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Lazare Kaplan Sues Antwerp Diamond Bank

Claims the bank misappropriated Lazare's proceeds.
Dec 25, 2011 5:17 AM   By Avi Krawitz
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RAPAPORT... Lazare Kaplan, a New York diamond manufacturer and dealer, has sued two Belgium banks for allegedly misappropriating $135 million worth of its diamond sales, the Financial Times reported.

The lawsuit, filed in New York federal court, claimed that KBC Bank and its subsidiary Antwerp Diamond Bank (ADB) funneled proceeds from Lazare’s diamond sales through numerous shell companies controlled by Erez Daleyot, owner of D.D. Manufacturing, across Europe, the Middle East and Asia, the report stated.

Lazare has failed to meet financial reporting requirements for the past two years, including its most recent reporting quarter that ended on August 31, 2011. The company delisted its shares from the New York Stock Exchange due to the discrepancies.     

The Financial Times reported that Lazare is seeking $500 million in lost proceeds on allegations of racketeering and money laundering.

The complaint claims that Lazare consigned a parcel of diamonds to Daleyot who was supposed to sell them to third parties and return the proceeds from the sales to Lazare. Instead, the banks and Daleyot allegedly worked together between 2008 and 2010, to transfer the diamonds through a series of legitimate and sham transactions that made them difficult to trace, and use the proceeds to pay off loans the banks extended to Daleyot, the Financial Times quoted the claim as saying.

The lawsuit further alleges that KBC and ADB received $20 million in bribes from Daleyot to assist with the money laundering scheme.

The suit is a counter claim to ongoing proceedings brought by ADB against Lazare in Belgium. Lazare explained in an October filing to the Security Exchange Commission (SEC) that ADB is seeking payment from Lazare of amounts the company allegedly owes under a $45 million credit facility the bank had extended Lazare. The company denies the claim and is seeking a negotiated settlement with ADB and KBC. The case has been rescheduled to be heard in September 2012.

The company explained that the continued litigation and resulting uncertainties in its financials is having a “detrimental effect” on its ability to transact ordinary business.

''As such, in the event that the company is unable to reach a negotiated settlement with ADB and KBC prior to the end of its second fiscal quarter ending November 30, 2011, the company intends to initiate proceedings in the United States against ADB and KBC seeking compensatory and punitive damages and/or pursue such other options it determines would be in the best interests of the company and its stockholders in order to resolve the remaining material uncertainties,'' Lazare stated in October.

Lazare recently reported that it expected sales to have increased by 13 percent year on year to $37.5 million in the first fiscal quarter that ended in August. 

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Tags: Antwerp Diamond Bank, Avi Krawitz, diamonds, Erez Daleyot, KBC Bank, Lazare kaplan
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