EGL Int’l Is Not Going Away Quietly

On Dec. 3, fresh off his appointment as the global manager of the EGL network, Menahem Sevdermish told me that EGL International was closing down. Later he walked that back a bit to National Jeweler. To understand why requires some background. 

The EGL network operates via franchises. In Israel, there have been two franchisees: EGL Platinum, run by Sevdermish, and EGL International, owned and operated by Guy Benhamou. (EGL International was once known as EGL Israel.)

As JCK readers know, lately controversy has swirled around the EGL name and EGL International in particular. So founder Guy Margel’s heirs—who aren’t in the diamond business but claim ownership of the brand (except in the U.S., but we’ll get to that)—recruited Sevdermish to standardize the network’s grading. They also informed EGL International they were revoking its license. As they see it, Benhamou can still operate a lab, he just can’t call it an EGL.

But in the ensuing days a strange thing happened. EGL International’s website and Facebook page no longer use International, but rather call it EGL Gemological Laboratories, with Benhamou as CEO. And this week, Benhamou sent out a text to industry people with Hanukkah greetings from EGL Israel.

Yesterday, the EGL network sent out the following to members of the trade in Israel, hoping to make things clear: 

The EGL trademark rights owners have informed the various organizations and institutions in the Israel diamond, gem, and jewelry industry and trade that on November 25, 2014, the licensing agreement with EGL managed by Mr. Guy Benhamou (also known as EGL International)…was canceled.

Upon termination of the licensing on November 25, 2014, EGL International is no longer authorized to issue and distribute diamond grading reports of any kind whatsoever bearing the trademark EGL and/or to represent the brand EGL. Each grading report issued by this laboratory after this date consequently is issued illegally, and the owners of the rights will deem this a forged document. Therefore, such a report is not to be considered as a reliable diamond grading report and people making use of such reports will do so at their own risk and may be at risk of various claims, with all the resulting legal implications.

Benhamou, however, wasn’t having it:

[Company name] EGL Eurogem has been the leading franchise in possession of the EGL Company trademark for over twenty years. The company is the legal franchise owner and will retain the right to use the EGL trademark for many years to come. The malicious notice that was publicized today came from interest groups with outsider motives who set for themselves a goal of causing damage to EGL and its operations. The company will continue to give high-standard professional service as it has done until now for its hundreds of customers.

Which led one of Margel’s heirs to call me to reiterate that the franchise has indeed been canceled. This may soon go to the lawyers. 

If so, one hopes the issue is resolved quicker than the EGL case here in the United States. As it’s stressed in a series of statements, EGL USA stands independent from the rest of the network. In 2003, it asked the Customs Service to block other EGL reports from entering America, as it owns the brand name here. That helped spark a court battle between EGL USA and the rest of the network, beginning in 2004. (The border ban is no longer contested.) 

The case went to a bench trial in July 2013, nine years after it started. It is now December 2014, and no ruling has been issued. While it is not uncommon to wait for a decision, there has been little word for 18 months (and counting).

Margel’s heir hopes to iron things out with the American lab. “We want to make sure that things are consistent for everybody,” he says. “Now it is not good for the business, and it is not good for the industry.” EGL USA, however, said it intends to remain independent: “We are not part of EGL International or any other EGL overseas entities, and we will never be part of their proposed network.” 

One final point: Sevdermish feels there is some misunderstanding regarding the differences between the GIA grading scale and that used by the non-U.S. EGLs. While the EGL system does sometimes evaluate color faceup, he stresses that happens only with borderline calls. “Sometimes you turn the stone faceup and you get a better sense of how the color is distributed,” he explains. In the overwhelming majority of cases, the EGLs will grade color the traditional way. (That seems to differ from EGL International, which wrote in a statement that it puts “a great deal of emphasis on grading the color of the diamond faceup because that is how a diamond is seen when it is worn, whereas other labs attribute most of the color grade to the facedown position.”)

Sevdermish adds that the network will adhere to the GIA system, with two exceptions:  It doesn’t list color grades past N, describing those grades as yellow and light yellow; and it uses an SI3 grade. He plans an article to further illuminate those differences. He also asserts, and many would agree, that several other labs don’t strictly follow the GIA scale.

Indeed, while the EGL saga has been grabbing most of the attention, the current controversy is starting to drag other grading services into the spotlight. EGL International may stay or go, but this issue shows every sign of hanging around.

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JCK News Director