Certifigate scandal has landed diamond industry in a dilemma. Ketan Tanna offers tips on how to escape unscrupulous traders

The scandal over diamond certification by the Gemological Institute of America is snowballing into a major controversy with industry watchers calling it certifigate. Indeed, are diamond gradation certificates just an illusion? The resignation of Thomas C Yonelunas, CEO of the Gemological Institute of America (GIA) Laboratory, and sacking of four employees, is the first major scandal in the firm’s 74-year history. In India, the scandal has raised a larger question-who or what an average Indian should trust when buying a diamond.

First the facts. New York jeweller Max Pincione, in a lawsuit filed against the GIA lab, Vivid Collection and two others, had alleged that GIA had upgraded certified diamonds in return for payment. The case raised an uproar in the diamond industry. For many decades, it was the much touted gradation certificate provided by various laboratories that was broadly accepted as the parameter of diamond quality. Diamond certification industry gave rise to scores of diamond grading laboratories .The leading ones are American Gemological Society (AGS), Diamond High Council, European Gemological Laboratory (EGL), Gemological Institute of America and the International Gemological Institute (IGI).

Essentially, diamond certification ensures that a diamond is being sold at the price it has been valued at. Otherwise, in reality, it is a carbon stone with a notional value. Before a diamond is eventually sold to the customer, it passes through grading at various stages right from the mine to the market. A varying number of gemologists with varying degrees of training and expertise grade them. Grading of lower quality of diamonds can be subjective at times, depending on the person grading it. Minor variations in the quality or colour are acceptable but when the grades itself are fixed, the credibility of the grading system takes a knocking as has happened after the GIA scandal.

“Naturally, the Indian diamond industry is worried though it hopes that the storm will blow over. Well yes, the industry will take a few knocks but it is more of an aberration,” feels Sanjay Kothari, former chairman of the GJEPC. According to Kothari, it is not just the diamond industry that has been hit by such allegations. “Even the gold industry faced questions about purity. But since then things have changed. Every industry faces such problems and comes out stronger after learning its lessons,” he says.

According to Kothari, there cannot be a completely full-proof system of diamond grading. However, he says, an average diamond buyer needs to ensure that he or she purchases from somebody trustworthy. “Please do not go to someone you do not know. And yes, if you have some doubts, get them verified from another jeweller or laboratory,” says Kothari. There should not be price variation of more than 20-30% in case of a re-check.

Arvind Sanghvi a leading diamond merchant, who is a partner of K P Sanghvi firm, hoped that the industry would tide over the problem created by GIA imbroglio. “I agree that GIA was considered the best and we did not expect such a problem. Naturally, it will hurt the credibility of the grading system. Having said that, I do not see any major fall out. There have been lapses in the diamond industry. But then this is true of other industries as well. In any case, it is better for a customer to have a certificate than not to have one,” says Sanghvi.

The solution Sanghvi says is that each diamond merchant should have his own certificate which clearly states the quality and the value of the diamond.

According to Roland Lorie, CEO of IGI Worldwide, (a rival of GIA) the aftermath of the GIA scandal will be felt more in the coloured diamond category. “The gradation of coloured diamonds is more subjective while the gradation of white diamonds is less complex,” said Lorie. Pointing out the fact the Indian market is dominated by white coloured diamonds, Lorie felt the impact of GIA scandal will be less in India as compared to the world market, as coloured diamonds form a minuscule portion of the diamond industry in India.

Lorie said that IGI handles on an average 500-600 diamonds everyday in India for gradation and ensures that for each stone, a minimum of two gemologists have a look in addition to computer gradation.

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