GIA Found 'Misconduct' at Grading Lab; Moses New Head

A four-month investigation ordered by the Gemological Institute of America's board of governors found “isolated incidents of misconduct” at its noted grading lab—prompting the firing of four graders. In addition, its chief executive officer has resigned, though he was not implicated in any misconduct.

A GIA release says the investigation was the result of a lawsuit from former Harry Winston employee Max Pincione. The suit, filed in April and now being amended, charges that “payments were made” to improve grades at GIA's Gem Lab. In the GIA statement, board of governors chairman Ralph Destino said the board was “deeply disturbed by the claims asserted in the complaint.”

The board eventually hired the law firm of Thomas F. O'Neil III, a former assistant U.S. attorney, to investigate the allegations, which led to the termination of the graders.

The sometimes-vague GIA release did not say what the four graders were fired for, and it is not evident whether the investigation found clear-cut instances of bribery as alleged in the Pincione lawsuit. In a statement to JCK, GIA said: “The laboratory employees have been terminated for violating/failing to comply with GIA's policies. Privacy laws dictate that we cannot be more specific than this.”

Sources stress that the investigation covered a 10-year period and found that the alleged wrongdoing involved only a small number of reports. They added that no wrongdoing was found on the part of lab or GIA management.

Also leaving is CEO Thomas Yonelunas, who has been with the GIA lab for nearly 30 years. Yonelunas was not involved in any improprieties—a fact stressed by numerous sources both off and on the record.

Yonelunas is being replaced by Tom Moses, the lab's current vice president.

In one of the most-speculated-upon parts of the release, Destino noted that GIA has “identified a small community of lab clients” who are “implicated in … improper attempts to influence the outcome of our grading reports. Rest assured,” he continued, “they will be dealt with swiftly and decisively.” The industry rumor mill has speculated that some big names could be involved. GIA told JCK: “It is our intention to terminate such clients immediately, and that is currently in the works.”

GIA will also appoint a compliance officer to report to the Institute's general counsel to oversee the enforcement of compliance policies. All GIA employees will be obligated to report violations of the Institute's policies to the compliance officer.

The moves came as GIA faces something of a crisis of confidence within its base, the New York diamond trade. Many traders believe that abuses were widespread within the lab.

One open question is whether law enforcement is involved in this case. In its release, GIA said: “When the Special Committee appointed by GIA's Board of Governors initiated its investigation, it disclosed its formation and the existence of the inquiry to law enforcement officials. The Special Committee has kept those officials fully apprised of both the status of the investigation and its findings. We regret that we cannot provide further details on this subject.”

GIA sources said that one suggestion being urged on the Internet—a “recall” of reports—is not taken seriously. However, in its statement to JCK, GIA did say: “In the event that there is a question about a diamond with an existing GIA Grading Report, our verification service can be utilized to confirm grading information. GIA will offer the verification service on a complimentary basis for a limited time. The client will pay shipping, handling, insurance, but GIA will not charge for the service. It will be an expedited process.”

One reason for GIA's vagueness on the results of the investigation could be its ongoing litigation with Pincione. In its recent release, GIA reiterated that it will “defend itself vigorously.”