Former Jeweler Sentenced to Nearly Four Years in Prison for Laundering Money by Pawning Diamonds Falsely Reported Stolen
BIRMINGHAM -- A federal judge today sentenced a Vestavia Hills man to three years and nine months in prison for laundering money by pawning a 3-carat diamond that was among a cache of jewels he collected a $2.6 million insurance payment on in 2004 after reporting them stolen in a Mountain Brook Jewelry store robbery.
U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Roger C. Stanton, U.S. Secret Service Special Agent in Charge Craig Caldwell, Vestavia Hills Police Chief Dan Rary and Mountain Brook Police Chief Ted Cook announced the sentence.
U.S. District Judge Karon O. Bowdre sentenced JOSEPH HAROLD GANDY, 65, in accordance with a binding plea agreement the former jeweler entered with federal prosecutors. As part of his sentence, Gandy must pay $20,000 in restitution to the jewelers where he pawned the diamonds. He also must forfeit to the government nearly all the diamonds and jewelry the FBI recovered from him, which includes a rare Blue Diamond worth at least $620,000. The Blue Diamond was among about $1.5 million worth of diamonds and jewelry Gandy falsely reported stolen in 2004. In 2013, Gandy sent a friend to pawn some of those diamonds he had reported stolen.
The U.S. Attorney's Office charged Gandy in October with one count of money laundering for pawning property worth more than $10,000 that he obtained through a criminal act, wire fraud, which he committed when he submitted an insurance claim on diamonds falsely reported as stolen. Prosecutors also charged Gandy with one count of being a convicted felon in possession of firearms for 99 weapons seized in a search of his Vestavia Hills home in November 2013. Gandy is prohibited from possessing weapons because of a 1989 federal mail fraud conviction. Gandy pleaded guilty to both federal counts in November.
Vestavia Hills Police seized the 99 weapons at Gandy's house. The state is prosecuting him on weapons charges and on drug charges based on prescription drugs also seized at his residence in the November search. A state court hearing is scheduled later this month. The Vestavia Hills police are handling forfeiture of the firearms.
According to court documents, Gandy's federal crime unfolded as follows:
Gandy was an owner and the operator of Denman-Crosby Jewelry Store in Mountain Brook in 2004. In December of that year, he reported that two unidentified men robbed the store at gunpoint. At the time, Denman-Crosby was promoting a loose diamond sale for Christmas. It had many diamonds and other jewelry in on consignment from jewelers in New York and elsewhere. The store carried a $2.6 million insurance policy. Gandy had increased the coverage amount with XL Specialty Insurance Company a few weeks before the robbery.
In January and March of 2005, Gandy used interstate wire transmissions to submit insurance claims from the robbery. He included a detailed inventory of jewelry worth about $2.8 million that he reported stolen. XL Specialty paid the policy's limit of $2.6 million.
In July 2013, Gandy began sending a friend to jewelry stores in Jefferson County to pawn diamonds he had reported stolen in 2004. The first effort ended when the jeweler requested documentation on a 1.59-carat diamond, mounted in a platinum setting, and attempted to examine the stone closely. The concern was that the diamond might bear a laser inscription useful in tracing its history. Subsequently, Gandy examined 10 to 12 diamonds under a microscope and selected stones that bore no inscription.
On July 26, 2013, Gandy sent his friend to a Birmingham jewelry store to pawn a 3.01-carat emerald-cut diamond he said was worth about $43,000. Gandy said he wanted at least $15,000 for the stone. The store accepted the diamond in exchange for a $12,000 loan. The diamond was one Gandy reported stolen in the Denman-Crosby robbery. He gave his friend $2,000 for making the transaction.
Between August and November of 2013, Gandy's friend pawned two more diamonds: a 3.45-carat cushion-cut diamond for $8,000; and a 2.16-carat round diamond for $2,000. Both stones were on the stolen inventory list Gandy provided the insurance company in 2005. Gandy gave his friend $1,880 after receiving the $8,000 for the 3.45-carat diamond.
The FBI, Secret Service, Vestavia Hills and Mountain Brook police departments investigated the case. Assistant U.S. Attorney George A. Martin Jr. is prosecuting the case.