GIA scandal makes the headlines

Rob Bates and Anthony DeMarco, JCK Senior Editors -- JCK Online, 12/20/2005 12:37:00 PM

The Gemological Institute of America confirmed to JCK Tuesday that federal investigators are involved in the Gemological Institute of America grading scandal. The scandal and the involvement of the federal government were reported Tuesday in stories by The New York Times and The Wall Street Journal.

In addition, the association said it has cut jobs in its development department as it changes its fund-raising philosophy and confirmed that its public relations officer has retired and has been replaced.

The two consumer publications are the latest to report on the scandal that's been the talk of the worldwide diamond and jewelry industry since at least August. That's when the JCK Web site first published a report on a lawsuit filed in April by a broker alleging that GIA and two diamond dealers conspired to inflate the grade of two diamonds. The Times reports that the two parties are negotiating a settlement.

The first publication outside the industry to report the scandal was the New York Post on Dec. 13 in a small piece by gossip columnist Cindy Adams. Tuesday's news stories have been picked up by print and broadcast media around the world, possibly eroding the trust—within and outside the industry—of the organization that bills itself as, "The World's Foremost Authority in Gemology."

Ralph Destino, newly installed GIA chairman, confirmed to JCK that the institute turned over information to federal investigators.

"We have made half a dozen different reports every few weeks to the U.S. attorney," Destino told JCK. "They never tell us anything. It's a one way communication from us to the U.S. attorney’s office, so we don't know what they plan to do with the information that’s provided."

Destino also told JCK that GIA has cut staff members to its development department because it has changed the way it solicits funds. He did not say how many jobs were lost.

"We cut the staff of the development department," he said. "We are not soliciting funds within the diamond grading community. Therefore we no longer need to have people to do that."

The scandal was spurred by a lawsuit against the institute brought by gem broker Max Pincione who alleges that two large diamonds he sold to members of the Saudi royal family in 2001 had been given inflated grades in certificates issued by the Midtown lab.

Pincione's lawyer, Joseph Tacopina, declined to discuss the case with the Times because he said he was negotiating a settlement with the institute. In another development, it was confirmed to JCK that Alex Angelle, GIA senior public relations manager, has retired effective Dec. 16. Angelle has been replaced by Laura Simanton who took over the position on Monday.