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Thoughts on GIA
March 5, 2008
There is a lot more renewed talk about the GIA "certifigate" scandal lately. Chaim, in particular, seems to be on a tear on this – and there may be more from him tomorrow – so I have a few things to say …
The question everyone has is: What is the true story of what happened at GIA? And which companies were involved? I’ve talked to quite a few former GIA employees who think the “problem” was a lot bigger than has been acknowledged. The New York diamond community largely thinks so too. But remember, there is a lot of bitterness, hidden agendas, and axes to grind here.
GIA has done a pretty good job handling this scandal, but the one mistake they made was pretty major. Aside from the two big executives that left – and some (unpublicized) reshuffling and reassignments at the lab – the people who are holding the top positions at GIA and the lab after “certifigate” are the same people who were holding top positions before it. The board members are also basically the same (with some turnover).
At the Plumb Club forum’s sessions on ethical issues, one of the things repeatedly stressed was the need for third-party auditing regarding social issues. Speakers said over and over again: “Companies today can’t just say 'trust me.'” That is the problem with how GIA handled this. The new bosses are essentially the old ones, with better titles. Nothing against any of those people, but bringing in at least one independent outsider in a top position would have been a reassuring signal that a new era was truly upon us.
Now, GIA did have a former U.S. attorney do an independent investigation which, rather famously, resulted in four graders being dismissed. But that person's law firm has since become GIA’s corporate counsel – not exactly an independent position.
GIA is essentially saying “Trust me” here. Now I believe the Institute is filled with people of integrity. But I also know the reports of bribery, which I’d heard many times throughout the years, only triggered a serious investigation once the Institute was hit with a lawsuit. Given that, I think some kind of “third party verification,” and outside people involved, would clear up a lot of things, and we really could put this rather nasty subject to bed. (And, need I add, GIA made its name on “third party verification.”)
Now if a prosecutor had taken this case, that would have been the ultimate third party verifier. But, in fact – contradicting what I wrote here, from what I thought was good evidence – I now am not sure there is a Federal investigation. People who have spoken to the U.S. attorney have not gotten any indication one way or another. I understand that New York’s U.S. attorney, who overlooks Wall Street, has far bigger fish to fry. But this is a serious subject, involving plainly illegal activities. It may be a small potatoes to him, but it's a big deal to us.
GIA’s new consumer ad campaign has the tagline: “The difference between wondering and knowing.” We all still wonder what really happened at GIA. What we need is a way to know.
Comments welcome, but they will be strictly monitored on this subject, and anything defamatory will not be posted. People with any further information on this topic, or leads they want me to follow (on this or any subject), can email me at rbates@reedbusiness.com.
UPDATE: And Chaim indeed has more here.
Posted by Rob Bates on March 5, 2008 | Comments (4)
