NY Times Reports GIA Scandal, Suit in Settlement Negotiations

Max Pincione, the diamond dealer who sued the Gemological Institute of America (GIA) and Vivid Collection over alleged payments in return for issuing upgraded reports for two diamonds, is negotiating a settlement with the institute, according to a report in The New York Times. This is the first time a media outlet outside the diamond industry has reported on the GIA Certifigate scandal.

The New York Times, reporting the story today (Tuesday) in the New York Region section of the paper, also reports that Federal prosecutors are “gathering information about a bribery scandal.” The GIA said that in the past it gave U.S. authorities information it gathered in an internally conducted investigation.

According to eyewitnesses, FBI agents have visited the GIA lab in Manhattan since the scandal broke.

The newspaper quotes new GIA chairman Ralph Destino, individuals at the New York Diamond Dealers Club and a spokeswoman for the United States attorney's office in Manhattan, making the first public report by the mainstream media. It is unclear what kind of effect the report will have on consumer purchasing behavior.

According to the report, Pincione's lawyer, Joseph Tacopina, declined to discuss the case with the newspaper because he was negotiating a settlement with the institute. In April, Pincione started a whirlwind that sent a tremble through the industry when he sued the GIA.

The $50 million in damages suit, resulted in an internal GIA investigation, the firing of four employees, the resignation of the lab’s CEO Tom Yonelunas, the ending of Rapaport's exclusive arrangements, an overhaul in donation policies and cancellation of membership pricing.

In the suit, Pincione said he bought a platinum diamond ring with a 37.01 carat diamond, and 103.78 carat pear shaped pendant from jewelry designer Vivid Collection in 2001. The two diamonds were GIA certified: The 37.01 carat diamond as H / VS2 and the 103.78 carat pendent diamond as D / Flawless.

According to the complaint, Pincione sold the diamond ring to the Royal Family of Saudi Arabia. But then, he alleges, “After the sale was made, and the stone was examined by independent experts of the Royal family of Saudi Arabia, the diamond ring was returned to the plaintiff without explanation, and with a demand for the return of the monies paid for the stones.”

The same happened with the pendant, which was sold to a Saudi businessman and then returned on the same grounds – that the stone was not of the “quality stated in the GIA grading reports.”

The GIA announced following the internal investigation that “a handful” of clients were involved in the scandal, but never released their names.