The Gem Room Scam

By Kirpal Singh

The Gem Room: Part 1

In November, 1990 I was called to a meeting with Hari Jiwan and a woman named Devorah, who had an intriguing proposal. Devorah had been the second-in-command at First Capital Trading, which had been shut down by the FTC the same year. She and the top salesman at the firm (Dave) needed a safe place to land, and if we would provide the cover, well, she knew the whole business inside and out and we’d have a franchise without having to pay the franchise fee.

From that point on the ball was in my court. I had a few additional meetings with Devorah where she described most of the details of running a gem room. We then set up a dinner at Orsini’s on Pico where I met Dave for the first time. We were the only ones in the restaurant due it being the first night of the Persian Gulf War. Everyone was home watching the news, bombs were dropping on Bagdad, and we were discussing the finer points of Dave’s requirements.

Dave had a healthy bite taken out of his assets by the FTC in the raid on First Capital. He was very well known in the gold, silver, and gemstone telemarketing community and would not/could not be a known part of that. GRD (or whatever it would morph into with this venture) would provide the cover. Devorah would be Dave’s handler – in other words, it was a package deal. Devorah would be paid a salary and Dave would receive 30% commission on sales with a 5% bonus over $30,000 in sales. He was also assured that we had the financial backing and the telemarketer’s disposition (i.e., lack of morality) to back this enterprise.

Yogi Bhajan, unbeknownst to Hari Jiwan and DASK, had told me to report to him directly. I gave him a full report following the meeting. His words were: “We’ll eventually turn this into a legitimate business.” The next week DASK gave me the following news: the Gem Room was a go. Also, Hari Jiwan would be phased out of GRD and sent to Espanola, and DASK would be running the whole show. Of course, DASK didn’t realize at the time that within a few months his wife would be a hostage in Espanola.

The Gem Room: Part 2

I spent the next two months working with Devorah to set up the Gem Room. I found an office space above a donut shop on Robertson, came up with a classy English name (Blakemore and Cabot), had four-color brochures designed and printed, got a phone system installed, and had meetings with Dave just so he’d feel that things were moving.

First Capital had previously had a 36-month buyback policy and Dave wanted it changed to 18 months. In other words, Blakemore and Cabot would guarantee a buyback of customer’s “investment grade” gems up to 18 months after they were purchased. We agreed on this, which also meant that we would need to close up shop after 18 months and move across town with a new name.

I was also introduced to the appraiser, Sarafina, of First Capital fame. She had to be a lot more rigorous in appraising at 6x the purchase price. This meant I had to find stones and get an initial pre-appraisal to see how much the final appraisal amount would be. This was a learning curve for me, since I never had anything to do with gems prior to this.

Dave started making his first calls in March, 1991. This is when I figured out another derivative of the trash/invoice scheme: I’d find related phone rooms and call Federal Express and say that I was auditing the firm’s books and needed copies of all the invoices for the last 6 months. Federal Express would send the invoices to a mail drop and we now had the names and addresses of paying customers. Dave was the only recipient of those leads for all the time I was there.

By May, 1991 Blakemore and Cabot was bringing in $100,000 a month with Dave as the only salesman (do the math and he was taking $35,000 a month cash.)

During its best year, with between 8 and 15 salespeople, GRD was raking in about $350,000 a month with costs at approximately $150,000. Now, with new regulations and consumer awareness, the toner business was starting to go to hell in a handbasket (monthly receipts were down to about $150,000,) so all eyes were on the gem room and everyone was seeing $$$ signs, especially Yogi Bhajan.

The Gem Room: Part 3

By the summer of 1991 Yogi Bhajan engaged in a classic takeover of GRD. The $ wasn’t rolling in fast enough, so he sent Hari Jiwan to Espanola for an enforced retirement. The pretext was that he’d keep Yogi Bhajan company as one of the faithful during the summer, but he remained in Espanola way past the usual summer hiatus (actually, he hardly ever left from that point on.)

DASK was already gearing up to head GRD, knowing fully well that HJSKwasn’t coming back. Around that time, Yogi Bhajan took DASK down a notch by sending his wife, HHKK, to Espanola. According to DASK, they frequently enjoyed (more often than the prescribed 1/month) conjugal relations and were very happy together. Now he was working twice as hard to do what he was doing before, also running GRD, and going to Espanola for the occasional tryst. The subject of how Yogi Bhajan fucked with men’s heads while keeping the woman away is too long a subject and probably covered elsewhere. It is sufficient to say that DASK tried to do everything Yogi Bhajan wanted him to do, even at the detriment of the business. Yogi Bhajan had DASK hire Jerry’s (owner of Artin) cousin, Mordechai, to keep “the books.” More on that later.

SRSK, KSK, and SLSK were now working next to Dave. They were in awe of his breaking sales records every month (along with DASK and Devorah doing everything they could to keep him happy) and also were unaware that I was feeding Dave leads. By September, Yogi Bhajan’s requests/demands for money and payouts were coming in at an astonishing rate.

Interlude
Yogi Bhajan and Gems

Yogi Bhajan said he was going to turn the Gem room into a viable gem business. Meanwhile he was perpetrating the Artin scam in many dimensions. It worked this way:

Yogi Bhajan would take someone with extra cash or a couple of gem dealers to see Jerry at Artin on Rodeo Drive. Once there, Yogi Bhajan would schmooze with Jerry for about two hours. Then he would have someone fork up dinero of up to $10,000 to either buy something for themselves or “the Dharma” (Yogi Bhajan, Guru Amrit, etc.) Sometime after the sale, YB would get a cut of the take. It was usually in the form of jewelry, gems, other favors, and occasionally cash.

Yogi Bhajan absolutely loved gems. Movement of cash across national boundaries could be checked, but a single gemstone could have 10 different appraisals. Customs inspectors just didn’t bother too much checking invoice amounts against the real value of stones. Generations of families would be involved in transporting in stone, such as diamonds from mine to cutter to wholesale to retail. No nation can keep track.

Whenever Yogi Bhajan converted an asset into cash he would buy a gemstone. If you want to  know how he hid his assets, they are in the form of gems all around the globe. Unbeknownst to DASK, Jerry’s cousin would come in on weekends to courier or ship gems outside the US for Yogi Bhajan.

The Gem Room: Part 4

Fall of 1999: GRD, although grossing significant revenue, was hemorrhaging financially. The fixed costs increased as Yogi Bhajan asked for and got more funds directly and indirectly. The toner business was not as profitable as it once was. No one was really minding the shop with HJSK gone.

The commissions to the sales people were becoming tardy. The cardinal rule was to never to screw your sales people, and even that rule was breaking, except for Dave. He was now bringing in at least a third of the revenue and had to be kept happy at all costs (and he wasn’t in the cult and therefore couldn’t be coerced.)

DASK resorted to a check kiting scheme: he had two banks for which he continually transferred funds. This kept the balance in the accounts higher than it really was (sort of a trance state for bank accounts) and was also illegal.

I saw the future of GRD and it was fucked. There was no avoiding it. Rather than leave, I stayed and formed an alternative plan; one that I descended into darkness with.