Diamonds are a girl's best friend—unless, of course, her boyfriend is accused of smuggling them. Dynasty star Joan Collins, 50, found herself between such rocks and a hard place when reports surfaced that her latest beau, Peter Holm, 36, was allegedly involved in a scheme to sneak some ice into his native Sweden in 1975. Swedish officials confirm that an arrest warrant for Holm was issued "in his absence" when he failed to show for a 1976 court hearing to face charges (along with 12 others) in a $2 million smuggling scheme. Holm has denied the accusations and Joan reportedly still considers her younger man a gem.

"It would not be libelous to say Holm was a fugitive from justice," says a colleague of Holm's Swedish prosecutor. But, he adds, "He's not any Al Capone." Lars Lindros, a music promoter who performed with Holm in a Swedish pop group in the mid-'60s when Holm (real name: Peter Gustaf Sjöholm) was a teen star, says Holm was in love with a Gothenburg girl who involved him in the diamond mess. "I don't think Peter knew at first the diamonds were smuggled," Lindros maintains. "Later on I think he was subjected to pressure." The prosecutor agrees Holm "was largely a victim of circumstances."

Holm, who, after leaving Sweden, lived in Paris before moving to England, met Collins at a London party four months ago. This fall he moved into the Beverly Hills home that Collins has continued to share with daughter Katy, 12, since the actress' separation from third husband Ron Kass earlier this year. Holm runs a business in England called Glaze Trade that transfers photographs to dinner plates and is said to own a computer business in the U.S. Though acquaintances describe him as "charming," the recent revelations have left some friends wondering if Holm isn't taking advantage of Collins. "He seems to care very much about her," says an acquaintance, "but now everyone is wondering if there are any other skeletons in his closet."