Whistleblower: De Beers diamond price-fixing settlement may soon pay off for buyers

Phyllis Michaels sang in a country band for decades. She was on the road for five of those years, rubbing elbows with George Jones, Hank Williams Jr. and Jan Howard. To fit the glittering image, Michaels spent a chunk of her earnings to adorn herself with diamond rings, necklaces and bracelets.

So in 2007, when Michaels heard a TV news report that De Beers, the world's largest diamond seller, would pay $295 million to settle allegations of rampant price-fixing, she knew she wanted in on the gig.

Michaels, 66, of Minneapolis, is one of legions of consumers who bought diamonds or diamond jewelry between 1994 and 2006 and joined a class-action lawsuit against DB Investments Inc., the Luxembourg-based parent of the De Beers companies.

Five years after the final settlement was announced, she's still waiting for her money.

Michaels contacted Whistleblower in 2010 to ask for help getting her money, but a reporter found that the settlement was under appeal. In March 2012, she asked Whistleblower to "light a fire under their butts or something."

In May 2012, the New Jersey Supreme Court refused to hear an appeal of an appeals court decision affirming the district court's decision. Michaels started checking her mailbox.

Months later, she contacted Rust Consulting Inc., the Minneapolis-based claims processing firm appointed to hand out the money. She was told payment would be made in the next couple of months, she said.

But the checks may actually soon be in mail. A deadline came and went Monday without anyone formally objecting to a payout proposal filed with a New Jersey district court in April.

"We're just waiting for [District Judge Stanley Chesler] to issue an order. We just called his chambers today to inquire about the status," Eric Fastiff, an attorney for San Francisco law firm Lieff Cabraser Heimann & Bernstein, said Thursday. "We're expecting that order to issue any day now."

As long as the proposal is approved as submitted, Rust may be able to send out checks in as little as a week or 10 days, said Fastiff, who is one of the lead attorneys for the class.

Between 2001 and 2005, seven lawsuits were filed "alleging that the De Beers group of companies used its market dominance to wrongfully raise the prices of rough diamonds," the settlement order stated.

De Beers' chairman "declared publicly" that it "violates [U.S. antitrust law] by managing the diamond market, controlling supply, managing prices and acting collusively with other firms in the diamond industry," according to a complaint filed with the court.

Michaels said she has firsthand knowledge of the alleged price fixing.

"I was working at Goodman Jewelers in 1995. And my boss came up to me and said, 'Well, if there's anything you want you better buy it now because the prices are going up.' That was due to De Beers upping their prices," Michaels said.

De Beers denied those allegations and asserted that a U.S. court has no jurisdiction over its business. But it eventually agreed to settle the lawsuits. The collective settlement included antitrust language and placed De Beers under U.S. court jurisdiction in certain instances.

The settlement didn't end the litigation, however.

"The money should have been in the consumers' hands years ago," Fastiff said. "But there are unscrupulous lawyers who are trying to extort money by filing these frivolous objections and we refused to pay them off ... [to make them] go away."

The settlement was divided among three groups. Those who bought directly from De Beers were apportioned $22.5 million; $137.1 million went to 6,190 jewelry stores and other middlemen; and $135.4 million was designated to pay the claims for consumers who paid a total of more than $2 billion for diamonds and diamond jewelry over a 22-year period.

Fees charged for 39,000 hours of work done by 18 law firms took 25 percent off the top of each pool. Interest that accumulated as the money sat in escrow was added back in.

Subtracting attorney expenses, payments to top plaintiffs and more than $900,000 to Rust, the average payout to consumers will be $180.75, according to a memorandum submitted to the court. Michaels paid $18,000 for the jewelry she included on her claim form, but her refund will be based on just the diamonds themselves.

What is Michaels going to do with the money when she finally gets it? She said she now receives Social Security and makes a little side money working the meat raffle and the pulltab booth at Schooner Tavern in Minneapolis. She sold some of her jewelry just to get by.

"I said to those people at Rust Consulting that even if I only get $200, you know what I'm going to do with that $200? I'm going to Rainbow."