The GIA Mystery Treatment Case Lands in Court

Remember that alleged mystery treatment GIA said temporarily improves a diamond’s color? There’s now a lawsuit about it.

In an interview in December 2015, outgoing AGS lab director Peter Yantzer talked about the so-called mystery treatment the Gemological Institute of America (GIA) said it discovered last year, which it claims temporarily improves a diamond’s color.

“You don’t hear a word about that now,” he said. “It just kind of died.”

Indeed, one year ago, the GIA said that it discovered around 500 diamonds that, in its view, had been treated by a previously unknown color-improving process. It also banned—and in an unusual move, publicly named—the four Israeli companies that it claimed submitted the diamonds. (One of those companies told JCK it was submitting for another company.)

A little later, at a panel at JCK Las Vegas, GIA said it was “close” to figuring out what the treatment was. The next month, International Gemological Institute said it too had run across the treatment and considers it a coating. (The accusation is significant because not disclosing a treatment, particularly a temporary one, violates trade guidelines and the FTC Guides; World Federation of Diamond Bourses president Ernie Blom called it “clearly unlawful behavior.”)

And that’s been it—for almost a year. Last month, two of the named Israeli companies—L.Y.E. Diamonds and E.G.S.D. Diamonds—filed suit in New York state supreme court charging GIA and Rapaport Corp. with defamation, trade libel, tortious interference with a contractual relationship, among other counts. The case was subsequently moved to New York federal court.

The suit calls the GIA’s statements, as well as Rapaport’s publication of them, “defamatory and false.”

“[The two companies] never treated any diamonds submitted to GIA with a process that temporarily masks the inherit color of a diamond and can lead to a higher grade,” it says. “GIA could not have reasonably suspected that [the] diamonds submitted were treated…. No such treatment was ever used.”

The companies further claim that GIA contacted the Israeli police about the case, who investigated but eventually closed the case. An arbitration at the Israel Diamond Exchange found GIA lab director Tom Moses’ testimony “unpersuasive,” according to claims in the same legal papers.

Doron Leiby, lawyer for the plaintiffs, tells JCK: “To be very clear, our clients did not treat their diamonds in any way, and were completely shocked by this entire episode.… The Ylazarov family [owner of the two companies] is eager to be vindicated by the court of law, to remediate the damage done in such an unfounded way by GIA and Rapaport in the court of public opinion. “

Perhaps the most interesting part of the suit is the inclusion of a translation of the Israel bourse arbitration report (though at least one page appears to be missing). According to the arbitration report, Moses testified that 252 of the 500 diamonds have been received back from GIA and then retested. The report says the GIA found that 24 percent showed no change in color, 40 percent had their color downgraded one grade, 29 percent had their color downgraded two grades, and 7 percent had their color downgraded three grades.

For years, GIA has been under pressure to disclose the names of companies that are allegedly involved in these types of incidents. This time, it claims to have done that. But as we see, that is not without perils. Still, if nothing else, this case may provide clarity on an important and enduring mystery, that the trade has received frustratingly few details about since its initial disclosure.

GIA said it is aware of the suit and plans to “mount a vigorous defense.” It had no updates on the nature of the treatment, and has not filed a response at press time. Rapaport Corp. chairman Martin Rapaport did not respond for a request for comment, but legal papers filed by company counsel says the division being sued (Rapaport Diamond Corp.) does not publish the site or price list. 

JCK News Director