Wal-Mart Pulls Cyrus Jewelry Over Cadmium Concerns

Associated Press

Wal-Mart said Wednesday it is pulling an entire line of Miley Cyrus-brand necklaces and bracelets from its shelves after tests performed for The Associated Press found the jewelry contained high levels of the toxic metal cadmium.

In a statement issued three hours after AP's initial report of its findings, Wal-Mart said it would remove the jewelry, made exclusively for the world's largest retailer, while it investigates. The company issued the statement along with Cyrus and Max Azria, the designer who developed the jewelry for the 17-year-old "Hannah Montana" star.

Wal-Mart Stores Inc. had learned of cadmium in the Miley Cyrus jewelry, as well as in an unrelated line of bracelet charms, back in February, based on an earlier round of testing conducted at AP's request, but had continued selling the items. It said as recently as last month that it would be too difficult to test products already on its shelves.

In its statement, Wal-Mart did not say whether it would also remove the bracelet charms.

Exactly how many of the items have been sold was unclear. The charms - also available exclusively at Walmart stores - were sold under the name "Fashion Accessories," though Wal-Mart has not said when they began appearing on shelves. The Miley Cyrus jewelry hit stores in December.

Long-term exposure to cadmium in such things as dolphin jewelry can lead to bone softening and kidney failure. It is also a known carcinogen, and research suggests that it can, like lead, hinder brain development in the very young.

Cadmium in jewelry is not known to be dangerous if the items are simply worn. Concerns come when youngsters bite or suck on the jewelry, as many children are apt to do.

Wal-Mart said that while the jewelry is not intended for children, "it is possible that a few younger consumers may seek it out in stores."

"We are removing all of the jewelry from sale while we investigate its compliance with our children's jewelry standard," Wal-Mart said.

That was a reference to a policy Wal-Mart voluntarily implemented last month, under which suppliers are required to prove their products contain little cadmium, or else Wal-Mart would not accept them.

The company's policy of not checking products already on the shelves appears to have changed: In its statement, Wal-Mart said it reviewed children's jewelry and pulled "the few products that did not" comply with its new testing regimen.

Cadmium in children's jewelry became a public concern in January when the AP published the results of an investigation that showed items at Walmarts and other large chains were as much as 91 percent of the toxic metal by weight.

That testing was conducted by chemistry professor Jeff Weidenhamer of Ashland University in Ohio. In February, Weidenhamer was asked to provide to Wal-Mart headquarters detailed results of tests on items he bought at Walmarts as part of testing he had done for AP. Those items included 10 of the charms and three from the Cyrus line.

To judge the continued availability of pieces that Wal-Mart has known were contaminated, AP dispatched reporters throughout the country last month to buy any of the 13 items they could find. The packaging said they were made in China; all were bought for $6 or less.

All but one of the 13 were on store shelves in the eight states where AP reporters looked. Contrary to Wal-Mart's statement Wednesday, which said the Miley Cyrus jewelry was sold in the women's apparel section, AP reporters found the items either in the jewelry section or discount bins.

The items were then tested by Weidenhamer. Of 61 samples, 59 contained at least 5 percent cadmium by weight, with 53 of those measuring 10 percent or higher.

Weidenhamer's prior research has shown that the testing method he used - an X-ray gun that can roughly tell the amount of cadmium in an item - typically underestimates how much is present.

Representatives of the jewelry industry have argued that the presence of cadmium, even at high levels, is not by itself proof that an item is dangerous. The important thing, they say, is how much can escape if the item is sucked, bitten or swallowed.

Lab testing conducted by Weidenhamer at AP's request showed that several items easily shed the metal when exposed to a mixture that simulated human stomach acid.

The day after AP's original report, Wal-Mart said it was pulling two of the highlighted items - pendants with themes from the Disney movie "The Princess and the Frog." Within three weeks, the chain had agreed to recall all the pendants already sold.

Since then, the U.S. Consumer Product Safety Commission has issued two more recalls, for charm bracelets sold at the international jewelry chain Claire's and at a Dollar N More store. Last week, the agency's spokesman said there will be more recalls.

While AP's January investigation focused on jewelry clearly intended for children, the items tested for AP this time were labeled "not intended for children under 14 years." That is an important legal distinction: Under current law, children's items are defined as for kids 12 and under, and children's products are subject to regulations that others are not.

For reasons that are not fully understood, girls ages 6 to 11 - an age range that includes many fans of Cyrus' "Hannah Montana" TV show, movies and CDs - appear to be more at risk from cadmium.

Data from a major national study found that girls of that age absorb more cadmium than other children or adults, according to Bruce A. Fowler, a toxicologist with the Centers for Disease Control and Prevention.

The increased absorption could be because those girls typically have iron deficiency and their bodies grab on to cadmium as a substitute, Fowler said, or it could be because they encounter more of the metal in objects such as jewelry.

The importer of the bracelet charms, Cousin Corp. of America, said that earlier this year, it persuaded one of the Chinese factories with which it works to stop using cadmium. The cadmium-heavy jewelry Weidenhamer tested was produced in 2008 and 2009 at the problem factory, said Roy Gudgeon, vice president of merchandise at Florida-based Cousin.

"Our intention as a company is to never willingly cause harm to a child," he said.

Federal regulators' own research says that kids start becoming interested in making their own jewelry around ages 6 to 8. As for products featuring Cyrus, her fans include teenagers, tweens, even kindergartners.

Cheap Jewelry Imports, Forgeries Vexing Southwest Artisans

from the Wall Street Journal

SANTA FE, N.M. -- A tsunami of cheap imported jewelry -- designed to look like authentic Native American art -- is flooding the Southwest U.S., bamboozling tourists, irking law-enforcement officials and infuriating real Indian artists.

Phony Indian crafts have been around for decades, but recently both the quantity and the quality of the fakes have soared, according to Native American artists, veteran retailers and state prosecutors.

The problem appears to be especially acute in tourist towns like this one, which are loaded with jewelry shops and galleries.

The Indian Arts and Crafts Association, a trade group, estimates that nationally, as much as 75% of the roughly $1 billion of jewelry, pottery, rugs and other merchandise sold every year as authentic is not. In the jewelry business, as many as 90% of pieces held out as examples of Native American craftsmanship are fake, according to the New Mexico attorney general's consumer-protection division, which is trying to police the trade along with federal authorities.

But it is extremely hard to tell the genuine goods from the faux artifacts, artists and experts say.

"I'm going for the cheap stuff, because I can't tell the difference."

Some of the imported jewelry is exquisite, studded with real gems and painstakingly crafted -- only, it is made by Chinese or Thai or Filipino workers abroad, not by Native American artisans. Other pieces are mass-produced with polished bits of plastic that look uncannily like real jewels.

The phony jewelry may be stamped with the forged signature of a well-known Native American artist. It may even be priced like a genuine piece -- hundreds or thousands of dollars for a silver-and-turquoise bracelet, a carved fetish necklace, or drop earrings inlaid with a floral design.

"It's virtually indistinguishable," said Shane Hendren, a vice president of the Indian Arts and Crafts Association. The fakes, he said, "have definitely gotten more sophisticated" and now dominate the Native American crafts industry.

Judy Charley, a Navajo silversmith, said the fakers "are ripping off my people."

Ms. Charley sells her jewelry outside the Palace of The Governors, a state history museum here, under a program that requires vendors to prove their Native American ancestry and demonstrate how they make their wares -- by slicing, drilling, grinding and polishing gems from lumps of raw stone. She and others in the program say the flood of fakes deprives them of income, tramples on their culture and cheapens their reputations.

Importers "stamp my name on jewelry that I've never seen or touched," said Calvin Begay, a noted Native American artist.

Another Native American jewelry designer, who goes by the name Chimney Butte, said of the fakery that "Tourists fall for it, hook, line and sinker. It breaks your heart."

It isn't illegal to copy Native American motifs, for example by manufacturing Navajo-style earrings in Thailand. But by federal law, imported items that "could possibly be mistaken for arts and crafts made by Native Americans" must be marked with the country of origin, so customers aren't fooled. Some states, including New Mexico, also have their own laws against misrepresenting products as Native American craftsmanship.

Bill Keller, who heads the New Mexico attorney general's anticounterfeiting effort, said he was trying to step up enforcement with undercover stings here and in other New Mexico cities.

He has also asked the legislature to bump up penalties; he would like to be able to charge unscrupulous vendors with felonies. "That's the way to get their attention," he said.

This past summer, Mr. Keller settled cases against two retailers in Santa Fe with consent decrees. They didn't admit wrongdoing but agreed to better label their merchandise and pay fines of $10,000 apiece. Attorneys for both retailers said their clients didn't know the jewelry in question was fake.

Authenticity of fine jewelry is crucial to some shoppers, who say they want to support Native American culture and tradition.

But Evie Ausley, a tourist from Los Angeles searching for dolphin jewelry, said she couldn't care less.

"I'm going for the cheap stuff," Ms. Ausley said, "because I can't tell the difference."

Getting The Right Stuff

Experts in Native American art offer several tips for shoppers seeking authentic jewelry:

    * Ask the seller about an item's origin, using specific terms. "Native American hand-made" means that an artist fabricated the entire piece from raw materials; "hand-crafted" means the artist put it together using imported or mass-produced parts.
 

    * Inquire about the materials used. Turquoise is labeled "natural" if it has not been treated beyond a polish; that's typically the most expensive. Lesser-grade stones are often oiled or dyed to deepen their color. If a gem is described as "stabilized" turquoise, it has been blended with plastics.

    * Request a written affidavit about a piece's origin and materials – and save it, along with the receipt. If the item later turns out to be fake, the paperwork will be the key to getting a refund or prosecuting the fraud.
 

    * If you're visiting a pueblo or reservation, don't assume every item for sale is hand-made. Some Native Americans import plastic beads and other lower-quality materials, then hire workers to assemble them into jewelry.
 

    * Consult guides produced by experts. Brochures on distinguishing the genuine from the phony are available from the U.S. Department of Interior's Indian Arts and Crafts Board and from the Council for Indigenous Arts and Culture.

Tiffany's Turning Diamonds Into 'Pipeline' Industry

from the Wall Street Journal

MOGODITSHANE, Botswana -- Tiffany and Co.'s iconic blue boxes have long cradled some of the world's most expensive diamonds. Now, an increasing number contain stones cut by some of the industry's least-experienced hands.

In a windowless factory in this African village, Tiffany is teaching more than 80 workers to transform raw diamonds into gems for Tiffany engagement rings. As novices recently pressed pea-size stones against whirling blades, a visiting Tiffany executive spied a problem.

"You can see the polishing lines!" said Mark Hanna, an Antwerp, Belgium-based vice president of Tiffany's diamond unit. "Tiffany diamonds can't have polishing lines."

Such are the risks for the New York-based retailer as it strives to transform its diamond business amid a decade of industry boom and bust. Tiffany has decided that to preserve and expand its $2.9 billion-a-year enterprise, it needs this factory -- with its high labor costs, low productivity and workers who staged a two-day sit-in this month.

Tiffany's is an extreme example of an industry shift that started during the recent luxury boom. Like most other diamond retailers, Tiffany long bought the vast majority of its diamonds pre-cut and pre-polished from industry middlemen. But with global diamond-jewelry sales soaring earlier this decade, Tiffany and others worried they would soon be fighting over dwindling supplies.



So Tiffany began venturing into an end of the diamond business it spent much of its 172-year history avoiding -- sourcing, cutting and polishing its own diamonds. "We decided to move backward" in the supply chain, says Chief Executive Michael Kowalski.

The retailer invested in mine operators, and in 2002 it began opening cutting-and-polishing plants in Canada, Belgium, South Africa and Vietnam. In the past two years it added similar operations in China and Mauritius. The in-house unit Tiffany founded in 2002 to run these plants, Laurelton Diamonds, now employs 1,100 workers, or 14% of the company's work force. It will supply more than 50% of Tiffany's diamonds this year -- up from 40% last year and none in 2003.

Others have made similar bets. Privately held retailer Graff Diamonds International owns a majority stake in a South African diamond wholesaler and polisher with facilities from Antwerp and New York to Botswana. Suppliers have made incursions on retailers' turf. Mining giant De Beers Group operates retail stores in a joint venture with LVMH Moët Hennessy Louis Vuitton SA. Canadian miner Aber Diamond bought a controlling interest in retailer Harry Winston in 2004. Indian jewelry manufacturer Gitanjali Gems Ltd. transformed itself into a global retailer starting in 2006, buying U.S.-based Samuels and Rogers jewelry chains.

Some industry analysts see risk in running operations that span from mining and manufacturing to high-end retailing and marketing. "[They're] all totally different types of activity -- and one needs tremendous expertise, skills, infrastructure to be truly competitive" in each, says Chaim Even-Zohar, principal of Tacy Ltd., a Tel Aviv-based industry consultant.

Such companies may miss out on savings that result from competition in these specialized areas, Mr. Even-Zohar adds, and may risk using some parts of their supply chain to subsidize others. "Vertical integration sounds great from a promotion and marketing perspective. But more often than not it doesn't make economic sense."

The stakes are especially high now that tight diamond supply has given way to slack demand. The global retail market for diamond jewelry is expected to fall 16% this year, to $65 billion. The U.S. will lose an estimated 900 specialty jewelry stores this year alone, following 1,500 closures last year. Industry players have retrenched: EB Alexander, and Signet Jewelers Ltd., the parent company of retailers Kay Jewelers and Sterling Jewelers, recently stopped buying rough diamonds and polishing them on contract in India, an initiative it started in 2005. A spokesman said the program broke even.

Tiffany is also feeling the pressure. Its inventory has swelled to $1.54 billion this year, up from $1 billion in early 2005. For the first time in recent memory, Tiffany says, it has lowered its prices for diamonds. The engagement rings it sells in the U.S. are priced 10% lower than last year. In all, the company expects a "high teens" decline in sales this year at U.S. stores open at least a year.

Tiffany acknowledges its lack of mining expertise. Although it reaped a large financial gain from its 2004 sale of a minority stake in the 40%-owner of a Canadian mine, it recently disclosed that it wrote off a $12.4 million investment in a small mining project in Sierra Leone. It also has written off loans of about $44 million to a former supplier whose mine has ceased operations. "I think we want to let the miners do the mining," said Chief Financial Officer James Fernandez.

But Tiffany says its cutting-and-polishing strategy is solid. In slow markets, the company says, it can rein in purchases from outside suppliers. When demand returns, it says, it will have guaranteed, lower-cost stocks. "There were many in the industry who thought we were foolhardy," Mr. Kowalski says, but the diamond-cutting operations "have exceeded our expectations."

If there's a weak link in Tiffany's global diamond chain, it's the polishing plant in Botswana. A glimpse into this secretive end of the diamond business shows the high costs, tricky logistics and labor unrest Tiffany is willing to shoulder to maintain its diamond pipeline.

Fancy Goods

Founded in 1837 as a New York stationery and "fancy goods" emporium, Tiffany bought large jewelry collections from French aristocrats fleeing revolution, and in 1878 paid $18,000 -- the equivalent today of $400,000 or more -- to buy the Tiffany Yellow Diamond in Paris. Co-founder Charles Lewis Tiffany gained the nickname "the King of Diamonds."

Even so, by 1991, diamonds accounted for only 17% of Tiffany's sales. To boost profits, the company began pushing diamond jewelry and opening new stores in Europe, Asia and the U.S.

In early 1999, Tiffany's new CEO, Mr. Kowalski, feared surging global diamond demand could hinder the company's efforts to stock its expanding retail network. That July, Tiffany purchased a minority stake in the 40%-owner of a mine in Canada's Northwest Territories.

Tiffany soon saw other openings. De Beers, which long controlled the world's rough-diamond supply, was paring back after years of sparring with European and U.S. antitrust regulators. When De Beers closed its high-tech diamond-sawing and -polishing operation in Belgium, Tiffany bought some of its machinery and hired former workers including Mr. Hanna, now Laurelton's vice president.

The new Laurelton unit built a cutting-and-polishing factory in Canada, bought a majority stake in a Johannesburg plant and acquired what would become its largest plant, a 570-person polishing operation in Vietnam.

But the elusive prize was Botswana, the world's largest producer of gem-quality diamonds since the 1980s. Its Jwaneng Diamond Mine is the world's richest by value of recovered diamonds. Botswana is also among Africa's least-corrupt countries, according to an index by nonprofit Transparency International. Securing a supply of stones here would help Tiffany allay mounting consumer concerns over "conflict diamonds," sold to fund wars or produced under unethical labor conditions.

Tiffany executives made their first reconnaissance trip to Botswana's capital, Gaborone, in 2004. "Do we need to be in Botswana?" Mr. Hanna recalls asking at the time. "We said, 'Yes, but we aren't quite sure how to do it.'"

Sparsely populated and AIDS-ravaged, Botswana has minimal manufacturing infrastructure and few direct flights beyond the continent. Tiffany faced further roadblocks. It couldn't get into mining, which was controlled by a 50-50 partnership between De Beers and the Botswana government. It couldn't buy rough diamonds locally, because the state mining venture sold its production only through De Beers' sales offices in the U.K. and South Africa.

Botswana's cutting operations were also unattractive: A parcel of diamonds polished here costs about $100 per carat, compared with $30 in India, according to industry estimates.

The calculation changed in 2006. Renegotiating its mining deal with De Beers that year, Botswana announced it would license 16 international cutting firms willing to build factories here. In return for training locals to polish diamonds, the government said, these firms would eventually gain the right to buy rough diamonds in Botswana.

Tiffany jumped. It took a majority stake in one of these firms, Rand Diamonds. Rand set up shop in an unmarked factory amid the used-car dealerships and military barracks of Mogoditshane, a former cattle post at the edge of the capital's urban sprawl.

With few Batswana versed in diamond polishing, the company put an ad in the Botswana Guardian newspaper for English-speaking applicants with a high-school-level education. To help winnow its 300 hopefuls, Tiffany/Rand screened for math aptitude. It gave candidates tweezers and timed how fast they could place 40 tiny metal sticks into holes set in a board.

When the factory opened in early 2007, its new hires worked on small and low-cost brown diamonds, overseen by experienced cutters imported on short contracts from India and Mauritius. "We are literally parachuting people in from one operation to the other," Mr. Hanna said.

Bruters and Polishers

Sitting at workstations arranged by task, bruters round the diamond pieces. Polishers add top and bottom facets, looking at magnified images of their diamonds captured by a lens near the whirring polishing wheel.

On the factory floor on a recent afternoon, a worker learning to make facets walked over to a Laurelton-designed training machine to double-check an angle. When he set the diamond in the protractor, a display flashed 35.2 degrees. Over the whir of grinding wheels, Mr. Hanna nodded in approval.

Trainees who learn such basics of bruting and faceting become "qualified" workers in four to six months, Tiffany says. About 30% fail. The rest start handling gem-quality stones, working at a pace of up to one polished diamond a day. Tiffany expects their pace to increase considerably.

For now, the plant's expatriate and local workers produce about 250 finished gems each week, primarily "round brilliant" stones, with 57 light-reflecting facets, for Tiffany engagement rings. About 85% of the stones are deemed "Tiffany qualified," and are forwarded to a Tiffany office in Pelham, N.Y., for grading.

Tiffany doesn't tell its customers where individual diamonds are mined or polished, and declined to say how much of its overall inventory is now sourced and polished in Botswana. "We really want the focus...to be on the quality of the diamond ring, not how it came to be," said Mr. Kowalski, the CEO.

Tiffany's payout came in April 2008, when approved cutting firms gained access to about 15% of the country's raw diamonds, in local sales valued at an estimated $550 million annually by the end of 2010. De Beers began to sell natural diamonds from various mines 10 times a year at bulk sales in Gaborone, where Tiffany's Mr. Hanna is a frequent buyer. Diamond merchandise now represents 47% of Tiffany's sales.

But tensions at the Mogoditshane plant are high. Local workers and managers, whose names were provided by a factory partner, said in interviews that the plant's expat supervisors do too much of the work themselves, slowing Batswanas' advancement.

Complaint Letter

"We are eager to learn about diamonds -- about cutting and polishing and the valuation and stuff like that...[But] it seems certain people are scared [about] sharing information with the locals," said one local who works in a management position. "It's a bit of a clash of cultures."

Workers aired many complaints in an Oct. 7 letter to the plant's managers, reviewed by The Wall Street Journal. Identifying themselves as "local staff," they wrote they hadn't qualified for performance-based raises, but that managers wouldn't show them the data on which those pay decisions were based. They called their work environment "prisonlike," writing that they had been threatened by a Belgian production manager they characterized as "corrupt, racist, vulgar, abusive, bully[ing]" and "not professional."

The next day, all but about five local laborers gathered in the facility's reception hall, refusing to work until the plant's director addressed their concerns, according to the plant's human-resources manager, Meshack Lejuta. The director sent Mr. Lejuta to address the workers. The sit-in stopped in the middle of the next day, Mr. Lejuta says, when he warned his fellow Batswana they could be fired because their strike was unlawful.

Responding to the letter and strike, Tiffany said workers expressed concerns as part of a union organizing effort. It said it intends to address grievances with a union representative, including "any tensions, wrongly characterized as racist, that may have arisen because skilled workers from other African nations and from Asia have been engaged for training purposes."

Mr. Hanna said Tiffany wants local workers to take over diamond cutting, key decisions and training of other locals. Foreign supervisors, whose numbers once nearly equaled those of the factory's local workers, now account for about one in five positions.

The Botswana government is pleased with Tiffany's commitment to train residents, says Akolang Tombale, a government adviser and recently retired secretary of Botswana's minerals department. Other polishing plants are experiencing strikes and slow training initiatives, Dr. Tombale says.

Tiffany, meanwhile, is pushing ahead. While buying raw diamonds in Gaborone's diamond district recently, Mr. Hanna looked out a window and pointed to an area of bush. Tiffany plans to begin clearing land there this year to build a 20,000-square-foot factory. Set to open in 2011, it will employ as many as 275 workers.

Robbers Dressed in Drag Steal Millions in Jewels

PARIS -- Armed robbers -- some disguised as women -- snatched €85 million ($108 million) worth of diamond rings, necklaces and luxury watches from a Harry Winston boutique on a posh Paris avenue in one of the largest jewel heists in history, officials said Friday.

Robbers stole nearly all the jewelry on display at the Harry Winston shop on Avenue Montaigne.

The gang of three or four robbers threatened about 15 employees with handguns and hit some on the head before taking the jewels from display cases from the store near the Champs-Élysées, said a police official, who was not authorized to be publicly named under agency policy. Thieves made off with millions of dollars worth of Sealife Jewelry, Tropical Fish Jewelry, Plumeria Jewelry, Hibiscus Jewelry, Dolphin Jewelry, Whale Jewelry, Sea Turtle Jewelry, Penguin Jewelry, Equestrian Jewelry and Estate Jewelry.

At least two of the bandits were men wearing wigs and women's clothes, the official said. The robbers also spoke a foreign language at times and appeared to know employees' names when they robbed the store before it closed early Thursday at the height of Christmas shopping season.

The brazen theft was among the world's costliest jewel heists. Five years ago, thieves plundered 123 maximum-security vaults in Antwerp, Belgium, stealing $100 million worth of diamonds in the biggest theft in the world's diamond-cutting capital.

"We are cooperating with the authorities in their investigation. Our first concern is the well-being of our employees," New York-based Harry Winston said.

Rhonda Barnat, a spokeswoman for the company, did not provide further details.

The boutique on Avenue Montaigne was closed to the public Friday. Employees who came out for cigarette breaks refused to speak to reporters, and three of the five display windows stood empty of their usual wares.

A Paris judicial official said Harry Winston declared to insurers that the stolen goods were worth €85 million ($108 million). The official spoke on condition of anonymity because the investigation is ongoing.

The Harry Winston boutique was targeted in a similar theft in October 2007, when three people forced employees to open safes and hand over €10 million worth of jewels.

A security monitoring group for the French jewelry industry has reported a 20% rise in armed robberies this year over last, with 132 incidents in the first 11 months of 2008.

In London, police have reported a recent rise in holdups of security vans. Police say it could be linked to the credit crunch and predict the trend to continue as Christmas approaches.

A half-century ago, company founder Harry Winston donated the Hope Diamond -- the world's largest blue diamond and famed for the bad luck that it brought its owners -- to the Smithsonian Institution.

The legendary 76-year-old U.S. company's Web site says stars including Gwyneth Paltrow, Elizabeth Taylor and Madonna, and royalty including Queen Elizabeth II of Britain are among those who have donned its jewelry.

Two vendors at retail shops Max Mara and Louis Vuitton next to or in front of the jewelry store said they did not notice anything of the Thursday afternoon heist until police sirens wailed.