Judge expected to rule soon in Bahia Emerald ownership case

The long and tortuous legal battle over the ownership of an 840-pound gem once valued at $372 million went to trial Thursday as the last group of active claimants to the Bahia Emerald told a Los Angeles judge that they had obtained the stone for the relatively meager sum of $1.3 million after a deal for diamonds fell through in 2008.

The one-day trial took place despite demands by the Brazilian government earlier this year to dismiss the case outright or put it on hold while officials continued negotiations with the U.S. government to secure the emerald’s return.

A parade of gem traders, miners, real estate developers and financiers have laid claim to the emerald as the case has wound its way through the courts.

The stone was pulled from a mine in northeast Brazil in 2001 and taken to Sao Paulo. In 2005, a self-trained geologist and mining entrepreneur in Northern California who knew the original miners shipped it to New Orleans, where Hurricane Katrina submerged the stone for weeks near the French Quarter.

Larry Biegler, an investor from Paradise, Calif., eventually ended up with the gem. When he and business partner Jerry Ferrara entered into a deal to sell diamonds to Idaho businessman Kit Morrison, the pair demanded that Morrison pay $1.3 million upfront. Morrison said he agreed and the business partners offered him ownership of the emerald as collateral in case the diamonds were not delivered.

The diamond deal fell through, Morrison testified, and he became the owner of the Bahia Emerald.

Superior Court Judge Michael Johnson, who previously said the trial would not determine the merits of Brazil’s claim to the emerald, questioned Morrison’s account of the diamond agreement.

“Were you keeping your fingers crossed that the diamond deal wouldn’t go through?” he asked. “It seems like a very strange transaction.”

Morrison said he didn’t completely trust the emerald’s appraisal and said that diamonds could be sold more easily than the gem. Nevertheless, he said, having the gem would at least cover his losses if the diamonds didn’t materialize.

“Quite frankly, I didn’t know what I would do with the Bahia Emerald,” Morrison said.

Morrison later formed a group with Ferrara and Idaho businessman Todd Armstrong called FM Holdings and moved the gem from a South El Monte vault to a more secure facility in Las Vegas where, Morrison said, he could better showcase the gem to potential buyers.

Biegler reported the gem missing to the Los Angeles County Sheriff’s Department in 2009, shortly after it was moved. Sheriff’s investigators tracked the gem to Morrison and confiscated it when they could not sort out who owned the gem.

That move set off years of litigation, in which eight different people at one time or another claimed ownership. All other parties have either settled their claims with Morrison’s group or had their claims thrown out by the court. Lawyers in the case said they expect the judge to rule in the next few weeks.

Morrison’s attorney, Andrew Spielberger, said Brazil can still attempt to take back the gem should Johnson declare Morrison’s group the rightful owner at the end of the trial.

A lawyer representing the Brazilian government was in court Thursday to watch the proceeding. John Nadolenco, a Los Angeles-based lawyer, said the country is following the case and will continue to work with the U.S. government to secure the stone’s return.

“We will look at our options given whatever the judge’s ruling is,” he said. “Brazil will continue to use all appropriate avenues to pursue repatriation.”

javier.panzar@latimes.com

Twitter: @jpanzar