When the dirty diamond fracas began, some in the industry dismissed the fuss as the work of fringe human rights groups and their allies in the sensationalist press. But now the heavy hitters are getting involved?a sure sign that this controversy isn?t going away.

In recent months, there?s been action on the issue from Congress, the State Department, the United Nations, and the British Parliament. The media aren?t letting up, either. In the week before this article was written, there were ?conflict diamonds? articles in the Los Angeles Times, the Washington Post, London?s Financial Times, and the New York Daily News (which asked, ?Are diamonds becoming the next baby seals??). Most of the stories link diamonds with the now-familiar pictures of children whose limbs were amputated by Sierra Leone rebels. And, in what could be the most damaging piece yet, the popular CBS news magazine 60 Minutes is covering the issue.

No one in the industry denies a link between diamond sales and rebel armies in Angola, Sierra Leone, and other African nations. In the past, when confronted with questions about diamonds? origins?such as the attempt in the 1980s to include diamonds in U.S. sanctions against South Africa?the industry trotted out the perfectly valid argument that it?s unable to tell where diamonds come from. This time, however, the argument is being thrown back in the industry?s face. The reasoning goes like this: Because it?s impossible to tell whether or not a diamond is ?dirty,? you shouldn?t buy any. ?It?s hard to feel quite as giddy about that sparkly engagement ring when you think it might have paid for the removal of someone else?s arm,? wrote the Daily News.

Congressional hearings. For now, the industry?s biggest challenge is the CARAT (?Consumer Access to a Responsible Accounting of Trade?) Act, introduced by Rep. Tony Hall (D-Ohio) and cosponsored by Rep. Frank Wolf (R-Va.). If it passes, jewelers will have to include ?certificates of origin? with every diamond they sell. While many in the industry acknowledge the good intentions behind the measure, they unanimously consider it onerous and unenforceable. Trade associations that followed recent congressional hearings on the issue say they don?t expect the bill to get very far. ?The information we have is that it is not going to pass,? says David Rocha, assistant executive director of Jewelers of America, which has a lobbyist following the bill. (JA?s lobbyist was not permitted to speak with JCK.) Nevertheless, Hall says he?s pressing forward. ?If the industry doesn?t want the CARAT Act, it better come up with a better solution,? says Deborah DeYoung, Hall?s spokeswoman.

The industry?s second worry is that a human rights group will carry out an anti-diamond ad campaign. That?s not an irrational concern. Many of those involved in the debate, including Hall?s office as well as British human rights group Global Witness, are using the threat of such a campaign to spur the industry to action. Says DeYoung, ?I could easily see an ad campaign where you have a five-year-old girl with her arm amputated, and it asks, ?Is a diamond this girl?s best friend?? I think then you would have the industry rushing to embrace things like the CARAT Act, because otherwise you invite the revulsion of consumers.?

JCK was unable to find evidence of a serious anti-diamond advertising campaign even in the planning stages, although there are least five groups?mostly European?involved in this issue, including one that?s also engaged in the fight against land mines. Global Witness?the group that?s best informed about combat diamonds and whose public relations efforts led to the recent spate of news stories?has said that such a campaign would be ?irresponsible,? given the role diamonds play in boosting the economies of Third World nations like Namibia and Botswana. ?We are not planning anything, though obviously we can?t stop anyone else,? says the group?s spokesman, Alex Yearsley.

Industry takes action. With such threats on the horizon, the industry is working hard to contain the issue. Recently, De Beers, which now guarantees it sells no diamonds from conflict areas, submitted written testimony to a congressional subcommittee on Africa?a particularly unusual spectacle, since De Beers has no official presence in the United States. Diamond Dealers Club president Eli Haas also submitted testimony. And many world diamond leaders recently attended a ?conflict diamond? conference?officially sponsored by the South African government, but stemming from an idea from the International Diamond Manufacturers Association.

The industry also has been reaching out to the government. ?We?ve managed to make some friends in some very significant places,? notes Haas, who recently met with officials from the State Department and Congress. ?It?s a whole different atmosphere. We are now seen as part of the solution rather than part of the problem.? In that constructive spirit, De Beers? recent congressional testimony offered several suggestions on how to deal with the problem, including using ?run of mine? samples to determine the origin of rough.

So what does all this mean to jewelers who sell diamonds? For now, some are guessing that even if the current furor subsides?and, since at least four countries are involved, that?s a big if?the problem could resurface as new African rebel movements spring up and seize diamond-rich areas. And while the CARAT Act is probably doomed, in the future it may become commonplace for a notice of origin to accompany a diamond, just as notices of treatments accompany diamonds today. Already, some companies are touting their diamonds as ?conflict-free.? And mining companies like De Beers and Canada?s Ekati are looking into ?branding? their diamonds to signify their origin.

So far, the news reports and the publicity haven?t done much harm. Last year was one of the industry?s best ever, despite the year-end flurry of ?dirty diamonds? articles. And this year?s first-quarter sales have remained strong. But even if the negative publicity doesn?t dissuade a single consumer, it still cuts into the industry?s time and saps its energy. The money De Beers spends defending diamonds is money not spent on promoting them. The worst-case scenario?an anti-diamond campaign?may not hurt the market significantly, but it could do some damage. The people who respond to boycotts are typically younger?the core market for engagement rings. Of course, many argue that women will always love diamonds. They have a point: Animal rights activists? dramatic politicking did affect fur sales, but the resurgence in luxury spending has refueled demand for fur.

Global Witness Plays Vegas

If one didn?t know better, one might think the jewelry industry had suddenly fallen in love with Global Witness, the feisty human rights group that has become a force to be reckoned with on the ?conflict diamond? issue. At a recent seminar on the subject at The JCK Show in Las Vegas, speaker after speaker hailed the group for bringing the issue to the industry?s awareness. Even the State Department had kind words for the organization.

The truth is, many in the industry would be happy to send Global Witness packing, but the London-based NGO (non-governmental organization) shows no sign of it. At the show, director Charmain Gooch and spokesman Alex Yearsley met with people from the industry, toured the show floor, and attended seminars. But while Global Witness may not be ready to bid farewell to the diamond controversy, there are indications that its attitude toward the industry is softening somewhat. (Its literature still assails

De Beers for buying diamonds from Angola?s UNITA rebels in the pre-sanction early 1990s.) Yearsley says the group plans to start focusing on the oil industry?which it also blames for fueling African civil conflicts.

So who is Global Witness, and why has it become the jewelry industry?s No. 1 hobgoblin? The nine-person nonprofit organization was founded by Gooch and others to study the link between human rights and natural resources. Its main triumph so far has been halting the timber trade that fueled Cambodia?s civil war. Backers of the group include Britain?s Foreign Office and British playwright Harold Pinter.

Even those occasionally at odds with the group acknowledge that its employees are dedicated and do their homework. Its working paper on conflict diamonds runs 40 pages and has more than 130 footnotes. When the group began looking at diamonds, it organized three other NGOs into a campaign dubbed ?Fatal Transactions? and sent out public relations packets illustrated with a fake diamond in a box. The campaign was brutally effective, leading to anti-diamond articles in the New York Post and elsewhere. And its government lobbying may account in part for the recent spurt of official activity on the issue.

Nevertheless, Yearsley contends the industry is ?lucky? Global Witness became involved. The United Nations first linked diamonds and war, and articles about the link have appeared since the early 1990s. Yearsley notes that a ?less responsible? group would already have called for a complete boycott or launched an ad campaign against diamonds?something the group once threatened but now says is unlikely.

Global Witness is convinced it was able to attain the industry?s cooperation only through pressure?and the group doesn?t intend to let up. ?Our strength is that we stay with issues,? says Yearsley, who notes that it spent years examining the relationship between the timber trade and war in Cambodia. Notes Mark Van Bockstael, the Antwerp industry?s point man on the issue: ?The diamond industry now has its own NGO.?

When the Fur Flew

As the diamond industry ponders the fallout from the ?conflict diamond? crisis?especially the upcoming piece on the CBS newsmagazine 60 Minutes?industry leaders keep repeating the same mantra: ?We don?t want to be the fur industry.?

For years, fur was the ultimate sign of status and style?not unlike diamonds. But in the 1990s, animal rights groups launched an advertising campaign that featured scantily clad supermodels proclaiming, ?I?d rather go naked than wear fur.? Activists spattered fur coats with red paint and protested outside fur shops.

Did the campaign hurt the fur industry, as is commonly assumed? Carol Winne, executive director of the Washington, D.C.-based Fur Information Council, notes that while fur sales fell during most of the ?90s?a time when diamond sales generally rose?she doesn?t necessarily blame the activists. ?It was a time when a lot of things were going against us?the bad economy after the Gulf War, warm weather, and?like jewelry?we had a luxury tax,? she says. ?The animal rights activists were probably last on the list in terms of factors.?

There are differences between a campaign against ?conflict diamonds? and the one against fur. Anti-fur activists were against all furs, whereas conflict diamond activists say they have nothing against buying diamonds per se?just those that fuel African wars. In addition, the diamond industry has acted to head off a campaign by holding repeated meetings with the human rights groups involved in the issue. It?s hard to imagine a similar meeting taking place between a fur company and an animal rights organization.

Finally, the diamond industry is still largely controlled by one company ? De Beers ? which has enormous resources and marketing savvy. If necessary, it could run a counter-campaign stressing the good things diamonds do for Africa. No less a figure than former South African President Nelson Mandela has said that a diamond boycott would hurt the continent.

Winne acknowledges that the anti-fur campaign forced the fur industry to look inward. ?We did a lot of research and made sure that all our practices toward animals were correct,? she says. ?We had to promote to people that we cared about humane treatment of animals.? The industry also began working with designers to help them use fur in their products, and fur eventually worked its way back into the good graces of the fashion business.

In the end, the commotion died down, and last year fur sales were up 15%?the largest increase in a decade. Although it?s impossible to determine the commercial toll the campaigns took, they did have a psychological effect. ?When someone shows up in front of your store picketing, you get this feeling, ?Why pick on me?? ? Winne says. ?Now people just laugh at it.? Still, that?s one chuckle the jewelry industry would prefer not to have.