Missing-Ruby Saga Is Talk of Jewelry District : Commodities: The valuable Burmese gem that a merchant says was stolen from him in a consignment deal was recovered in an Encino parking lot. FBI records trace it on a roundabout journey.

Jewelry merchant Peter Morlock makes it his business to keep an eye out for precious gems on the cheap, and last winter he found a deal he couldn’t resist: A group of men offered to sell him the same $1.2-million Burmese ruby that was stolen from him in 1990.

Forget profit. Morlock was just hoping to get even.

So he called police--and in a sting operation last month five men were arrested on suspicion of conspiring to sell the 6.76-carat stone prized for its large size and deep blood-red color.

Among those arrested was jewelry broker Ali Reza Paravar of Woodland Hills, who had the stone in his pants pocket when police stopped him in an Encino parking lot.

The case of the ruby--which apparently passed from hand to hand to hand before completing the circle back to Morlock--now is the talk of the close-knit cluster of jewelry markets in downtown Los Angeles. Scheduled for a hearing next month, it provides a rare glimpse inside the nation’s second-largest jewelry district, a place where handshakes are the preferred way of doing business and where police and prosecutors are often loath to intercede, insiders say.

“It’s an interesting, interesting group of people you don’t want to mess with,” said Andrew Vorzimer, an attorney who has represented dozens of jewelry district clients, including Morlock. “There’s a lot of sleaze that goes on down there and causes legitimate business people to suffer.”

The saga of the ruby began in 1990, when Peter Morlock was sent to Los Angeles to represent his father’s Germany-based jewelry business. He was 23 at the time.

Morlock declined to comment for this article, but the ruby’s twisted journey is described in FBI records, court papers and other public documents.

With the ruby and other gems in tow, Morlock opened an office in the International Jewelry Center, the 16-story centerpiece of Hill Street’s jewelry district, bent on making his father proud. “He was trying to make a name, trying to make a reputation,” Vorzimer said.

According to the lawyer, Morlock soon became friendly with Ron Levi, a charismatic former diamond store salesclerk--also 23 at the time--who had recently opened his own gem shop a block away.

As an outsider in the district, Morlock needed contacts and trusted Levi, who bragged about having “connections to Israel” that would make it easy to move even hard-to-sell gemstones.

A few months after their first meeting, Morlock gave Levi three gems, including the ruby, on consignment, according to police reports. The two other gems, a smaller ruby and a sapphire, are still missing, the documents say.

Consignment arrangements, in which brokers give other dealers merchandise to sell for them in exchange for receipts called “memos,” are the standard procedure in the jewelry industry, brokers say. Often, such deals, which are usually for two weeks or 30 days, are typically sealed with a handshake and nothing else.

If the stone is sold, each gets a share of the money. If not sold, it is to be returned.

“Everything here is based on trust, and sometimes people take advantage of that,” said one broker, who like others interviewed for this story requested anonymity for fear of losing business.

In the case of the Burmese ruby, Morlock told authorities that the consignment was for three days in September, 1990.

Then the tale gets fuzzy.

Even the value of the stone, described by Vorzimer as “the Mona Lisa of rubies,” is the subject of debate. While Morlock told police that the stone has a retail value of $1.2 million, its appraised wholesale value is about $527,000. And though Burmese stones--because of their rarity and color--are more valuable than other rubies, Morlock has declined to talk about the origin of the stone, saying only that it was “a trade secret,” according to court records.

As for what happened to the ruby, about all that’s clear is that when Morlock tried to get the stone back, Levi didn’t have it. But tracing the path through all the contradicting statements in FBI reports is like trying to follow the pea in the old shell game. First it’s here, then it’s not.

According to a statement that Morlock made to the FBI, Levi at first told him that he gave the stone to another jeweler, who in turn gave it to Levi’s brother--also a jewelry broker.

But Morlock told the FBI that Levi later offered a different sequence of events--saying he tried to sell the ruby to Paravar. Under this scenario, as described in the FBI reports, Paravar kept the ruby and refused to return it until he was paid for several diamonds he had given Levi on consignment.

Yet another version was offered by Paravar. After first telling the FBI that he had never seen the ruby, he told agents that he did, indeed, receive it on consignment--only to return it one hour later. During the past three years, Paravar has at various times claimed that Levi owed him between $27,000 and $1.6 million in broken consignment arrangements, according to documents and interviews.

In a recent interview, Paravar, a soft-spoken man who spent a decade as an engineer in the oil industry before switching to the jewelry business in 1985, said he was an unwitting victim.

“I am a naive person,” he said, explaining why he had originally trusted Levi. “He got close to my family, came to my house for dinner. He was a very nice, thoughtful person who appeared to be honest.”

His attorney, Jerry Kaplan, said Paravar has done nothing wrong. “My client received the ruby as collateral for a debt owed to him by Levi. He wanted the diamonds back, but he has a right to the proceeds of the ruby because it was given to him in good faith.”

Though the consignment system seems risky when dealing such valuable goods, brokers say it is not unusual for more than half a dozen people to handle gems before a buyer is found.

“If something is hard to sell, it might pass through 10 or 11 people’s hands,” said one broker, who did not want to be identified. “You win some, you lose some, but you don’t do business with people you don’t trust.”

“Most people in this business are honest and honorable,” said Ralph Shapiro, a longtime Los Angeles jewelry broker and president of West Coast Diamond Club, which helps resolve disputes between dealers. “But in any business you’re going to get that certain element that tries to take advantage of the rules.”

In October, 1990, just three weeks after Morlock handed over the ruby to Ron Levi, he filed a civil suit in Los Angeles Superior Court alleging breach of contract against Levi and several others, claiming they had stolen the gem.

Filed with the lawsuit was a statement from a broker, who did not identify himself, that claimed the ruby’s disappearance was part of a larger scam in which Levi and others netted $3 million by entering into consignment arrangements they never intended to honor. The scheme worked, according to the broker, due to the “marginal ethics and borderline illegality of many L. A. diamond dealers and their methods of operation.”

The broker also blamed the “insular nature” of the diamond business, writing: “If there had been an exchange of information about Ron Levi . . . it would have been obvious to all concerned that Levi couldn’t sell or pay for what he was getting,” according to the court record.

Two days after filing the civil suit, Morlock went to the police. Accompanying him were 11 other brokers, not party to the lawsuit, but who claimed that Levi had swindled them out of about $1 million after Levi had undersold jewels they had given him on consignment and then claimed the gems had been stolen.

As the Los Angeles Police Department began investigating Levi’s conduct, he disappeared, according to police records. Later, the Los Angeles County district attorney’s office declined to file charges, citing a lack of evidence.

“To prove grand theft, you have to prove intent,” said Deputy Dist. Atty. Ed Feldman, head of the district attorney’s fraud division. “And in these cases, especially if it’s done on memo, that’s very hard to do.”

In November, 1990, the FBI investigated Levi and arrested him on suspicion of transporting stolen property across state lines. Levi spent a single night in custody, then was freed after the federal prosecutors did not file charges, again citing lack of evidence, according to records.

Two years later, in September, 1992, Morlock’s lawsuit over the ruby was dismissed when Morlock, for reasons that are unclear, failed to make a court appearance.

He did not forget the gem, however, and this February it virtually fell in his lap.

According to a police report, Morlock made the rounds of the jewelry district, asking about the stone. Eventually, he met three men--Antranik Harbouian, Behzad Saba and Rasekh Siddiqui --who said they knew of a similar Burmese ruby.

The men allegedly told Morlock that for a $35,000 fee, they would arrange to sell him a 6.76-carat Burmese ruby for $325,000. According to a police report, Morlock replied that the ruby had been stolen--from him.

After a July 12 meeting in which he became convinced that the ruby was the same one he had lost three years earlier, Morlock arranged a second meeting and called police, who equipped him with a microphone.

On July 19, Morlock met the men in an Encino parking lot, where they drove to the nearby home of a fourth man, Abdul Rasheed Usmani. After the meeting, police arrested all four men and picked up Paravar in a nearby parking lot with the ruby in an envelope in his right front pants pocket.

Paravar told the arresting officer: “I don’t know what’s in the envelope. Someone gave it to me,” according to the arrest report.

Harbouian, Saba and Siddiqui, who have pleaded innocent to charges of receiving stolen property, say they were simply acting as middlemen to help Morlock recover the ruby. Usmani says he was simply extending a courtesy to Siddiqui, his brother-in-law, by allowing them to use his house for a meeting.

If convicted, the men face prison sentences ranging from three to seven years.

Each denies knowing that the ruby was stolen.

Meanwhile, Levi’s whereabouts remain a mystery. He turned up in Dallas in 1991 where he was again investigated by the FBI--but not charged--for allegedly selling gems on consignment and then claiming they were stolen, according to federal prosecutors there.

Levi is not being sought by Los Angeles police for the Burmese ruby theft.

And for that gem, it resides at the moment at police headquarters in downtown Los Angeles, owned jointly by Morlock and an insurance company. The company lays partial claim to the gem because it paid Morlock more than $200,000 when he reported it stolen, his attorney said.

Vorzimer says Morlock now would like nothing better than to buy out the insurance company’s stake--at the moment he cannot afford it--and forget about the ruby’s tumultuous past.

“It was an extremely emotional and traumatic experience for him,” Vorzimer said. “Getting it back would help.”