The GIA Laboratory head resigned and four New York City GIA laboratory employees were fired following an internal GIA investigation over grading practices at the institute’s east coast laboratory. The Gemological Institute of America announced the results of the investigation and the actions taken in a statement issued Tuesday.

The investigation was launched by a special committee of GIA’s Board of Governor’s following a lawsuit by a former Harry Winston employee, Max Pincione, which names GIA as one of four defendants (see previous story).

“The Board was deeply disturbed by the claims asserted in the complaint, and we felt that we had a responsibility to ourselves, our clients, and the public to not only look into them but to also thoroughly examine all lab practices,” Ralph Destino, chairman of GIA’s Board of Governors, said in the GIA statement. “That is precisely what we have done.”

As a result of the investigation, GIA made the following changes:

* Thomas C. Yonelunas, CEO of GIA Laboratory, while not implicated in any violations of GIA’s Professional Ethics and Conduct Compliance Statement, has tendered his resignation, effective Dec. 31, to ensure a smooth transition of leadership.

* Yonelunas will be replaced by Thomas M. Moses, G.G., with the title of senior vice president, GIA Laboratory and Research;

* Four employees of GIA’s New York lab have been terminated. The employees were not identified.

* GIA adopted a “zero tolerance” policy; and

* GIA said it will appoint a compliance officer.

The suit, filed in the Supreme Court of the State of New York in April, charges that in 2001, Pincione purchased two pieces of jewelry from Vivid Collection, a New York-based jewelry designer and manufacturer: a platinum diamond ring with a 37.01-ct. stone, and 103.78-ct. pear-shaped pendant. According to the lawsuit, the pieces had reports labeling them as H VS2 and D Flawless, respectively.

Pincione, according to the complaint, then sold the diamond ring to the Royal Family of Saudi Arabia. He said after the stone was examined by independent experts of the royal family, the diamond ring was returned “without explanation, and with a demand for the return of the monies paid for the stones,” the suit said. Pincione then sold the pendant to a Saudi entrepreneur. Again, the diamond was returned to him and he was later advised that the stones were not of the quality stated in the GIA report, according to the lawsuit.

The suit includes an “Exhibit F,” which it claims is “a document delivered to the plaintiff by an informant which indicates that payments were made by defendant VIVID to defendant GIA to ‘upgrade’ the quality of the diamonds.”

The internal review began in May, GIA said. The Board formed a special committee to investigate the allegations in the lawsuit and any related business practices. The committee engaged the law firm of DLA Piper Rudnick Gray Cary US LLP to conduct the review under the leadership of Thomas F. O’Neil III, a partner based in Washington, D.C., who chairs the firm’s Government Affairs practice group and who served as an assistant United States Attorney for the District of Maryland.

“The investigation revealed that, although GIA had undertaken to fortify various facets of the grading process during the past decade, additional measures are warranted,” O’Neil said in the GIA statement. “Accordingly, we have presented for the board’s consideration a number of possible enhancements of, and supplements to, existing policies governing the grading process and compliance in general. The board already has decided to implement a number of our recommendations, including the appointment of a compliance officer in the laboratory who will report to the general counsel and will oversee the enforcement of the Institute’s compliance policies.”

“We have zero tolerance for any misconduct by employees of the laboratory,” Destino added. “They undermine confidence in GIA’s ability to serve the diamond industry and ensure the public’s trust in gems and jewelry. Going forward, all GIA employees will be obligated to report all suspected violations of the institute’s compliance policies to the new compliance officer.”

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