Inside Israel's diamond trade: a family affair

Alittle dusty, very proud, Moshe Schnit-zer strode into the house in his overalls, a diamond cutter's uniform in the 1940s. His first day on the job was done.

His mother, a cultured Romanian émigré, took one look at him and burst into tears. Here was her son - so bright, for whom she wanted so much - a manual laborer.

But World War II was creating opportunities for Palestine's fledgling diamond industry. Mr. Schnitzer saw beyond the diamond cutter's wheel, though neither he nor his mother imagined how far that vision would take him.

Sixty years later, the barrel-chested patriarch is known affectionately as "Mr. Diamond." His family, now an institution in the Israeli diamond community, along with some other major players, is a driving force behind Israel's transformation from a leading diamond center to potentially the world's most important.

Their story reflects the rise of Israel's diamond trade from humble coffee shop origins to global prominence. It's a tale of grit, talent, and, critics snipe, ruthlessness. Their saga also parallels the arc of the diamond industry's fortunes worldwide, from the 1940s birth of the boom years to the 1990s controversies over diamonds and war, through to today's unprecedented challenges as outsiders try to pry open a trade that has operated for centuries in oysterlike secrecy.

Reports that illicit diamond sales bolstered the fortunes of Osama bin Laden and the Al Qaeda terrorist network have heightened already intense scrutiny of the diamond trade. Even before these revelations, the issue of "blood" or "conflict diamonds" - gems sold to fund wars in Africa - were the subject of United Nations inquiries and Congressional reports. In November, spurred by the possible terrorist connection, the US House of Representatives passed a bill to throttle conflict-diamond trade.

There is widespread worry in the diamond community that the ensuing restrictions could stifle legitimate trade as well, but Schnitzer is seemingly unconcerned.

"It's nothing," he says, dismissing the furor with a wave. Yet it's an issue that touches his family.

His son Shmuel helps lead efforts by the Belgium-based World Diamond Council to cope with conflict diamonds and protect the industry. And the whiz-kid reputation of Schnitzer's grandson, Daniel Gertler, has been shadowed by stories of his willingness to spice diamond deals with military perks.

Beneath a denim-blue sky full of cotton-ball clouds, morning commuters honk their way through the parry-and-thrust traffic at Moshe Schnitzer Square. High above the fray loom the four glass towers of the Israel Diamond Exchange, a thoroughly modern facade for an ancient trade.

The diamond business has endured war, pogroms, an inquisition, and the advent of modern technology, all without much change. It is largely a family business in which traders work on trust, eschewing written contracts, and has drawn Jewish families since medieval times. For a long-persecuted group banned from entering industry in many places, diamonds offered a guaranteed, portable way of making a living.

The trade has expanded since then, but it is still strongly rooted in Jewish communities. Diamond dealers the world over are known by the Hebrew term Yahalom Manin. Deals are sealed with a handshake and the Hebrew words mazal ubracha, or luck and blessing. Gems can be brought or sent halfway around the world for inspection without any guarantee of purchase. In this environment, your good name is worth everything. Disputes are settled internally at peer-review courts. Wrongdoers face a penalty more serious than jail - expulsion from the diamond community.

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