Lab-grown diamond manufacturer’s board slams ex-director for “wild accusations”
An investigation by two members of Scio Diamond’s board have concluded there is “no basis” to allegations made by a dissenting ex-director.
In a scathing resignation letter released earlier this month, James Korn, a former board member of the Greenville, S.C.–based lab-grown diamond manufacturer, accused current chair Bernard M. McPheely of purchasing inventory at a discount and not properly disclosing a receivable and an equipment failure.
The board appointed a special investigation committee—composed of two directors, vice chairman Bruce Likly and audit committee chair Ben Wolkowitz—which issued a report declaring there was “no basis” to Korn’s assertions.
McPheely purchased only one lot of gemstones, and not at a bargain price, the directors concluded. They added that the company has not recognized any revenues related to the receivable, and the equipment failure was not a “notable or material event.”
As far as Korn’s characterization of the company’s performance—he described it as on “life support”—the two directors said that during Korn’s time on the board, he “offered no input on product strategy, customer strategy, or operational plans. On occasion, Korn offered positive comments to management in response to periodic business updates, and in no circumstances did he provide any negative feedback or any suggestion of ‘horrific’ performance.”
The report concludes: “Korn’s statements contain inaccurate assertions, wild and unsupported accusations, and, in some cases, suggest that he did not fully understand that he was tasked with oversight as a member of the Audit Committee. The letter is inconsistent with his character and demeanor as a director.”
It added the company is looking into adding more board members, including a director with diamond industry experience.
Korn could not be reached for comment.