Sales of an African gemstone to be featured at the upcoming 2002 Tucson Gem, Mineral and Fossil Showcase have been linked in news reports to the al-Qaida terrorist network.

One of the reported links came through a former Tucsonan who worked for Osama bin Laden.

But industry officials preparing for the Tucson gem show - one of the biggest in the world - say the reports by The Wall Street Journal are false and are hurting the trade.

Gem-industry officials are planning a "tanzanite summit" in Tucson to counter a retail backlash caused by the allegations of terrorist links.

The Journal reported in November that Islamic extremists loyal to bin Laden were buying tanzanite stones from miners and middlemen, smuggling them out of Tanzania to free-trade havens such as Dubai and Hong Kong. The newspaper quoted local miners and government officials.

Last week, the Journal reported that a diary of a personal secretary to bin Laden reveals that al-Qaida may have been using the popular blue gemstone to help finance its operations as early as 1995.

The newspaper cited a day planner confiscated by the FBI from Wadih el Hage, convicted of conspiracy and sentenced to life in prison last year in the 1998 bombings of U.S. embassies in Kenya and Tanzania.

El Hage lived in Tucson in the mid-1980s and married an American Muslim woman from Tucson.

Gem-industry and Tanzanian officials have denied any connection between tanzanite sales and terrorism.

"I don't believe that to any degree," said Douglas Hucker, executive director of the American Gem Trade Association in Dallas.

He said the entries in El Hage's diary indicate he may have bought and tried to sell some tanzanite, but that doesn't mean there's an underground tanzanite supply network benefiting terrorists.

"This man was not in the gemstone industry - he may have purchased some tanzanite and may have tried to sell it, but he didn't have much success," Hucker said.

According to the Wall Street Journal, El Hage's planner shows that his first efforts six years ago to become a gem supplier to European jewelers failed.

"The Tanz (pieces) were not identical," El Hage - then based in Nairobi, Kenya - wrote after a gem dealer he visited in Antwerp, Belgium, Europe's diamond capital, turned him down. "He wants to make a pair of earrings, a ring and necklace. It has to have same color."

He also wrote that London jewelers were "either not interested or want different kinds (of gemstones) or have own suppliers." But El Hage eventually found a London dealer in "Tanz," though it was unclear whether he was able to sell stones to the company, the Journal reported.

Hucker said the association has been working with the National Security Council and the State Department to investigate the terrorism allegations, but nothing has been found to corroborate a tanzanite-terrorism link.

The National Security Council, the CIA and the Customs Service say they are investigating possible ties between tanzanite and terrorism but haven't come to any conclusions, the Journal reported.

"We don't know much about this yet, as we've only just started to look at the issue," said Alan Eastham, an expert on "conflict diamonds" - gems whose proceeds back wars in Africa. Eastham was recently appointed by the State Department to look into the tanzanite matter, the Journal reported.

Officials of the Tanzanian Mineral Dealers Association, which represents 90 percent of the tanzanite dealers in the East African country, issued a sharp rebuke of the Journal's story in November. The Journal has stood by its story.

Tanzanian government officials, U.S. State Department officials and gemstone dealers plan a private meeting in Tucson Feb. 8 to discuss the issue, Hucker said. Afterward, the group plans to report some of its findings publicly, he added.

Tanzanite will be featured along with other African gemstones and minerals at one of the showcase's major retail shows, the Tucson Gem & Mineral Show, Feb. 14-17 at the Tucson Convention Center. The gemstone will also be available at several other individual shows.

William Hodgson, president of the Tucson Gem and Mineral Society, said he knew nothing about the recent tanzanite controversy.

"It's a total shock and surprise to me,'' he said, adding that this year's African gem and mineral theme was chosen more than two years ago.

Alrene Hibben, a former secretary and board member of the Tucson Gem and Mineral Society, said Friday night that she had read the Wall Street Journal article and was "blown away.''

She said some dealers mentioned the tanzanite controversy when they met earlier this month in Quartzsite for a swap-meet-style gem show that serves as a prelude to the Tucson shows.

"At the show, we were talking about The Wall Street Journal article, and a Pakistani dealer told us, 'You can't believe how much stuff goes through Dubai on behalf on bin Laden,' '' she said.

Overall, 20 dealers have listed tanzanite as one of the minerals they will be selling at the various wholesale and retail shows.

One tanzanite dealer planning to attend said he doubts the terrorist allegations and that the news has hurt business.

"I don't think this is true," said Harish Daga, owner of Gems International of California in Los Angeles.

"I was at the mines (in Tanzania), and I don't think anyone was involved in that."

Daga said he doubted that tanzanite sales could significantly support terrorist operations, noting that the gem represents a tiny fraction of overall sales.

Last year, the retail trade in tanzanite jewelry in the United States - the main market for the stone - was estimated at $400 million.

Tanzanite can command thousands of dollars per carat on the retail market.

Since the Journal first reported that Islamic extremists in Tanzania had penetrated the trade, three of America's largest jewelry retailers - Zale Corp., QVC Inc. and Tiffany & Co. - have suspended sales of tanzanite.

The boycotts have damaged the gem's export trade, say tanzanite miners and dealers.

Daga said tanzanite sales have dropped 30 percent to 40 percent and prices have dropped about 30 percent since the Journal reported the terrorist allegations.

"What really happened with tanzanite in the U.S. was the Home Shopping Network," said Steve Rosley, a Chicago gem dealer. "It's more of a well-known commodity now, and I think that's taken the price up."

Rosley said he hadn't heard of the possible connection between the gem and al-Qaida.

"It kind of reminds me of people who sell ivory," Rosley said.

"If they bought it when it was legal, then they can sell it, but if they're buying it now, they're in trouble. I would be very apprehensive about buying tanzanite if they proved that."

* Star reporters M. Scot Skinner and Thomas Stauffer contributed to this report.
* Contact David Wichner at 573-4181 or at wichner@azstarnet.com.