Diamond dealers lawsuit alleges $3 million fraud

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Diamond dealers lawsuit alleges $3 million fraud

By Beth Braverman

June 28, 2007

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New York—Lawyers representing 45 diamond companies filed suit today against three men accused of being part of a fraudulent "bust-out" scheme that led to the theft of $3.3 million in diamonds.

The civil suit, filed in the Supreme Court of the State of New York on Thursday, names Alfred Avi Taub, 28, his father, Shalom S. Taub, both of diamond wholesale company A Taub Diamonds Corp., as well as Shirian Atias, 25, described as an "affiliate" to the company.

The suit alleges that Alfred Avi Taub established A Taub Diamonds Corp., a diamond wholesale business in New York's diamond district, in April 2006, and together with his father rapidly established credit and contacts within the diamond industry by initially paying the bills on small transactions over a period of 11 months, and using clients as references for one another, court papers said.

But this April and May, the suit alleges, the company had built up its credit enough to "bust out," and Alfred and Shalom Taub, as well as Atias, proceeded to collect more than $3.3 million in diamonds on memo, which the suit alleges the three men never returned or paid for. In addition, A. Taub Diamonds Corp. did not have enough money in its bank account to cover the diamonds it had taken on memo, according to the suit, and began bouncing checks written out to the lawsuit's plaintiffs.

"As the defendants were amassing $3.3 million in diamonds on credit, they were also clothing their company with the appearance of insolvency in order to avoid ever paying for the diamonds," the suit states.

The lawsuit states the defendants also lied to their plaintiffs regarding the whereabouts of the diamonds on memo, with Alfred Avi Taub claiming that some had been converted into sales. In mid June, he also told several of the plaintiffs that he'd been robbed and lost $1 million in diamonds, but that he had insurance to cover the loss, court papers said.

Dealers began realizing that his statements didn't jibe.

"Word spread like wildfire on 47th Street in early June when the defendants refused to return millions of dollars worth of memo goods and/or failed to pay April's invoices as they came due and/or began to bounce checks," the suit says.

Last week, David Rosenberg, president of the Diamond Bourse of the Southeastern United States, issued a warning to trade members about the company.

The defendants have not returned to their office and let the lease expire in April, the suit states.

The lawsuit accuses Alfred and Shalom Taub and Atias of fraud, conversion and conspiracy. It seeks millions in damages.

The suit also accuses Web designer Oran Taub, Alfred's brother, of aiding and abetting fraud by creating a Web site for A Taub Diamonds Corp. and selling the allegedly stolen diamonds online.

The suit currently has 45 plaintiffs and alleges $3.3 million in lost diamonds, but attorney Cindy Molloy says her firm is aware of at least 91 alleged victims and more than $4 million in losses. The firm plans to revise the lawsuit in the next few weeks to reflect all the alleged victims, Molloy says. She declined to comment on whether the plaintiffs had filed criminal charges against the four men.

Attempts to reach A. Taub Diamonds Corp., Alfred Avi Taub, Shalom Taub, Oran Taub and Shirian Atias were unsuccessful on Thursday.

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