Nevertheless, officials from the gem industry and the Tanzanian government say they have crafted measures to ensure the legitimacy of the gem's trade.

"The mere suggestion of the gemstone's illegitimacy is a cause for serious concern, and especially if that suspicion is somehow linked to terrorism," said Matthew Runci, president and CEO of Jewelers of America Inc. "The products are wonderful, but, without integrity, they simply cannot be consistently sold."

The American Gem Trade Association's wholesale trade show at the Tucson Convention Center provided an ideal opportunity for a tanzanite summit of major industry stakeholders, including miners, dealers, manufacturers, suppliers and retail jewelers.

Highlights of the Tucson Tanzanite Protocol were announced to a crowd of more than 300 people Saturday at a conference room in the convention center. Edward Maokola-Majogo, Tanzanian minister of energy and minerals, was one of several speakers to address the crowd, which included more than 15 Tanzanian representatives.

The controversy surrounding the blue-violet gem mined only in a 5 square-mile region of Tanzania began in November when The Wall Street Journal reported that Islamic extremists loyal to the al-Qaida terrorist network were smuggling tanzanite bought from miners and middlemen to Dubai and Hong Kong.

In the wake of The Wall Street Journal story, Tiffany & Co. and other U.S. jewelry businesses suspended sales of tanzanite. The United States accounts for 80 percent of the tanzanite market, and prices for tanzanite have fallen by nearly 40 percent since the U.S. market shut down.

Mike O'Keefe, officer of East African affairs for the State Department, said he was pleased to announce that a thorough investigation found no evidence that tanzanite was supporting al-Qaida or any other terrorist group.

But he did concede that the trade of tanzanite is "somewhat chaotic" and that an al-Qaida operative sold a small amount of tanzanite to help finance the 1998 attack on the U.S. embassy in Nairobi, Kenya.

"What the press did was make the conclusion that, because a certain percentage of the trade is smuggled and because this al-Qaida operative had sold a small amount in 1998, it was now funding al-Qaida," he said. "Our resources are a hell of lot bigger than the press. We have a billion-dollar intelligence community that got to the bottom of this."

O'Keefe said the tanzanite saga has acted as a "wake-up call for the whole gem industry."

Gemstones of all varieties provide criminals and terrorists with an ideal method of transferring and laundering money because they're high in value, hard to trace, very light and easy to move across borders.

"It's a lot harder to move several thousand dollars in cash than several thousand dollars in gems," O'Keefe said. "That's why I think the Tucson protocol is a truly significant achievement that could be a model for the whole gem industry, which presently has some pretty weak regulations."

The steps outlined in the protocol include detailed analysis of the tanzanite market chain to determine what improvements can be made to prevent possible abuses; a system of warranties provided in writing that states that the tanzanite bought, sold, cut, polished, set or otherwise traded came from legitimate sources; and a mandate that all subsequent traders should accept only tanzanite that is accompanied by the appropriate written warranty.

Maokola-Majogo pledged that the Tanzanian government would conduct sweeps of mines to ferret out illegal miners and dealers and develop a more comprehensive system to monitor the flow of tanzanite.

Tanzanian officials reported that their exports of tanzanite totaled $16 million in 2000, while the United States sold $380 million in the same year. That comparison has been used by the press to assert that up to 90 percent of the tanzanite mined is smuggled, an assertion that is false, said Cecilia Gardner, executive director and general counsel for the Jewelers Vigilance Committee.

"They compared exports of uncut tanzanite to retail sales of finished tanzanite jewelry in the U.S., and that's simply an inaccurate comparison, like comparing apples to oranges," she said.

* Contact Thomas Stauffer at 573-4197 or at stauffer@azstarnet.com.