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.
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