Every Week Undisclosed Synthetics are Detected, and the Consequences are Nearing

After months of pointing out what is wrong and needs changing in the diamond industry, discussing problems and spreading gloom, it is time to take a positive approach and make constructive suggestions, a roadmap to a healthier sector, if you will. That was the planned column for this week. Instead, it was impossible to ignore the reports emerging throughout the industry about undisclosed lab-made diamonds populating many parcels of melee goods.

Sadly, this is not new. During a visit to India this summer, the hottest conversation topic among diamond traders was lab-made diamonds, and their possible impact on the diamond industry. It was not limited to how they may influence the value of their natural diamond inventory, but also the growing prevalence of lab-made goods mixed in with natural goods.

Many traders were very concerned. Evidence to that is the growing number of diamonds submitted to diamond labs. In the past year, GIA had a record number of diamonds submitted for grading; something the lab was not prepared for. The flow of diamonds for grading into the lab is so large, that today turnaround time is double, if not triple, what it used to be.

According to Roland Lorie, owner and co-CEO of IGI, they find less than 10 lab-made stones every week. Yesterday [Wednesday] they had four lab-made stones submitted by a very large retailer that got suspicious because of the price of the goods. “There is no need for panic,” he says, “this is just a small fraction of a percent of what is going through the labs but this is still very bad and will increase if industry leaders don’t take very strong measures immediately.”

According to Chaim Even Zohar, who brought this story out in a number of exposés in his Diamond Intelligence Briefs, there are about half a dozen “mega offenders” that “pepper” parcels of melee goods with undisclosed polished lab-made diamonds. Among the offenders are allegedly a few large and otherwise respectable firms, including some DTC Sightholders! Chaim goes on to state that “the market knows precisely who they are – but keeps silent.” This is a hair-raising assertion. Not only that this is becoming commonplace, and that among the offenders are large and important companies in the industry, but to make things worse, many in the market are accepting this with their silence.

Larger undisclosed lab-made goods will be detected, but what about the melee? Melee are small diamonds, weighing 0.001 carats (1000th/carat) to 0.18 carats. Most graded goods are a third of a carat and larger. Now the labs are seeing more and more “thirds” and even “fifths” (0.30- and 0.20-carat) submitted for grading. A new business for some of the labs is screening of melee parcels. Clearly, many vendors want to make sure that their goods are all natural. So much for trust in a handshake.

Where is the Industry Leadership?
Apart from Chaim and Martin Rapaport, no one is loudly speaking out about this. Chaim called on De Beers and other producers to act. The rest of the industry leadership should step forward as well. WFDB can demand that each invoice state that all the diamonds in the parcel are “natural,” as Rapaport and Lorie suggest. The heads of the bourses and industry organizations should step forward too.

The industry leadership should take the lead on this topic, just as it did in the past with other issues. Industry members should take action as well. If you take action, your clients notice and understand on what side of the fence you are standing. This is essential.

Possible Implications
There is no telling how far-reaching this problem is. Are we talking about a billion dollars’ worth of goods or tens of millions? But beyond the possible criminal aspect this poses, we should start thinking in terms of consumer confidence. Do we really want the story of diamonds this holiday season to be one of lack of disclosure and dishonesty?

 “If you have $10,000 you want to spend, why buy diamond jewelry if you are not sure of what you are buying,” Lorie asks. Really, why?

This can also quickly turn into an issue of controls. In the past year, there have been many discussions about tracking origin of goods. Currently, the backdrop is political, blocking goods coming out of Zimbabwe, but what if this becomes about disclosing origin in a much broader sense – did a stone come out of the ground or out of a lab?

With diamond manufacturers and wholesalers so dead set against further oversight, they may just bring it upon themselves. By allowing the practice of “peppering the parcel” to continue uninterrupted, they are salting the earth they are walking on.

No, not good news at all.