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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.
FTC CONSUMER & SMALL BUSINESS ADVISORY - PUBLIC DOCUMENT
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