A Case With Many Facets : A $1.2-Million Ruby Is Recovered; Now Who--if Anyone--Stole It?

Jewelry merchant Peter Morlock, who keeps an eye out for bargains, found a deal he couldn’t resist last winter: A group of men offered to sell him the same $1.2-million Burmese ruby that was stolen from him in 1990.

Morlock called police, and in a sting operation in July, five men were arrested on suspicion of conspiring to sell the 6.76-carat stone, prized for its deep blood-red color.

Among those arrested was jewelry broker Ali Reza Paravar of Woodland Hills, who had the stone in his pocket when police stopped him in an Encino parking lot.

The case of the ruby--which apparently passed from hand to hand to hand before completing the circle back to Morlock--now is the talk of the close-knit cluster of jewelry markets in Downtown Los Angeles. Scheduled for a hearing next month, it provides a rare glimpse inside the nation’s second-largest jewelry district, a place where handshakes are the preferred way of doing business and where police and prosecutors are often loath to intercede. “It’s an interesting, interesting group of people you don’t want to mess with,” said Andrew Vorzimer, an attorney who has represented dozens of jewelry district clients, including Morlock. “There’s a lot of sleaze that goes on down there and causes legitimate business people to suffer.”

The saga of the ruby began in 1990 when Morlock, then 23, was sent here to represent his father’s Germany-based jewelry business.

Morlock declined to comment, but the ruby’s twisted journey is described in FBI records, court papers and other public documents.

With the ruby and other gems in tow, Morlock opened an office in the International Jewelry Center, the 16-story centerpiece of Hill Street’s jewelry district, bent on making his father proud, “trying to make a reputation,” Vorzimer said.

According to the lawyer, Morlock soon became friendly with Ron Levi, a charismatic former diamond store sales clerk, also then 23, who had recently opened his own gem shop a block away. As an outsider in the district, Morlock needed contacts and trusted Levi, who bragged about having “connections to Israel” that would make it easy to move hard-to-sell gems, Vorzimer said.

A few months after their first meeting, Morlock gave Levi the ruby on consignment, according to police reports. Consignment arrangements, in which brokers give other dealers merchandise to sell in exchange for receipts called “memos,” are standard procedure in the industry. Such deals, good usually for two weeks or 30 days, are often made with a handshake.

If the stone is sold, each broker gets a share of the money. In not sold, it is to be returned.

“Everything here is based on trust, and sometimes people take advantage of that,” said one broker.

In the case of the Burmese ruby, Morlock told authorities the consignment was for three days.

Then the tale gets fuzzy.

Even the value of the stone, described by Vorzimer as “the Mona Lisa of rubies,” is subject to debate. Morlock told police it has a retail value of $1.2 million, but its appraised wholesale value is about $527,000. And though Burmese stones--because of their rarity and color--are more valuable than other rubies, Morlock has declined to talk about this one’s origin, saying it was “a trade secret,” according to court records.

As for what happened to the ruby, about all that is clear is that when Morlock tried to get the stone back, Levi didn’t have it. But tracing the path through all the contradicting statements in FBI reports is like trying to follow the pea in the old shell game. First it’s here, then it’s not.

According to a statement Morlock made to the FBI, Levi first told him he gave the stone to another jeweler, who in turn gave it to Levi’s brother--also a broker.

But Morlock told the FBI that Levi later offered a different sequence of events, saying he tried to sell the ruby to Paravar. Under this scenario, Paravar kept the ruby and refused to return it until he was paid for several diamonds he had given Levi on consignment.

Yet another version was offered by Paravar. After first telling the FBI he had never seen the gem, he told agents that he did, indeed, receive it on consignment--only to return it an hour later. During the past three years, Paravar has claimed that Levi owed him between $27,000 and $1.6 million as a result of broken consignment agreements.

In a recent interview, Paravar, a soft-spoken man who spent a decade as an engineer in the oil industry before switching to the jewelry business in 1985, said he was an unwitting victim. “I am a naive person,” he said, explaining why he trusted Levi. “He got close to my family, came to my house for dinner. He was a very nice thoughtful person who appeared to be honest.”

Paravar’s attorney, Jerry Kaplan, said the Woodland Hills man “received the ruby as collateral for a debt owed to him by Levi. He wanted the diamonds back, but he has a right to the proceeds of the ruby because it was given to him in good faith.”

Although the consignment system seems risky when dealing such valuable goods, brokers say it is not unusual for more than half a dozen people to handle gems before a buyer is found.

“Most people in this business are honest and honorable,” said Ralph Shapiro, a longtime Los Angeles jewelry broker, and president of West Coast Diamond Club, which helps resolve disputes between dealers. “But in any business you’re going to get that certain element that tries to take advantage of the rules.”

In October, 1990, weeks after Morlock handed the ruby to Levi, he filed suit in Los Angeles Superior Court alleging breach of contract by Levi and several others, claiming they had stolen the gem.

Filed with the suit was a statement from a broker, who did not identify himself, that claimed the ruby’s disappearance was part of a larger scam in which Levi and others netted $3 million by entering into consignment arrangements they never intended to honor. The scheme worked, according to the broker, because of the “marginal ethics and borderline illegality of many L.A. diamond dealers and their methods of operation.”

Two days after filing the suit, Morlock went to Los Angeles police. Accompanying him were 11 other brokers, who claimed Levi had swindled them out of about $1 million after underselling jewels given him on consignment.

As the LAPD began investigating, Levi disappeared, according to police records. But county prosecutors later declined to file charges, citing a lack of evidence.

“To prove grand theft, you have to prove intent,” said Deputy Dist. Atty. Ed Feldman. “And in these cases, especially if its done on memo, that’s very hard to do.”

In September, 1992, the civil suit was dismissed when Morlock, in effect, gave up.

He did not forget the ruby, however, and this February it virtually fell in his lap.

According to a police report, he made the rounds of the district, asking about the gem. Eventually, he met three men--Antranik Harbouian, Behzad Saba and Rasekh Siddiqui--who said they knew of a similar Burmese ruby.

The three allegedly told Morlock that, for a $35,000 fee, they would arrange to sell him the 6.76-carat stone for $325,000. A police report says that Morlock replied that the ruby had been stolen--from him.

After a July 12 meeting in which he became convinced the ruby was the one he lost three years earlier, Morlock arranged yet another meeting and called police, who equipped him with a microphone.

On July 19, Morlock met the three men in an Encino parking lot, from which they drove to the nearby home of a fourth man, Abdul Rasheed Usmani. Police then arrested all four and picked up Paravar in a nearby parking lot, with the ruby in an envelope in his pants pocket.

Paravar told the arresting officer: “I don’t know what’s in the envelope. Someone gave it to me,” police records report.

Harbouian, Saba and Siddiqui, who have pleaded not guilty to receiving stolen property, insist they were simply acting as middlemen to help Morlock recover the ruby. Usmani says he was extending a courtesy to Siddiqui, his brother-in-law, by allowing him to have a meeting in his house.

If convicted, the men face prison sentences ranging from three to seven years.

Meanwhile, Levi’s whereabouts remain a mystery. He turned up in Dallas in 1991 where he was again investigated by the FBI--but not charged--for allegedly selling gems on consignment and then claiming they were stolen, according to federal prosecutors there.

He is not being sought by Los Angeles police for the ruby theft.

As for that gem, it resides at the moment at police headquarters in Downtown Los Angeles, owned jointly by Morlock and an insurance company. Vorzimer says Morlock would like to buy out the insurance company’s stake--when he can afford to--and forget about the ruby’s tumultuous past.

“It was an extremely emotional and traumatic experience for him,” Vorzimer said. “Getting it back would help.”