The pear-shaped diamond was stolen in 2003 and made its way through various sellers before ending up purchased for $175,000 by Saddle River resident Frank Walsh.
The pear-shaped, 7.35-carat diamond was stolen in 2003. (Photo courtesy of William Strasser) SADDLE RIVER - A federal appeals court has ruled a New Jersey couple can't sue to keep a stolen 7.35-carat diamond, even though it was given as a gift from mother to daughter, the couple's attorney confirmed on Monday.
The pear-shaped diamond was stolen in 2003 and made its way through various sellers before ending up purchased for $175,000 by Saddle River resident Frank Walsh, according to previous reports.
In 2012, Walsh's wife gave the diamond as a gift to their daughter, Suzanne, and son-in-law Steven Zaretsky.
When the Zaretskys tried to have the diamond insured, a jeweler discovered the gem had been stolen in 2003 by celebrity stylist Derek Khan, according to reports.
Khan borrowed the diamond for a fashion shoot and pawned the gem instead of returning it, according to court documents.
According to reports, original owner, the William Goldberg Diamond Corp., called police and later reported the theft to the Gemological Institute of America, which maintains a database of stolen jewelry.
In 2014, a federal judge sided with the Zaretskys, ruling that they were the stone's rightful owners, despite the diamond having been previously stolen.
But last week a three-judge panel serving on the Second Circuit Court of Appeals in Manhattan decided the lower court erred because Khan was a stylist and not a merchant under New York's commercial code.
Therefore, he could not legally sell the diamond and the Zaretskys could not legally hold title to it, the judges ruled in a 32-page decision.
Court rules couple can keep diamond
The judges determined that only a person who "deals in goods of that kind" can be considered a merchant -- not Kahn. The terms of the consignment agreement denied Khan the authority to sell the diamond, the judges decided.
"Obviously the court had a different opinion than (the lower court judge)," William Strasser, who represents the Zaretskys, told NJ Advance Media on Monday. Strasser said he plans to appeal the decision on behalf of the Zaretskys.
The attorney questioned how the diamond could have passed through other jewelers without being detected as stolen before it ended up in his clients' possession.
Khan, who made his name by borrowing high-end jewelry in exchange for it being worn by celebrities, was eventually arrested and charged with stealing $1.5 million in jewelry. He spent two years in prison and is now working as a jeweler and personal shopper in Dubai, according to various news reports.
Anthony G. Attrino may be reached at tattrino@njadvancemedia.com. Follow him on Twitter @TonyAttrino. Find NJ.com on Facebook.