In the Jewelry Center, All That Glitter Sure Is Gold

On the 16th floor of the International Jewelry Center, Randy Matiyow’s walls are rigged with alarms and reinforced with several tons of lead. Employees come and go wearing guns and holsters. Television monitors keep an unblinking eye on every room.

In this atmosphere, Matiyow and his company--Prosegur Inc.--specialize in the storage and shipment of gold, silver, diamonds and other precious commodities.

Through the company’s massive vault flows much of the lifeblood of the Los Angeles Jewelry Center, giving Matiyow what he considers a rough barometer of the district’s growth. Three years ago, he said, the vault was far from its huge capacity--25,000 pounds of bullion. Now it is stacked to the limit.

The one dark cloud on his otherwise booming business, Matiyow said, is the problem of too little vault space. But it is a dark cloud lined with more silver, gold and diamonds than he ever imagined.

“I can’t store all the metal people want to give me because of the weight factor,” the former Brink’s executive lamented. “That’s the biggest problem I have right now. I think everyone was completely fooled about what the market would do down here.”

Indeed, the market is thriving. The L.A. Jewelry Center, an unlikely world of unlikely lineage, has become a sparkling success story in a rebuilding downtown. On the rise even after a decade of growth, it is a fast-paced immigrant outpost in an old part of town, a melting pot of old-time American jewelers and craftsmen from Japan, Hong Kong, India, Armenia, Thailand, Israel and elsewhere.

Together--despite problems of crime and competition--they have forged a multifaceted world where jewelry is imported, traded, designed, manufactured and sold. A few bulky buildings represented the district 12 years ago; today, about 2,000 jewelry businesses crowd the storefronts and high-rise offices that run along Hill, 6th and 7th streets. A dozen major jewelry buildings exist--with more on the way.

For many, the American Dream lies gilded within the delicate filigree chains and gold watches of a display shelf. Lights burn long into the night on floors where rings are sized and polished and diamonds are carefully set within the dimples of a metal earring.

“There is lots of bargaining and negotiating--and people enjoy it,” said retailer Rita Lam, the daughter of a prominent jewelry family in Hong Kong, describing the sense of community.

The handling of the merchandise in the district amounts to highly organized chaos. The Armenian retailer on the street buys his diamonds from the Israeli on the third floor and his opals from a Japanese importer on the ninth. Gold rings for those diamonds are the product of the gold importer down the hall, shaped by the manufacturer who passes it on to the diamond setter who does his work for the retailer.

The many foreign-born and first-generation jewelers who operate in the district feel secure investing in diamonds and gold, they said.

“Lebanese . . . Israelis . . . people from the Orient. You name it, they’ve come in,” longtime building operator Harry Mordy said. “Frankly, I don’t know how they all can make it.”

Lam said the thinking is simple: “If you (open) a restaurant and buy meat, it can go wrong,” she said. “Jewelry cannot go wrong.”

Despite Cassandras who predict doom because of falling stock prices, the crush of trade has turned Los Angeles from an also-ran to a major player on the international jewelry scene, according to most in the industry. Although notably smaller than America’s top market, New York, second-ranked Los Angeles is expected to continue gaining ground because of soaring demand for jewelry in the Pacific trade region, jewelers said. Total trade is estimated at more than $1 billion a year in Los Angeles.

“In the last five years it has grown tremendously--unbelievably,” said Haroon Hanasab, 31, part-owner of the Jewelry Design Center on West 7th Street. Hanasab’s family fled Iran after the revolution and sank their money into a 14-story building that was less than half occupied five years ago.

Now, he said, the building is more than 95% full, housing 120 jewelry manufacturing companies.

The district has made a significant impact on the downtown office market. Forty- and 50-year-old structures that were losing their hold on banks, theaters and department stores are now the domain of jewelers.

Space in the jewelry buildings goes for nearly double the lease rates at office buildings just a few blocks away, Coldwell Banker broker David Louie said. The old Bullock’s building--a landmark at 7th and Hill streets--is one example of the transformation. No longer desirable for the department store, it was gutted and resurrected five years ago as St. Vincent’s Jewelry Center, a sprawling home to 500 wholesalers, retailers and manufacturers. The $15-million project may be followed by another expansion, building manager Mike Youssefian said.

Western Jewelry Mart, which houses 207 companies near the southeast corner of Pershing Square, likewise is eyeing expansion. Architects have drawn up plans for an eight-story building on Hill Street that will include parking, fast-food restaurants and, of course, retail jewelry outlets. That project is due for ground breaking early next year, manager David T. Gungormezer said.

Nearly eight years ago, in its quest to rebuild downtown, the Los Angeles Community Redevelopment Agency gave a nudge to the district by securing a $4.7-million federal grant to help build the huge International Jewelry Center at Pershing Square.

Since then, CRA’s Donald Spivak said, the district has grown perhaps 2 1/2 times in size, emerging as “an entry point for the jewelry industry into North America.”

“The jewelry industry has contributed more to the redevelopment of downtown than the redevelopment of downtown has contributed to the jewelry center,” Spivak said.

Immigrants and an explosive proliferation of tiny retail booths--virtually non-existent in the district until the late 1970s--have helped to fuel the transformation. The district is studded with big companies and tiny entrepreneurs, competing, working together, feeding on the frenzy of growth. Ezra Suberi of New York, who was born into the trade, visited Los Angeles five years ago and met some longtime customers downtown.

He saw opportunity. “I said to myself, ‘This is a sleeping giant,’ ” Suberi remembered, and so he came West. He now operates his own jewelry supply business here, with 10 employees.

Former London diamond dealer Jacques Mouw, president of the Interdiam Corp., is a high roller, one of those who is leading the development of the district. Mouw’s office is one of the ritziest in the district, with upper-floor view windows overlooking the city. His claim to fame is that he once bought and sold the 137-carat Premier Rose--named after his mother--which is considered to be the largest perfectly flawless, colorless diamond in the world.

From offices in Antwerp, New York and now here, his firm handles “tens of thousands of diamonds a month,” so great a volume that $1 million a month in trade will not make his overhead, he said.

Selected for Climate

Mouw selected Los Angeles for his new home nearly nine years ago because of the salubrious climate--both for family life style and for prospects of success. “Los Angeles is such a tremendous magnet,” he said. “Los Angeles is the gateway to the Far East.” About 70% of his diamonds handled here are exported to wholesalers beyond that gateway, he said.

Unlike many U.S. businessmen, Mouw smiles as he talks about the foreign trade deficit, saying: “We do help the balance of payment quite a bit. There’s an insatiable demand for diamonds in Japan.”

The gems and gold that flow like a glittering tide through the jewelry center arrive from all points on the globe. Diamonds--the chief commodity of the district, cut to a myriad sparkling sizes by cheap labor overseas--pour in from Israel, Belgium, Brazil and South Africa.

Rubies and sapphires come from Thailand, emeralds from Colombia. Pearls are from Japan, Australia and Tahiti. The gold arrives from South Africa, Australia and the American Northwest--and from consumers who want their old jewelry melted down and refashioned.

Importers such as Moshe Eitani of L.A. Gems Ltd. said they spend weeks on the road, searching for the gems or jewelry that they later display on Hill Street. In some recent years, Eitani said, he has gone to Israel and Bangkok every two months. “Each trip, I could bring back a couple thousand stones,” he said.

Some places do almost everything; others are so specialized, one jeweler said, they may do nothing but import a single class of diamonds.

“If you need to change the size of a ring, or change the stone on a ring . . . (a dealer) can run upstairs and change it in half an hour,” said Moussa Hassid, business manager of the Los Angeles Jewelry Center, a towering building that houses about 200 companies. “Under one roof we have everything.”

The advantage to the symbiosis is speed and price, jewelers said. Services are cheaper and overhead, including rent, is less than jewelers might pay in retail malls. The savings is passed on to buyers, they said. A wedding ring priced at $2,000 in a mall often will sell for $1,000 or less in the district, according to jewelers.

Not Without Problems

But it is not a world without problems. Crime and other difficulties have accompanied the growth--the hazardous waste of a money machine. Some retailers fear that the district has grown too fast, becoming overextended and ripe for economic collapse.

Luxury items such as jewelry will be the first to go for consumers if the economy turns sour, some predicted. “I think after Christmas a lot of these places are going to be closing up,” said diamond-setter Harry Mavian, citing one empty building on 5th Street and a struggling retail plaza near Hill and 8th streets. “This pie is only so big, and when you’ve got to slice it up 2,000 different ways, it gets very thin.”

Others expressed increasing worries over crime and fraud--concerns that have led to sharply escalated police patrols of the district and an industrywide obsession with security. Receptionists sit behind inch-thick glass. Cameras and TV monitors fill the hallways and back rooms of the jewelry buildings.

“It doesn’t take a genius to figure out that behind a lot of those doors there’s a lot of money,” Los Angeles Police Department Capt. Rick Batson said. In the 10 months ending in October, about 950 robbery, burglary, theft and stolen-car cases were reported in the district, he said.

“Every day we have attempts to relieve (jewelers) of their merchandise,” Batson said. “But when you consider the millions and millions of dollars that are there in jewels, the attempts are relatively few.”

Perhaps because of the fortress-like security in the buildings, most crime in the area tends to occur in the streets, Batson said. Rip-off artists like to yank newly bought necklaces from the necks of unsuspecting women. Couriers in the upscale diamond industry are hit in more elaborate ways; in a typical scheme, Batson said, a courier’s car tire is punctured and he is followed perhaps 20 miles until the tire goes flat. Attempting to fix the flat, he is offered help by the pursuers. But one of them steals his briefcase.

An organization apparently exists somewhere in Colombia “to train people to do that,” he said. Police have responded by coaching jewelers in anticipating such heists. Additional patrols by uniformed officers have been bolstered by “very frequent and very substantial undercover operations down there,” the captain said.

Just in case that doesn’t work, a company in Glendale has just added its own contribution to the cause of protection: an unusual kind of travel case. With the press of a remote-control button, the company boasts, a courier can send 40,000 volts zinging through the specialized unit--enough to knock a would-be thief flat on the sidewalk.

Interest in the $695 attache case has been high, according to a marketing executive for Shamash International.

Occasionally, different sorts of crime crop up: Jewelers turn the tables by engaging in schemes of their own, in at least a few cases involving huge sums of stolen or fraudulent merchandise. Two years ago, FBI agents cracked a holdup ring blamed for the theft of $5 million to $10 million in jewelry from department stores in California and elsewhere. Much of that jewelry, it turned out, was traced to unscrupulous jewelers downtown who were selling it as part of the scheme, police said.

“There are people who throw in cubic Zirconia (when making jewelry) and call them diamonds, and people who sell 10- and 12-karat gold and call it 14-karat gold,” one jewelry-building executive said. “The honest jeweler can’t compete.”

How much of it occurs is difficult to gauge. John Davidian, who specializes in making wedding rings at Maia Designs, pointed an accusing finger to the many small retail booths that have proliferated in the last 10 years--an idea copied from the jewelry center in New York.

In the seemingly endless windows and glass display cases, Davidian can sometimes recognize 10- or 12-karat gold--on sale as 14-karat--by the slight difference in color, he claimed.

At other times, prices are a tip-off, he said, particularly when gold is being offered at prices below the current world selling price--about $490 an ounce. A half-ounce, 14-karat ring should contain a little more than a quarter of an ounce of pure gold. So with simple arithmetic, Davidian said, the problem becomes apparent: “If the piece weighs half an ounce, and it’s selling for $100, you know something’s the matter.”

Dealers say the practices undercut business for legitimate operators, but often they must throw up their hands.

“What can be done?” asked diamond-setter Mavian, Davidian’s partner. “Are you going to take a piece of merchandise out of somebody’s showcase and say, ‘We want to assay that ring.’ They’d say go to hell.”

Scales Policed

Responding to complaints, the Los Angeles County Department of Weights and Measures began less than two years ago to police the accuracy of scales used for measuring gold, silver and diamonds, said the agency’s assistant director, Nate Gluck.

A number of scales have been removed from the market, he said, and legal scales, properly calibrated, are sealed to prevent readjustment--an additional safeguard against fraud.

But so far, Gluck said, the agency has made only preliminary plans to begin checking the quality of gold and diamonds. “We probably (receive) five or six complaints a month, people wondering who regulates the industry,” Gluck said. Even so, “We do not at this time perform undercover test purchases in the jewelry mart.”

Most dealers, however, regard the problem as that of a few bad apples and note that the community attempts to police itself. A branch of the international Diamond Club, operating in Los Angeles, promotes ethical trade practices and settles disputes between dealers.

The nonprofit Gemological Institute of America, also operating a branch in Los Angeles, provides crucial safeguards against fraud by certifying stones and grading the quality of almost all diamonds sold.

The GIA’s work is especially vital to the industry, which seems to revolve around the lasting cash and sentimental value of diamonds, jewelers said. Through the doors of the GIA laboratory on Olive Street move untold thousands of diamonds that are letter-graded by color, carat weight, cut and clarity--and then mapped on documents that show the location of every miss-cut facet or flaw.

The grading scale has helped the emergence of jewelry centers like Los Angeles. “If you’re dealing with someone in San Francisco, you can describe the color and clarity you want over the phone,” importer Eitani explained, “and they can just ship it to you.”

After 22 years in the colored-gem trade, Eitani now deals strictly in diamonds, largely because of the grading system, he said. Rubies, while more expensive per carat than diamonds, are without a system to determine how color affects value, he said, and thus chancier to market.

Colored gems may appear one color in the winter sun of Bangkok and another in the spring rays of California. “There are too many variables,” importer Aaron Khafi said. “You can make a mistake and it will really cost you.”

Diamonds are a different story--the bedrock of the industry, a subject that causes many jewelers to wax lyrical.

“A diamond is an illusion,” said dealer David Marcus, somewhat vaguely, speaking in an office where the diamonds flow in and out almost constantly, wrapped a dozen or so at a time in small, neatly folded squares of paper. “If I show you a stone, there is not another one like it. It is like a person.”

Mavian stands at a polished display case of glistening diamond rings and patiently expounds on the nuances of the GIA’s D-to-Z color scale, on which D, E and F stones are considered colorless--some more so than others. A few notches on the scale may affect some stones by thousands of dollars. He talks about subtle problems like fluorescence--the tendency of some diamonds to change color under ultraviolet light--and speaks of diamonds like snowflakes or pedigree dogs.

“When you’re talking about a flawless D, you’re talking a speck, a grain of sand, in a sea of diamonds,” Mavian said. “And then to find one that is cut to the proper proportions, and without fluorescence--my God, you don’t know how rare that can be!”

Still, some long-established jewelers said Los Angeles has yet to equal Paris and other European centers in the quality of its craftsmanship. Glitzy boutiques on Rodeo Drive still manufacture their wares in places where jewelry families once worked for Napoleon, according to Sergio Baril, director of the Beverly Hills store Fred Joaillier.

“In Europe, each one is an artist,” he said, citing prices that run $150,000 to $5 million or more for a top-of-the-line necklace. “You don’t find that kind of jewelry here. It is very limited at the top.”

But Mouw, who has seen the important jewelry centers of Europe, defended the Los Angeles craft, saying it at least equals that in New York. Furthermore, it is only beginning, he said.

“You’ve got some really top-class manufacturers here in Los Angeles,” Mouw said. “And L.A. is only really coming into its own. In 20 years, it will be a whole different business here.”