Feb 27, 2010 4:48 pm US/Pacific
Fractured: Macy's Sued For Gemstone Fraud
As Featured on 30 Minutes Bay Area
SAN FRANCISCO (CBS 5) ―
For twenty-six years, Cortney Balzan ran a busy downtown San Francisco lab employing more than a dozen gemstone experts and craftsmen.
"This is not being used anymore," Balzan says, unlocking a door at the end of a corridor next to a freight elevator. "I'll just turn on the lights for you. It's a mess so don't mind it."
Balzan guides a CBS 5 camera crew through the door and flips on the overhead lights, revealing an untidy display case area to the left and work area stretching back to the right.
"They're not coming in this area anymore working with us," he adds, referring to his employees. "What a waste of talent!"
Balzan's biggest client was right across the street, and it remains the dominating view from the lab window: Macy's.
"I was quality control," Balzan says thoughtfully.
That's how he describes his long working relationship with Macy's. Balzan was the independent voice that told the department store whether each stone was up to store standards before it went up for sale. The arrangement was designed to protect Macy's customers and their own good name.
Balzan explains, "We just observed to see what the nature of the stones were. And if it met the standards, fine. If it was something that they did not want, it would go back."
And so it went until about 2007. That's when rubies under Balzan's microscope sent up a red flag.
"The material was very inexpensive," he remembers. "It had a $1000 look, maybe a $500 look, maybe more. But they were, at our level, $15 per carat. "
Cheap rubies he says looked good.. until you looked closer. In fact, they were covered with tiny fractures, filled with gas bubbles. As usual, Balzan let Macy's know the rubies weren't up to their standard. Then something unusual happened: customers started bringing gems just like them back in for sizing.
"We saw some of these pieces coming into us in the repair area," Balzan reports, some of his incredulity still apparent. "So we went, what are these doing here? Did they get out by mistake? Were they disclosed?"
Disclosure would become the very key to the conflict now building between Cortney Balzan and Macy's, one that would lead to accusations of fraud in court. So what would customers be told today if they bought rubies at Macy's?
We took our undercover camera to Macy's stores in San Leandro, Cupertino, and Serramonte.
In San Leandro, a male sales associate was eager to show us a variety of ruby rings.
"You can't go wrong because ruby is one of those stones that are really, really nice," he said encouragingly.
We bought a ring from him, and one from Cupertino, and one from Serramonte. Each ring was 1 3/8ths carat, with diamonds surrounding and a 14-carat gold band. And before each purchase, we asked the sales associate if the ruby was natural.
In San Leandro, his answer: "It is a natural ruby, yes."
In Cupertino, the sales associate said "Yes," and added, "We don't sell lab-created. All the stones are natural."
Serramonte's associate responded with "It should be, yes. All the stones are natural. But some are color-enhanced."
When we inquired about that, her response was, "I think they use just some liquid to make the color like even."
When we asked what liquid, she said, "That I don't know." She then pointed out an index-card sized sign we had seen in all the stores' display cases. It read in part:
"Gemstones... often are treated and/or require special care, ask associate for details."
The rings were priced at $1200 each. We paid between $600 and full price, and then went to see what we had.
We began our investigation with the same machine the federal government uses to test consumer products. It's called an XRF analyzer and we rented it from Thermo Fisher Scientific.
In test after test, the analyzer returned a reading showing "PB" - the chemical symbol for lead. The element lead does not naturally occur in rubies. So we turned to Master Gemologist Appraiser Nancy Stacy for answers.
"You got a sort-of ruby," Stacy responded with a laugh.
Stacy examined all three rings under a microscope.
"Oh, this looks like it has some really big holes in it," Stacy said, her eyes fixed to the microscope. "That and this luscious gas bubble right here tells me this has been lead glass filled."
Stacy says rubies that come out of the ground looking as incomplete as a sponge can be filled with molten leaded glass and faceted to look like something much more valuable. Our rings fall more on the "sponge" side.
"Basically you have a faceted stone that is about half glass and half ruby material," Stacy concludes. "I don't think it's a good buy based on the durability problems."
In fact, whereas a solid ruby is second in hardness only to a diamond, glass will scratch, even melt under too much heat. The simplest things can cloud the glass filler: lemon juice, soda, even regular gem cleaner. The ruby will be ruined, and there's no way to repair it.
Stacy's diagnosis is grim: "You will not be able to pass this down and down in your family because it's going to wreck itself before you get that far."
That's why people who buy glass-ruby composites need to know the stones need special care. We were sure to ask, just in case, when we bought ours.
In San Leandro, the sales associate avoided answering us directly, responding only, "Well, I think this is it," and changing the subject to sizing.
When we asked the associate in Cupertino about special care, she said Macy's sells gem cleaners. We pressed the "special care" question again. Her response: "Nothing special."
And in Serramonte, the associate's advice was to use baby shampoo to clean the ring.
Gemologist Nancy Stacy calls it "definitely a misrepresentation."
"Basically you got a Volkswagen when you thought you were getting a Cadillac," Stacy says. "You're welcome to pay as much as you want for anything and anybody's welcome to try to sell it for whatever they want as long as they disclose what it is."
And that was the problem Cortney Balzan had with Macy's. He had now checked the sales display cases and seen rubies of the same type his quality control team had rejected. He says customers were not being told these rubies were lead glass composites, something he calls a violation of Federal Trade Commission guidelines for the sale of gemstones.
Balzan says, "If you do sell it, in my account, it's selling... then it's fraud."
Balzan says he took his concerns up the chain of command all the way to a meeting with a senior vice president at the company's New York headquarters.
"Instead of saying, 'We have a problem area,' they were trying to glamorize the problem. 'Maybe we can merchandize it in certain ways that would make it sound wonderful!'" he remembers. "And I was just thinking, you know, you have a problem and you have to deal with it!"
Macy's didn't stop selling those rubies -- they stopped dealing with Cortney Balzan. When they didn't renew his last contract, he had to lay-off his staff and pack up his office. In December, he sued Macy's for fraud.
"It's all for the consumer good. I may lose everything I ever built up," he says quietly. "There's still a lot of consumers that have purchased things and still do not know what they have purchased."
Macy's declined our invitation for an on-camera interview, but sent us a statement acknowledging that some rubies are filled with glass, and in part:
"Ruby gemstones sold in settings in Macy's Fine Jewelry departments are genuine. We have signs in our precious and semi-precious gemstone departments to inform customers that gemstones may have been treated and may require special care. ... Rubies sold at Macy's represent an outstanding value for our customers."
Click here to read Macy's full statment.
But those signs in the display cases don't mention glass fillers. They're too vague, says Balzan, because nobody's telling the customer what they're really buying.
"The problem was not solved," Balzan says. "And the people that lose are the people that shop at Macy's."
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
Read Macy's Full Statement
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