I have a wealthy client with whom I had/have a good relationship. After completing a job above and beyond their expectations they said they felt they needed to do something to repay me. I told them not to worry about it but they insisted. Later on in the day they came into our office and made a bit of a spectacle about the "miracle" I performed and in front of everyone gifted me a a well known, high end watch.
Everyone in the office including myself were absolutely floored. I insisted that I couldn't take the watch and after a lot of "no let me give you something/no please just take it" he agreed to let me offer something for it. Later on that day during a break I decided to go to a local jewler (our office is across the street from one) to get a pricing on the watch. I was hoping this to be a "low end" model of this high end brand and thus perhaps be able to pay him at least something towards this outrageous gift (to ease my conscience as I couldn't just accept it for free).
The jewler looked at it and immediately told me it was a fake, and an "obvious" one at that. I've since gone back to the office and I'm really not sure what to do or what to say. Considering this was a wealthy client, there was no reason for me to consider it being a fake (especially given the performance that was given). I'm even starting to think that they were potentially trying to con me out of some money for this fake watch (they off handedly mentioned a "payment plan" after our talk).
I have no idea what I should do. I'll be back in the office in a couple of days and I'm not sure if I should just return it quietly and make up something as to the reason or if I should call them out on it because if I don't the whole office will be left with the impression they did something which they did not do?
Note: I suppose it's possible they didn't realise it's fake, but having been thinking over things I wouldn't exactly class this client as an honest person.
EDIT: Regarding company policies for accepting gifts: We don't really have any. My boss was there when it happened and like everyone else sort of just patted me on the back and said well done. So, unfortunately I can't really use the excuse of "company policy dictates I can't accept this gift".
EDIT2: Regarding offering money for the watch and culture: I did not intend to give them the full amount for the watch. It's hard to try and summarize a situation as you'll no doubt miss details others thought were key. In this case I was hoping to hear the way was relatively cheap so then I could make some token offer. This isn't usual in my culture, to be honest I don't know what I was really thinking. Looking back on it, his acceptance was potentially just to end the conversation and then later on refuse it when I offered.
As for the culture, yes this exchange is very much a script but I really did not want to accept it. Such a watch (from the little I know of them) could very easily have been worth a year or two's salary, probably more.