News of GIA scandal hits national press

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News of GIA scandal hits national press

By By Susan Thea Posnock

December 20, 2005

The lab scandal that has rocked the diamond industry and the Gemological Institute of America (GIA) over the past several months hit the big time today, as both The Wall Street Journal (in a front-page article) and The New York Times covered the story in the mainstream media.

Reportedly, GIA is in talks to settle the lawsuit that started it all, filed by diamond dealer Max Pincione last April. Pincione's claim that GIA upgraded diamonds for bribes eventually led to the dismissal of four employees at the New York lab, and new top management at the lab and the institute.

While there has been much talk in the trade press about what some have dubbed "Certifigate", the consumer press didn't pick up on the story until very recently, when New York Post columnist Cindy Adams made a brief mention of it in her gossip column last week.

Recently appointed GIA chairman Ralph Destino spoke about GIA's situation with both the Journal and the Times for the stories. After they hit on Tuesday, NATIONAL JEWELER spoke with Destino, who says the trade press has exaggerated the scope of the scandal.

"The investigation was a very intensive investigation, and we looked at thousands and thousands of reports and interviews and patterns of behavior. It all ended up with four people out of 700 graders [in the New York and Carlsbad, Calif. labs]," he says. "Four people there violated the code of ethics and they were terminated. And we found an absolute handful of lab clients that violated the code."

While some may view the story reaching the mainstream press as a negative, Destino says it allowed him to address what he called the "mini-tude" (as opposed to the "magnitude") of the matter.

"The trade has inflated the matter," Destino says. "It has blown it up way beyond recognition, and that's why I can safely say the trade and the public can rest assured that there's no reason to question the integrity of any GIA report that's out there, and anyone who has a question can send it back and we'll verify it with no charge."

One matter GIA remains hush on—despite pressure from industry organizations including the Diamond Dealers Club—is revealing which companies were identified to federal law enforcement officials and dropped as GIA clients for their violations.

"Those names, if the U.S. Attorney's office releases them, that's another matter," Destino says. "That's not in our hands. Our job was to report anything we found and we did that, and disclosure comes from the law enforcement agency."

With major announcements within the last month—including Destino's appointment and the elimination of GIA's membership structure—the trade's hope is that damage control was done early enough to keep the issue from hurting consumer confidence. That the news broke beyond the trade was inevitable, says Jeff Fischer, president of the International Diamond Manufacturers Association (IDMA).

"We have been saying all along that, sooner or later, it was only logical and reasonable that the public press get ahold of the situation. In my personal opinion, if it was an eventuality, now it's almost something of a relief that you don't have to anticipate it anymore," Fischer says. "GIA and the industry will conduct themselves in a way that is positive and constructive and it can be proud of. We're hopeful that the situation will not be sensationalized and distorted by the press."

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