Well, if they aren't authentic gemstones than this guy is either really stupid or really brave, since he's looking at prison time for fraud.
The pipes themselves look to me like they've been expertly carved, and they certainly aren't any less attractive than many other pipes I've seen produced by famous carvers for thousands of dollars.
I wouldn't pay that kind of money for ANY pipe, personally...I feel silly for dreaming about paying 3 or 4 hundred for a birthday Dunhill pipe one day....But there are people (often in China and Japan) who buy pipes like this. Believe it or not, that's where the pipe market is growing the most -- the Far East. I remember hearing C. Tarler at C&D explain one time that they shipped thousands of tins to China at a time.