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Honor Thy Father

Robinson Brown Jr. wanted to donate an emerald necklace to a Louisville museum as a memorial for his wife of 62 years. But when he died before he could give the gift, his heirs spent almost as much money as the necklace cost trying—unsuccessfully—to convince a local jury to make the seller take it back.

By David Federman, Editor-in-Chief

This 15-stone emerald necklace made by Krementz Gems was the center of dramatic jury trial that involved allegations of misrepresentation and fraud against Louisville jeweler Jim Jackson—all of which were dismissed.

In hindsight, the case of the Estate of Robinson Brown Jr. versus Aesthetics in Jewelry Inc. is a David & Goliath story. Let’s start with the players in this momentous minnow-meets-whale courtroom drama.

The defendant was Louisville jeweler James D. Jackson, whose 6th-floor buzz-me-in store, Aesthetics in Jewelry, has been making custom-design pieces since 1976. In 1980, he became a regular source of jewelry for Robinson Brown Jr. and his wife, Jean McCauley Brown. Several of those pieces featured emeralds, Mr. Brown’s favorite gem.

The plaintiffs were Mr. Brown’s five children, acting as his estate, who wanted to renege on their father’s proven intention to gift an emerald necklace bought from Jackson as a museum donation and force a refund of the $848,000 purchase price.

The case was brought once the heirs failed to force the jeweler to buy back the necklace and earrings. Every charge filed against him was part of a coercion strategy. That’s the basic narrative line of this case. That’s the story-gist you need to know before you can assess this case and its meaning to the jewelry industry.

A Memorial Gone Bad
Robinson Brown, Jr. was the kind of a client every jewelry dreams of having. His holding company, Brown-Forman, netted 3.3 billion in sales for 2008 and at one time owned Art Carved Jewelry. To be a jeweler for such a man meant more than patronage. It meant veneration from someone who knew jewelry and jewelry making first-hand.

In 2004, after the death of his wife of 62 years, Jean, the husband told both the jeweler and his family that he intended to honor her by having Jackson recreate an opulent emerald necklace given by Richard Burton to Elizabeth Taylor. Brown intended to eventually donate the necklace Louisville’s Speed Art Museum. Jackson was given a budget of up to $3 million for the replica. But after consulting with Dallas emerald dealer Ray Zajicek, it was decided to substitute a sumptuous 15-stone emerald necklace, as well as a pair of emerald earrings, made by Newark’s famed Krementz Jewelry, that cost considerably less: $848,000 (including tax). The suite was sold to Brown in March 2005 and the family informed of the transaction. Indeed, a gold plaque was made for the necklace that read: “Queen of the Creek – In loving memory of Jean McCauley Brown.” [Important note: The necklace was never intended to be immediately gifted to the museum. The heirs were to circulate it amongst themselves long enough for the piece to increase in value to the point where a write-off equal to its purchase price could be justified. Whether or not this represents a naïve expectation of constant appreciation in value, this was the plan Brown had in mind.]

After Brown died in July, 2005, and his estate was distributed, his five children had second thoughts about donating the necklace. They decided to return it to the jeweler for a full cash refund. The jeweler, who did not have the money to buy back the piece, offered to sell it on consignment. When his attempts to sell the piece failed, the heirs took matters into their own hands. To get some idea of the piece’s value, it was sent to New York for appraisals by two New York dealers who specialize in estate goods and the two major auction houses, Christies and Sotheby’s. This is when the nightmare begins.

You see, the estate was never given legitimate appraisals. What it received were a series of self-serving estimates of prices likely to be paid in various sectors of the fine jewelry disposal market. Under no circumstance could these estimates be considered appraisals. Let me explain.

Valuation Shenanigans
During the early 1980s, when jewelry appraisal reform began in earnest, most appraisal societies officially condemned the widespread use of thinly-disguised offer-to-buy (or sell) documents issued for free by auction houses and estate jewelers and assumed to be or often flat-out called appraisals. They weren’t. Here’s why.

Appraisals involve independent, objective research and must be performed by trained, knowledgeable practitioners with no past, current or contemplated vested interest in the property being valued. Valuations by sellers looking for merchandise or who are likely to base value-estimates on that fact are invalidated by an inherent conflict of interest. This conflict of interest usually results in what are called “lo-ball estimates.”

By 2006, when Robinson Brown Jr.’s estate started sending the emerald necklace for appraisals, lo-ball estimates masquerading as appraisals were thoroughly discredited. So one has to wonder why the estate was advised to send the piece to estate dealers and auction house for what were clearly disclosed as take-in valuations. As important, one has to wonder who advised such a means of gathering valid value information. One can only hope it wasn’t a certified appraiser who would, or should, have known such sources of pricing information would be open to charges of self-serving opportunism.

Nevertheless, the piece went to both Christie’s and Sotheby’s who valued it for auction purposes at between $180,000 and $230,000. The estate was also supplied with identical $200,000 estimates from two New York estate dealers—Paul Vartanian and Bradley Lempert. When Vartanian was confronted in deposition about his value, he confessed that was what he would have paid—not what it was actually worth. When asked what it was worth, he said $750,000. Pause here to ponder the troublingly vast discrepancy between the implied buy/sell prices for this piece that Vartanian admitted to. His "valuation" was a trust-buster in an industry whose life blood is trust.

Emerald earrings made by Krementz Gems.

Toward a True Appraisal
Okay, was the emerald necklace submitted for any bona fide appraisals? Yes. Jackson got two appraisals—one a wholesale valuation by Hartford, Connecticut, appraiser Neil Cohen for $550,000 and the other a retail replacement valuation by Dallas, Texas, appraiser Patti Geolat for $600,000 to $800,000. Unfortunately, only one of them—Cohen’s—was allowed to be submitted as evidence.

As we said before, this trial really wasn’t, as some claim, about valuation fraud. The jury didn’t buy into those charges. But it could have. And that would have spelled disaster if the verdict went against the jeweler.

So despite the happy ending, one of the many lessons to be learned from this trial is the following: retailers and wholesalers need to consult with appraisal societies about legitimate appraisal practices and, in our opinion, develop and pledge to a code of ethical conduct concerning these all-important documents. Most of this work has already been done but, alas, forgotten—or, perhaps, ignored.

The Myth of Oil-Dependence
The jury also did not buy into charges that the seller failed to make appropriate treatment disclosure. And here we come to the second installment of this legal nightmare—one in which treatment and treatment disclosure take center stage. Once again, the trial revolves around old discredited myths long ago discredited and issues long ago solved.

Reading key testimony in this case, one sometimes gets the impression that this trial was conducted in a time warp where long-repudiated valuation practices and long-abandoned gemstone-enhancement notions prevail. When one gemological expert witness for the Brown estate, Cap Beesley, testified that the permanent Excel polymer formula used to enhance all of the emeralds in the Krementz piece made it worth less than it would have been if treated with notoriously transitory cedarwood oil, I had to wonder if the trial was taking place in 2009 or 1989.

Let’s be clear: It is nostalgia at best and illusion at worst to believe in a continuing preference for oil/resin fillers over polymer fillers. That is why so many people I interviewed after the trial greeted Beesley’s remarks with incredulity, especially since he has been widely quoted as an advocate of Excel, the polymer filler used in the stones Ray Zajicek sold to Krementz.

An Easy Verdict
Once you see how successfully Sandra McLaughlin, counsel for the jeweler, challenged appraisal and gemological myths, and established the integrity of the original emerald transaction, you can see why jury deliberations lasted only an hour—and the verdict was unanimous to dismiss allegations of fraud, misrepresentation, unfair business practices, concealment and negligence. This isn’t to say the jeweler didn’t make some mistakes—or that the trial didn’t raise nagging, unresolved issues. We intend to discuss these issues in upcoming GemMails—starting with what constitutes full and proper treatment disclosure.

Look also for an article on the legitimate role and uses of expert witnesses. Too often expert witnesses act as hired guns using any means necessary to win favorable verdicts for their employers. Ironically, this is another of the myths James Jackson’s victory exposes. During this industry’s brief dalliance with appraisal reform, it was established that an expert witness is not supposed to be an advocate of any sort, simply a presenter of truthful fact and unbiased opinion. Those with long, clear memories will remember that condemnation of hired-gun expert witnesses was another of the common malpractices appraisal societies condemned nearly 30 years ago when the jewelry industry became serious about appraisal reform.

Given the sheer number of worst appraisal and expert witnessing practices in the Louisville emerald trial, those who want to celebrate Jackson’s acquittal should, we believe, do so by preventing future legal ordeals like his. That can only be done by seeing to it that judges and juries are exposed to best practices.

In the mean time, as dealer and trial observer Jeff Bilgore puts it, “The verdict is a vote of confidence in the jewelry industry, reaffirming the special relationship of trust between shopkeepers like Jim Jackson and clients like Mr. Brown.”

This was also sent out to our Colored Stone GemMail newsletter subscribers. Want to receive the latest up-to-date information on the gemstone industry? Sign up for our free Colored Stone GemMail newsletter.

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