A respectable party close to the GIA, with his own agenda, called virtually all the major New York newspapers with a “scoop,” leaking a selective version of the GIA corruption scandal. The results ranged from front-page stories for two consecutive days in The Wall Street Journal, to a smaller item in The New York Times and a gossip item in the New York Post. It seemed rather devious to do so just at the height of the consumer shopping season. However, what made it even uglier is that the source knew very well that GIA Chairman Ralph Destino was negotiating a settlement of the very court case on which the “scoop” centered.  For a person within the industry to pick this particular timing to get the corruption message to the consumer is contemptible, malicious and irresponsible. We trust that as many in the market know the identity of the caller, GIA senior management will definitely know it as well. Let’s see what happens.

Luckily for the GIA and for the industry at large, the “good news” overshadowed and somehow neutralized the negative publicity: the GIA announced on December 21, 2005, that the civil lawsuit filed by Max Pincione and Cimabue Ltd. in the Supreme Court of the County of New York had been resolved.  Though it was not immediately clear from the press release, the entire lawsuit has been settled – not just between plaintiff and GIA, but also with the other defendants Vivid Collections LLC, Moty Spector and Ali Khazeneh. This is great news.

Having followed the Certifigate developments closely for the past six months, allow me to express a sense a relief and congratulations to the GIA. A settlement was needed – almost at any price. We are not even asking, “How much was paid?” – After all, donors did not contribute their money for a court settlement. The “price paid” has now eliminated the problem – not just for the GIA, but for the entire industry - as no litigation continues, and no more bad publicity will be generated.

GIA Chairman Ralph Destino expresses being “pleased [that] this matter is behind us. Following a thorough independent investigation, the public can continue to have full confidence in the integrity of GIA’s diamond grading reports. As a public service, we have set up a program to re-examine any diamond that we graded free of charge if an owner has any concerns,” says Destino.

Then, he said something that we all desperately want to be true – but the very same press release, a sentence later, raises serious doubts about his statement. Says Destino: “GIA has long been the standard bearer for quality in the diamond industry. We are fully committed to assuring the diamond trade and consumers that they can count on GIA to uphold these standards.”

In the next line, the GIA statement quotes Joseph Tacopina, Max Pincione’s lawyer, as saying “After reviewing the GIA grading reports, the parties agreed that the grades at issue involved areas of subjectivity and fell within industry standards.”

I am at pains to comprehend that sentence. If the grades at issue “fell within industry standards,” what was all the fuss about? If they were within standards, Pincione would still have his Saudi Arabian clients; there would have been no need to go to the police; there would have been no need to bribe if these certificates fell within industry standards; there might not have been a vigorous legal case against the GIA. Certainly, there would be no case to settle – because the GIA would have been vindicated.

To add insult to injury, the very same day the GIA settlement was announced, lawyer Tacopina was quoted in the Wall Street Journal saying, "a difference in just two levels of a grade can mean a lot of money and the average consumer, of course, can't tell the difference."

Admittedly, in a settlement agreement the litigants may demand that certain joint statements be published. This statement is clearly inspired by the GIA, but it seems like shooting oneself in the foot. I wonder why the GIA did not pursue the opportunity to turn the settlement into an exciting and positive news story. Instead, they followed the “community of clients” precedent by unfortunate phrasing in the press announcement.

The GIA announcement refers to the “grades at issue.” In the court case, Max Pincione raised only two grading issues: a round 37.01 carat that allegedly moved (“upgraded”) from H-VS2 to a J color; and a 103.78 carat E-VVS2 that had been upgraded to a D-Flawless.

Even by any stretch of the imagination – and even by applying the worst possible standards – the difference between VVS2 and Flawless represents quite a number of grades. This is not a “split grade”. Any 100 carat stone is seen by many graders (and quality control supervisors) before a certificate is issued. This is anything but a “split grade” or “borderline” issue. In color ranges, one might possibly argue between an E and a D, but not between an H and J.

In litigation, complainants sometimes exaggerate their claims. Therefore, I do not know how strong the evidence is that the “upgrade” is exactly as Max Pincione suggested in his complaint. However, it is unlikely that someone would state erroneous information that is easily verifiable.

In any event – as the court case is off the table, the danger that the GIA statement will backfire in the future has also been removed.      

However, it does give food for thought. It may well be that the entire shake-up at the GIA - the firings, the passing of information to law enforcement and so on - may be based on information that is unrelated to the court case – though it is certainly, and admittedly, related to some of the documents submitted. But the GIA’s public relations people must have known one fact beyond doubt: when you mention the “grades at issue,” the only grades the public knows are the grades as specified in this article.

To say that these grades involve areas of subjectivity and fall within industry standards makes a mockery of industry standards. They certainly are not the standards the public (or Chairman Ralph Destino) expect the GIA to adhere to. The GIA can do better – much better. And, somehow, I am now convinced that the GIA will do better.

I may be one of the GIA’s severest critics (and that is the proper job of the trade media), but I have never forgotten that the GIA employs hundreds of great educators, graders, and researchers. They have all had a “rough year” – and, at the holiday season, they do deserve recognition – and they deserve the industry’s gratitude.

Have a nice weekend and happy holidays.