat, though they had the appearance of $500–1,000 stones. Despite his protests, Balzan was shocked to discover over time that gems purchased by Macy’s customers and subsequently sent to his lab for repair or sizing were the same types of stones he had rejected as substandard or fakes.  Once his lab received a “diamond” that turned out to be … wait for it … cubic zirconia!

Balzan pushed his complaints up the Macy’s hierarchy and eventually confronted a senior vice president in New York.  But Balzan gradually found the store sending fewer and fewer gems to his lab until his contract for quality control and appraisals was canceled in June 2009.  He continued kvetching about the poor quality of the stones Macy’s delivered for repair, until that contract was terminated in December.  Losing Macy’s as a client forced Balzan to lay off his staff of over a dozen.  He sued on December 15.

The second lawsuit, brought in January, is a class action by defrauded customers that relies heavily on Balzan’s claims, to judge from the text.

The allegations against Macy’s gained credibility from two televised sting operations, one by our local CBS5 a couple of weeks ago and another by Good Morning America last November.  In both, undercover reporters went to Macy’s and bought what salespeople told them were “natural” rubies, only to discover that they were the Cracker Jack lead-glass-ruby composites Balzan warned about.  Be sure to click on the CBS5 link for an interview with Balzan himself.

Here are some questions: First, where is the Federal Trade Commission in all of this?  Balzan cited FTC guidelines in his complaints to Macy’s management.  There’s certainly enough evidence to warrant an investigation.

Second, Macy’s replaced Balzan’s lab with another gem appraiser.  Who was willing to play ball?

Third, why is it that none of the local newspapers, to my knowledge, has covered this story?  Are they worried about losing advertising dollars from San Francisco’s signature department store? Is this another tale of the shortcomings of journalism’s (erstwhile) business model?

Moral of the story: If the world gives you lemons, make lemonade, but sell it as vintage limoncello.