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Canadian Gemstone Scams
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Facts for Consumers from the Federal Trade Commission
Canadian Gemstone Scams -- June 1993
Before you invest in gemstones that are sold by Canadian
telemarketing firms, you may want to think twice. The Federal
Trade Commission (FTC), Jewellers Vigilance Canada Inc., and the
National Fraud Information Center report a sharp increase in the
number of consumer complaints regarding the practices of some
telemarketing firms located in Canada. The FTC estimates that
consumers could be losing tens of millions of dollars annually to
these firms.
This brochure describes the deceptive sales practices used by the
Canadian telemarketing firms that have been the source of most of
the consumer complaints. It also lists resources you can use to
direct any inquiries or complaints.
Watch Out for Deceptive Sales Tactics
The suspect Canadian companies often use high pressure tactics to
sell gemstones. A salesperson may claim that you will realize big
profits with little risk. You also may be told that the stones
can be bought at or near their wholesale price, and that, once
purchased, they easily can be liquidated through the company's
own "rebrokerage" services.
The gemstones usually are accompanied by seemingly bona fide
grading certificates or appraisals, which make the gemstones seem
more valuable than they really are. If the gemstones are sealed
in plastic, you may be told that if the seal is broken, their
resale value cannot be guaranteed. This ploy makes it difficult
to examine the stones and determine their quality and their
value.
If you buy gemstones over the telephone, you later may receive a
second call. This time, a salesperson may try to convince you
that buying more stones will make your "gemstone portfolio" more
attractive for sale to outside "investors" or at alleged
auctions.
A salesperson also may call with the promise of a buyer for your
stones. Before a buyer can be introduced, however, you may have
to pay money upfront. The money is needed, you are told, to cover
a finder's fee, commission, examination fee, or "required" duties
or taxes. As part of the deal, you may have to buy additional
stones before you can sell any. After sending your money, you may
receive stones of questionable value, but no word of a buyer.
Whatever the approach, consumers inevitably end up with gemstones
worth only a small fraction of what they paid. In addition, the
promises of easy resale, outside buyers, and upcoming auctions
have all proven false. Consumers who believe these promises can
expect to lose all their investment money.
Use Extreme Caution
Few consumers profit from investing in gemstones. In fact, FTC
investigations have found that most consumers lose a large
percentage of the money they invest. The chances of recovering
losses are even less for U.S. consumers dealing with foreign
companies, such as those in Canada.
If a company calls you offering to buy or sell gemstones, watch
out. You may well lose every dollar you invest.
For More Information
If you have questions about investing in gemstones or have been
experiencing problems, you can call or write one of the agencies
listed below. When writing to register a complaint, include a
complete history of your involvement with the gemstone company.
You should enclose copies of all letters, brochures, or other
material you received from the firm in addition to any
correspondence you may have sent.
Federal Bureau of Investigation
Check your telephone directory for
your local FBI office.
Federal Trade Commission
6th Street and Pennsylvania Ave., N.W.
Room 200
Washington D.C. 20580
Contact: Denise Owens
(202) 326-3277
National Fraud Information Center
Consumer Assistance Hotline
1-800-876-7060
9 a.m. - 5 p.m. EST, Monday_Friday
Royal Canadian Mounted Police
(written complaints only)
225 Jarvis Street
Toronto, Ontario M5C 2M3
CANADA
The FTC also has published Investing in Gemstones, which offers
general information on the subject. For a free copy, write:
Public Reference, Federal Trade Commission, Washington, DC 20580.
You also can write to this address for a free copy of Best
Sellers, which lists all the FTC's consumer information
publications.
1/92, 11/92
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