Media Take Notice of GIA Problems

As many feared, the GIA money-for-grades scandal finally made it to the consumer press in December—with stories in the New York Post,New York Times, and Wall Street Journal.

The Wall Street Journal ran back-to-back articles over two days, on the scandal and reaction from consumers, and the newspaper’s coverage was considered perhaps the most damaging.

“The [scandal] has diamond buyers around the world wondering if they overpaid for their purchase,” the article said. One customer said the story “could send shock waves, not just through the jewelry and insurance industries. Can you imagine, going back to your bride-to-be and saying, ‘I don’t want to alarm you, but the ring may not be what the certificate says it is’? That could make for some interesting holiday conversation.”

The story notes that GIA is ready to regrade any “suspect” stones.

The first to write about the story was New York Post columnist Cindy Adams. The stories in the Wall Street Journal,New York Times, and the London Times followed the next week. The story also made CNN’s Web site and the news channel’s “ticker.” Not much in the articles was new to anyone who has followed the story in trade publications, although the New YorkTimes reported that a federal investigation was looking into the charges.

But newly appointed GIA chairman Ralph Destino said he didn’t know if that was true. “We have made half a dozen different reports every few weeks to the U.S. Attorney,” he said. “They never tell us anything. It’s a one-way communication from us to the U.S. Attorney’s office, so we don’t know what they plan to do with the information that’s provided.”

He noted that GIA was willing to re-examine any report with a suspect grade and reiterated that the number of companies and reports implicated in the scandal was small.

“GIA grades over 1 million stones a year,” he said. “We did a thorough investigation, and the number of questionable documents out there is infinitesimal. The trade has inflated this matter and blown it up way beyond recognition. Today, I can safely say there is no reason to question the integrity of any GIA report that is out there.”

In related news, GIA has settled the lawsuit that launched the scandal. The suit, from former Harry Winston employee Max Pincione, claims an improperly changed grade cost him a long-term client.

Destino said GIA is not likely to release the names of companies in its “League of Dishonor” for allegedly “improperly influencing lab personnel”—although in recent months, industry groups have called on it to do so.

“We are not a law enforcement agency,” Destino said. “We will simply be sending the names over to the U.S. attorney’s office.” GIA has also told those companies they can no longer do business with GIA.

GIA did not release any details of the settlement beyond a terse statement on its Web site. That statement contained a note from Joseph Tacopina, Max Pincione’s lawyer, that said, “The civil action filed by Max Pincione against GIA has been resolved. After reviewing the GIA grading reports, the parties agreed that the grades at issue involved areas of subjectivity and fell within industry standards.”

Pincione had also sued several in the trade, including the Vivid Collection. When asked if the claims against the other entities were also resolved, Tacopina told JCK through a receptionist, “All claims are settled.”

In further scandal fallout, GIA has scaled back its development office after deciding not to take any more donations from diamond dealers whose stones are graded at the lab. Sources say eight or more people were let go.

GIA also has scuttled its sometimes- unpopular League of Honor fund-raising dinner this year, because of the GIA Symposium. It may change the focus of future dinners, Destino said, and possibly honor its students and other industry members rather than just donors.