By Adriana Brasileiro

SÃO JOSÉ DA BATALHA, Brazil (Thomson Reuters Foundation) - Rare neon blue Paraiba tourmalines have adorned jewelry worn on the red carpet by Hollywood actresses Emily Blunt and Salma Hayek and U.S. singer Taylor Swift.

But behind the dazzling gemstones an ugly story is emerging of crime, poverty and worker exploitation akin to slave labor, according to investigators in Brazil's northeastern state of Paraiba where the world's most expensive jewel is found.

They say many of the precious stones were mined in dangerous conditions by underpaid workers in Brazil's north east, the poorest and most drought-prone area of the country where up to 60 percent of people live in poverty in some communities.

Tourmaline miners toil deep in miles of haphazardly built, unsafe tunnels at risk of collapse, breathing dust that can cause severe disease.

The Paraiba tourmaline is so rare it is only found in three mines in a remote area where a high copper content gives the stone its unusual neon bluish tone.

Paraiba tourmalines sell for about $16,000 per carat, compared with about $6,000 for diamonds.

But all three mines have closed in the past year as investigators bring criminal charges against the two biggest miners - Parazul Mineração and Paraíba Tourmaline Mineração.

The third mine was accused of breaching Brazil’s mining laws by mining outside its concession area. It faces administrative charges of illegal mining and was closed down as well.

Investigators say most tourmalines in circulation are the product of criminal enterprises reaping huge profits by endangering workers for low pay at unsafe mines - with the closure of the mines sending prices for the gems even higher.

"Most Paraiba tourmalines in circulation have some trace of criminal activity," Fabiano de Lucena Martins, a federal police investigator, told the Thomson Reuters Foundation. A federal investigation has traced all production of Paraiba tourmalines since 2009 to illegal mining, he said.Marcos Antonio Ferreira de Almeida, a prosecutor at the labor ministry in Paraiba, said investigators had found most miners were paid low wages off the books at all three mines.

Forced labor charges could be filed, he said, adding that the region has gone largely unnoticed as investigations have focused on slave labor cases involving larger numbers of workers such as those in the pig iron and sugar cane industries.

EIGHT CHARGED

Police have charged eight people, including two mine owners, a state congressman and an Afghan gemstone trader, with illegal mining, racketeering, money laundering and tax fraud, according to court documents seen by the Thomson Reuters Foundation.

For decades, Parazul and Paraiba Tourmaline had licenses to conduct scientific research but not to extract gemstones for commercial use from their mines. The research allowed them only to extract a small quantity of minerals, including gemstones, to test for various elements.

But one of Parazul's partners said in a sworn statement that is part of a plea bargain agreement seen by the Thomson Reuters Foundation that the mine was producing the coveted gemstones.

The partner, Ranieri Addario, confirmed that Parazul mined tourmalines illegally for years, according to the statement made public on May 27.

As well as being accused of illegal mining, Parazul's owner Ubiratan Batista de Almeida has been charged with bribing the former director of Brazil's mining agency (DNPM) $500,000 for a license to explore for tourmalines, Martins said. The agency's former director was fired.

But Valberto de Azevedo Filho, a lawyer representing Almeida, said the company never explored the mine commercially, only for research purposes, and denied his client bribed Brazil's mining authority to obtain an exploration license.

Paraiba Tourmaline Mineração did not reply to telephone messages requesting comment.

The third mine, owned by the company Heitorita Turmalinas da Paraiba, was the only concession with a license to mine for tourmalines commercially.

   

    DANGEROUS AND BACK-BREAKING

The mines sit at the top of a hill in São José da Batalha, a tiny town hidden down an unpaved, bumpy road off Paraiba's main highway in an arid region of scrubby vegetation and cacti.

The area is covered in white dust from mines extracting kaolin, a fine clay used in china and porcelain.

Miners dig based on evidence of tourmaline they find inside the kaolin.

Workers from the three mines reported toiling in extreme heat for up 12 hours in shafts 80 meters (260 ft) deep.

Pedro Soares da Silva said he started working in the tourmaline mines at age 12, and it nearly killed him.

The work was so dangerous and back-breaking he had to stop at age 35, he said. He suffers from asthma so severe he cannot even help fetch water from a well near his home nor help his father with odd jobs.

He has been diagnosed with depression.

"They squeezed the life out of me," he said in an interview.

    He tells his story from a small brick house he shares with his parents, a sister and her three children. Thin curtains separate the living room from a sleeping area and kitchen where the women cook a meal of manioc on a wood-fired clay stove.

    "When labor inspectors came, they would make us hide," he said. "To them, I was nothing more than an animal.

"Now I know I had a fortune in my hands, and I never stole anything."

    Mining companies producing tourmalines skirted taxes, especially a particular levy that was designed to compensate communities for the impact of mining activity, said João Raphael Lima, the federal prosecutor leading the case in Paraiba.

"The community never benefited from the Paraiba tourmaline trade because miners always acted outside the law," Lima said. 

   

    FOREIGN BUYERS

    He said the stones were sold abroad to jewelers such as Tiffany & Co and Dior, with certificates of authenticity.

    Dior said it had bought Paraiba tourmalines from "one of the very best European stonecutters" for use in its jewelry.

    It said it had for years been involved in tracing the origins of the precious metals and stones used in its jewels, adding it was also part of an OECD initiative on supply chains.

    Tiffany & Co said it uses Paraiba tourmalines from Brazil in its jewels but declined to comment on the allegations of tax fraud and poor working conditions.

    In recent years, the Brazilian gemstones found their way to U.S.-based designers such as Lorraine Schwartz, who created the jewelry worn by Emily Blunt and Taylor Swift, and Martin Katz, whose earrings adorned Salma Hayek on the red carpet.

    Schwartz declined to comment. Katz said the cases against the mines were a tax issue, with mine owners reporting the value of the mined Paraiba material at far lower value.

    "As Paraiba made its way into the eye of the press, attention was brought to their current value, which had appreciated tremendously," Katz said in an email.

    "That, most likely, ignited the investigation by tax authorities who wanted their share of the new value and to recover tax revenues for the past years when the market values were still being under-reported."

    Publicists for Blunt, Hayek and Swift did not reply to emails or telephone calls requesting comment.

    The closing of the mines has driven prices up for the coveted gemstones amid dwindling supplies and sent buyers looking elsewhere.

    "The shutdowns have definitely disrupted business, and many buyers are getting similar stones in Africa," said one gem trader who asked not be named due to security fears. "But the Paraibas from Brazil are superior in quality and larger in size, so top buyers continue to look for them, for special pieces."

    At the tourmaline-rich hillside, meanwhile, police conduct spot inspections to check that miners are complying with the closures ordered by the court.

A rickety winch with a rusty cage that used to lower workers into the dark holes lies in disuse.

    José Silvestre, a caretaker at the mine, tells police the mine has been visited by potential investors on the lookout for opportunities if the courts permit the mines to reopen.

    "It looks like they are just waiting for the dust to settle," he said.

(Reporting by Adriana Brasileiro, Editing by Ellen Wulfhorst. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights and climate change. Visit http://news.trust.org)