Read first diamond laundry (part one), diamond 47th (part two)

by Andrew Bast found at NY inquirer

The story of Kim’s Jewelry, and the bust there, exemplifies what the FBI called, “a major fence.” Nam Pyo Kim was born in Korea and immigrated to Los Angeles. After a failed shot at jewelry there, he spent a few years in Florida before finally moving to New York where he set up a jewelry shop, married and fathered two children. He crafted and designed Korean-style jewelry, and in turn succeeded by fulfilling a particular niche in the 47th Street Diamond District.

 “Jewelry is a difficult industry to turn a profit,” Special Agent Daniel X. McCaffrey of the FBI’s Violent Crime and Major Offender Unit explained to The Inquirer. “If you have the opportunity to buy a piece of jewelry at 10% of what you would normally pay, it’s a good incentive to get involved as a fence.”

“Fencing is a very competitive business,” McCaffrey explained. “Crews find a fence by word of mouth, and middlemen will even make money for referrals.” In the U.S. today, fences come in many forms. Kim’s is what’s known as a “Stationary Fence.” This is a jewelry retailer with an established store who is willing to sidestep the law and buy gems, which she or he knows are stolen, to then turn around and sell the pieces in their storefront. The incentive is clear: a retailer can stock his inventory at a drastically reduced cost.

The more business a crew does with a fence, the better return they’ll earn. For instance, in a typical “smash and grab” robbery, a halfassed thief would literally smash a display case, grab everything shiny he can and then run like hell. Next, he’ll head for a pawnshop, but he’ll be lucky to make 10 cents on the dollar. However, as Castro and Guerro peddled their wares to Kim – and the quantities were big, several times they stole hundreds of thousands of dollars worth of merchandise – after a few months Kim was paying forty percent of the retail value, an exceptional return for any thief.

Dealers on 47th Street describe a time 10 years ago when every secondhand purchase required extensive paperwork. Copies had to be sent downtown and filed. Today, that’s no longer required. According to Pauline Toole, a spokesperson for the City of New York Department of Consumer Affairs, the department has inspection teams in every borough who regularly check compliance and investigate complaints, but according to dealers in the Diamond District, they’re surprised if they see more than one a year. Not to mention, keeping a duplicate set of books isn’t difficult.

McCaffrey also describes a more complicated operation known as a “Flying Fence.” In addition to the Diamond District, there are three other main fencing hubs in the U.S.: Los Angeles, Miami and Houston. In a typical scenario, a gang will target a salesman. Salesmen for jewelry wholesalers often travel with large quantities of precious gems and are rarely protected by hired, armed couriers. A dumb salesman, and apparently there are plenty, will leave a briefcase worth a half-million dollars in his parked car. The crew will rob him. Usually it’s not so easy, so gangs are regularly known to rig a salesman’s car to break down on a desolate highway, and there, with no one around, they’ll take every last stone he’s got.

At the same time, associates of the gang will be dispatched to the area, pick up the stolen goods and jump the next flight out of the state to one of the four major hubs. With the fence waiting at the other end, the rings, bracelets, diamonds, rubies or garnets disappear like snowflakes in a drift. The jewels and money move fast, eluding detection. The FBI has tracked flying fences so developed that the members have racked up a million frequent flier miles.

Meanwhile, enforcement of stationary fences remains spotty and episodic. Despite the fact that vendors are required to keep a logbook with the vital details of every person with whom they do business, when authorities came calling on Kim, he disappeared into the back of his store for a long five minutes. When he finally emerged, he did have a logbook, but in it were scribbled just two entries.

Check Part IV: deadly diamond  The Diamond District Turns Deadly . . .