March 21, 2009
By ALAN FEUER
The New York Times
It is not so easy these days buying what the government is selling. One could argue that this holds true for low-yielding Treasury bonds and economic forecasts alike.
Some government commodities, though, are not only simple to obtain – they are actually priced to sell: Items seized during federal crimes, for instance, like the 605 loose diamonds that were auctioned off on Friday beneath the crystal chandeliers in the Grand Ballroom of the New Yorker Hotel.
While crime does not always pay the criminal, it does, in circumstances such as these, pay the government, the auction house and – if he or she can wangle a bargain from the process – the buyer, too.
“Whatever economic climate you’re in, there’s always opportunity,” said Rick Levin, a Chicago auctioneer who brought the diamonds to market after they were seized in 2003 from two Manhattan jewelers in a sting operation that was devised to combat money-laundering for Colombian drug cartels.
His diamonds, sold on behalf of the federal Department of the Treasury and divided into more than 100 lots, – had once belonged to Roman and Eduard Nektalov, a father-and-son team who sold gems in diamond district in Manhattan and were targets of Operation Meltdown, a federal investigation into the laundering of drug money. In 2003, the two men, members of a prominent family of Bukharian Jews, were arrested after trading the stones to an undercover agent for $500,000 cash.
Within months, Eduard Nektalov was shot point-blank in the back of the head as he walked up Avenue of the Americas between 47th and 48th Streets. Roman Nektalov, his father, was convicted in the money laundering case months later.
The noir-ish story, though, with all its gruesome details, was scarcely mentioned as dozens of buyers – many of them Hasidic and Bukharian Jews who work in the diamond trade – filtered into the ballroom of the New Yorker, at 34th Street and Eighth Avenue. The auction itself began at 10:15 a.m. when Rob Nord, a professor of bid calling at the Missouri Auction School (“The Harvard of Auctioneering”), started with Lot 1: four diamonds varying in weight from 1.1 to 1.4 carats.
“I brought my plastic,” said Mandy Ellis, who had flown in from Dallas, where, she said, she “dealt in a little real estate.” Ms. Ellis had come to spend money – “Whatever Saks didn’t get from me yesterday,” she said.
Terrence Byrne, a retired city bus driver, had driven in from Queens, because, as he put it, “I dropped a bundle in the market and I need a good investment.” Next to him was his wife, Julia, who reminded him they had also come to buy a diamond for her 25th wedding anniversary gift. (Mr. Byrne bought Lot 8, a 2.6-carat diamond, for $5,500.)
The Kodak brothers, Brad and Creighton, own a chain of three jewelry stores in northern New Jersey and had come in search of a deal. “We’re here for real value,” Creighton Kodak said. (They left when Lot 6 was on the block, deciding that the prices were, in general, too steep.)
Since most of the money flows back into government coffers to investigate further criminal schemes, Mr. Levin – a quick-talking salesman type – suggested there were patriotic, as well as financial, aspects to the sales.
Mr. Levin, who, on average, takes a 10 percent cut from his auctions, has been very busy of late. In the last few years alone, he has sold for the government smuggled horses in Arizona, stolen cab medallions in Boston, 54,000 pounds of smoked Chinese scallops, a shipping container of blue jeans, illegally marketed Freon and a million packs of untaxed cigarettes.
Tapping what could be a growing market, Mr. Levin recently secured a contract with the Federal Deposit Insurance Corporation to auction furniture, fixtures and equipment seized from failed banks around the country.
As Mr. Nord droned on in his Gatling gun baritone, four tuxedoed “ringmen” prowled the ballroom whooping loudly when they spotted a bid. By the end of the day, the auction brought in nearly $750,000. Mr. Levin turned philosophical – and somewhat self-promotional.
He was saying that with so many inscrutable toxic assets on the market these days the opportunity to purchase hard items, in an open setting, was refreshing.
“Auctions are the best way known to mankind to buy and sell things,” he insisted. “There’s a real-time ability to actually know what something’s worth.”