The fact that diamonds sold by Sotheby's could be blood diamonds that generate revenue used to fund human-rights violations probably would not have occurred to Sotheby's patrons. But it should, because when someone buys a diamond from Sotheby's Diamonds, some of their money ends up funding gross human-rights violations - suspected Israeli war crimes in Palestine.
While the Steinmetz Group is privately owned by Israeli billionaire Beny Steinmetz and can fund what ever regime he chooses, the same is not true for Sotheby's -- a publicly owned company listed on the New York Stock Exchange.
Under NYSE rules Sotheby's is obliged to make immediate public disclosure of all material information concerning its affairs, except in unusual circumstances.
According to the NYSE: "Whenever a listed company becomes aware of a rumor or report, true or false, that contains information that is likely to have, or has had, an effect on the trading in its securities, or would be likely to have a bearing on investment decisions, the company is required to publicly clarify the rumor or report as promptly as possible."
Sotheby's Proxy Statement for the annual meeting of stockholders 2013 informs shareholders that Sotheby's Board of Directors has adopted a Code of Business Conduct and Ethics, a Related Party Transactions Policy, and a Policy on Trading in Sotheby's Securities that are designed to ensure that directors, officers, and employees of the Company are aware of their ethical responsibilities and avoid conduct that may pose a risk to the organization.
Sotheby's has in place a Risk Committee, which evaluates risks related to macroeconomic and geopolitical events, strategic initiatives, brand and reputation, and other risks to the company.
On February 28th 2013, six weeks after I wrote to Mr. Ruprecht, Sotheby's lodged a Form 10K annual report with the Unites States Securities and Exchange Commission. Under "Risk Factors", the report lists twenty-six different forms of risk to Sotheby's business -- some of which are appear to lie at the far end of the probability spectrum. However, the report fails to mention the very real risk to Sotheby's reputation and business posed by the partnership with the Steinmetz Diamonds Group which has "adopted" a Unit of the Givati Brigade in the Israeli military -- a Brigade that stands accused of the Samouni family massacre in Gaza -- a war crime.
In Sotheby's most recent Investor Presentation, released on June 4th, the company again fails to mention of the risk to its reputation and diamond brand image, this despite a recent demonstration by human-rights activists outside its New Bond Street store in London.
Given William Ruprecht's legal and moral responsibilities to protect Sotheby's good name and reputation, and the interests of Sotheby's shareholders, one would expect that when the Steinmetz Diamond Group's relationship with a military regime accused of war crimes was brought to his attention that he would have acted promptly to sever their "unique partnership" and publicly disassociate Sotheby's from the actions of the Israeli military. He should also have brought this to the attention of investors and the Stock Exchange in a timely manner. As I pointed out in my letter to Mr. Ruprechet, corporate social responsibility necessitates affirmative action by management to protect clients and company from exposure to moral and legal hazards.
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