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Missing-Ruby Saga Is Talk of Jewelry District : Commodities: The valuable Burmese gem that a merchant says was stolen from him in a consignment deal was recovered in an Encino parking lot. FBI records trace it on a roundabout journey.


Jewelry merchant Peter Morlock makes it his business to keep an eye out for precious gems on the cheap, and last winter he found a deal he couldn't resist: A group of men offered to sell him the same $1.2-million Burmese ruby that was stolen from him in 1990.

Forget profit. Morlock was just hoping to get even.

So he called police--and in a sting operation last month five men were arrested on suspicion of conspiring to sell the 6.76-carat stone prized for its large size and deep blood-red color.

Among those arrested was jewelry broker Ali Reza Paravar of Woodland Hills, who had the stone in his pants 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, insiders say.

"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 Peter Morlock was sent to Los Angeles to represent his father's Germany-based jewelry business. He was 23 at the time.

Morlock declined to comment for this article, 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. "He was trying to make a name, trying to make a reputation," Vorzimer said.

According to the lawyer, Morlock soon became friendly with Ron Levi, a charismatic former diamond store salesclerk--also 23 at the time--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 even hard-to-sell gemstones.

A few months after their first meeting, Morlock gave Levi three gems, including the ruby, on consignment, according to police reports. The two other gems, a smaller ruby and a sapphire, are still missing, the documents say.

Consignment arrangements, in which brokers give other dealers merchandise to sell for them in exchange for receipts called "memos," are the standard procedure in the jewelry industry, brokers say. Often, such deals, which are usually for two weeks or 30 days, are typically sealed with a handshake and nothing else.

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

"Everything here is based on trust, and sometimes people take advantage of that," said one broker, who like others interviewed for this story requested anonymity for fear of losing business.

In the case of the Burmese ruby, Morlock told authorities that the consignment was for three days in September, 1990.

Then the tale gets fuzzy.

Even the value of the stone, described by Vorzimer as "the Mona Lisa of rubies," is the subject of debate. While Morlock told police that the stone has a retail value of $1.2 million, 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 the origin of the stone, saying only that it was "a trade secret," according to court records.

As for what happened to the ruby, about all that's 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 that Morlock made to the FBI, Levi at first told him that he gave the stone to another jeweler, who in turn gave it to Levi's brother--also a jewelry 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, as described in the FBI reports, 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 that he had never seen the ruby, he told agents that he did, indeed, receive it on consignment--only to return it one hour later. During the past three years, Paravar has at various times claimed that Levi owed him between $27,000 and $1.6 million in broken consignment arrangements, according to documents and interviews.

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