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One Red Diamond In Search Of An Owner

A hidden red diamond worth at least ½ million dollars that was supposed to be found using clues in a book will come out of hiding at a New York auction in September.

By David Federman, Editor-in-Chief

This 59 point VVS2 red diamond, bought for an international treasure hunt, is being auctioned on September 16, 2009, in New York.

Lightning was supposed to strike twice--but this time brighter and harder.

It didn't. And this is why collectors of fancy color diamonds have a chance to own one of the rarest of these treasures: a bona fide 59 point radiant-cut fancy red VVS2 diamond from Western Australia's famous--albeit tiny--trove of pinks and purples, the Argyle Mine. And that isn't all. A winning bid at a September 16th auction in the Penthouse of the International Diamond Tower at 580 Fifth Avenue also buys a 54-point oval VS1 fancy intense blue. And if that isn't enough, be consoled by a 1.01-carat VS2 modified shield fancy vivid yellow.

These winner-take-all diamonds are highlights of a 5-ring collection created as part of an ingenious global giveaway of opulent fancy color diamond jewelry for a treasure hunt that never took place. And the man who is charged with supervising the sale, Donald Palmieri of the Gemological Appraisal Association in New York, is the man who also chose and bought the stones for the author’s collection.

Those stones, as you can guess, cost a fortune. But, like they say, you've got to spend a fortune to make a fortune--or, in this case, lose one. And Palmieri, who has been appraising and grading diamonds for nearly four decades, was negotiating with all the cost-cutting skill at his command. He's pretty sure he got the best wholesale prices anyone could have at that more buoyant time. It's hard to say for sure--since red diamonds aren't exactly common. Indeed, it is tempting false expectations to say they are uncommon. The truth is they are nearly non-existent.

No wonder the red diamond, just purchased at a 2006 Argyle tender by colored diamond specialist Larry West, had a non-flexible price tag of $500,000. The blue, also supplied by West, was a little cheaper--$150,000. By the time Palmieri had finished acquiring the ultra-rare raw materials for the collection, he had spent close to $1 million. Yet due to troubled times the entire 5-ring collection now has a minimum reserve of $400,000. Be the only bidder on hand and--don't make me do the math--there is a killing to be made.

Okay, why in the first place was Palmieri spending six figures for non-plus-ultra diamonds to be given away as if prizes in an Easter egg hunt? This is where the story gets steamy. And this is why the diamonds have perhaps the wildest provenance of any we know. Here's the stormy saga behind this liquidation.

Twice upon a time
In 2004, software genius Michael Stadther self-published a best-selling fantasy novel, “A Treasure Trove: A Fairy Tale About Real Treasure for Parents and Children of All Ages.” Clues in the book led to a dozen 18k gold tokens buried by the author at various U.S. national parks. These tokens, in turn, served as winning tickets for special-design fine jewelry pieces related to the book.

When Stadther decided to publish a sequel fantasy novel, “Secrets of the Alchemist Dar,” in 2006, he did so in conjunction with Simon & Schuster, the distributor of his first book.

Once again, Stadther planned a jewelry treasure hunt—but this time with clues hidden all over the world. In addition, he decided to bury booty even more fabulous than the first lot. Again, he turned to Palmieri for advice. “He asked me to suggest gems with universal recognized rarity,” Palmieri recalls. “I told him that there were no gems with greater universal rarity than natural fancy color diamonds.”

Stadther not only took Palmieri’s advice, he took him on as his purchasing agent. As publisher of The Diamond Market Monitor since 1981, Palmieri was in an insider’s position to find the rarest diamonds. “I knew the crown jewel of this collection had to be a red diamond,” Palmieri continues. “I just hoped there was one around.”

If anyone in the New York diamond dealer community would have such a rarity, it would be Larry West. As luck would have it, the dealer had just purchased such a stone at an Argyle Tender (these are annual auctions of crème-de-la-crème fancy colors by Rio Tinto Zinc, the owner of the Argyle Mine). “The diamond had just come into my possession,” says West, “and Don shows up inquiring about a red stone. There is no way he could have known that I had just bought such a gem. It was a somewhat astonishing coincidence.”

Once Palmieri bought all the diamonds (center and accent stones) for the collection, it was entrusted to designer Aaron Basa to create pieces that were related—by theme and motif—to Stadther’s second novel. The author began to plan and plant clues—some in his book, others on line—to lead fans and readers to the secret locations of his second collection.

But for reasons no one wants to talk about, relations between Stadther and his publisher vaporized and the treasure hunt was called off during the ensuing acrimony. Stuck with a fancy color diamond jewelry collection whose creation he had financed, the author turned to Palmieri for advice on how to recoup his large investment. Palmieri suggested an auction and was given permission to hold a showing of the collection at the recent JCK Show in Las Vegas. Now it can be seen by special appointment at GCAL (212-869-8985; dap@gemfacts.com). “It would have been fun to hold the treasure hunt,” Palmieri admits, “but there’s still going to be a winner here. So creating the collection will have been worth all the time and trouble.”

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