GIA: Laboratory: Tom Moses Remarks to Diamond Bourse

Note: During the recently concluded meeting of the World Federation of Diamond Bourses (WFDB) in Mumbai, Thomas M. Moses, Senior Vice President of the GIA Laboratory and Research, addressed laboratory topics under discussion by attendees. At the conclusion of his remarks, Moses also talked about the results of the investigation of the GIA Laboratory, which were announced by GIA on Oct. 18. The verbatim text of those remarks follows:

I both realize and can fully appreciate that there have been rampant rumors and speculation swirling in the industry around GIA. I want to briefly address this issue. As I do, please understand, that I am constrained by our lawyers in what I can tell you, and importantly you should not read anything into this restriction.

First —and appropriately so— neither I nor any of GIA’s senior leadership were involved in the investigation that was led by outside counsel, and I am not and was not privy to the discussions between the investigators and the Board.

Secondly, since we are in the midst of litigation, our lawyers have instructed me not to discuss any specifics of the litigation or related issues. I know that most of you have some familiarity with the way the American legal system works, and can appreciate this.

We realize, of course, that our inability to speak more openly on the topic does not allow us to put our best foot as far forward as we would want, but the situation is what it is, and so let me tell you what I can about what the investigation found, and most importantly, what GIA is doing now to move forward.

As many of you know, a lawsuit was filed against GIA and three other defendants last May which alleges, among a number of things, that certain members of the GIA grading staff accepted money to upgrade two diamonds in 2001. As to this issue, we have told you that we intend to vigorously defend ourselves in this lawsuit and feel confident in our position.

Following completion of the investigation, we issued a press release on October 18^th announcing:

The Board engaged outside counsel to undertake a comprehensive four-month review of policies and practices.
The investigators reviewed tens of thousands of documents, interviewed dozens of witnesses, and examined thousands of diamond grading reports.
Based on the findings, we terminated four employees.
Additionally, we announced that those few dealers who may have violated our code of ethics would be dealt with swiftly.

We can appreciate that many in our industry want to know if the violations of our code of ethics by former employees or dealers is systemic. Fortunately, the answer is no. I have been at GIA for over 20 years, and I have worked closely with the graders and other staff members. The graders at GIA today in my opinion are diligent, honest, and talented people deeply committed to the mission of the Institute.

Many in our industry are also speculating that the there are thousands of stones whose grades are suspect. The credible evidence presented by the independent investigative team indicates that a very small fraction of the diamonds graded by GIA over the ten-year period covered by the investigation may have been affected. As you all know, the grading of precious stones is not and never has been an exact science. Although I am proud to say that GIA has over the years developed fairly exacting standards to establish consistency in the process, at the end of the day, it is part science, part art, with the acumen, expertise and perspective of the grader all playing a role.

Most importantly, I want you to know that we stand by our reports. If you feel that any diamond graded by GIA for any reason requires a second exam, we will do so free of charge for the next six months. You can find out more details about this on our website.

The third point I want to make is that the few dealers we believe violated our code of ethics have been notified and told that we will not do business with them going forward. We have turned the names of these few dealers over to the appropriate law enforcement agency.

That said, I want you to know that we are working actively to instill a new culture at GIA.

Among the initial steps we are taking include:

The appointment of a Chief Compliance Officer who will report to GIA’s general counsel;
Annual mandatory ethics and professional conduct training for all employees; and
The retention of an outside, independent company to provide services, a hotline essentially, that will allow confidential communications between clients and employees with GIA’s board and senior management.

And, I will be stressing in my first end of year letter to all dealers that we will not tolerate any dealer attempting to give money to any grader for any reason or otherwise seeking to influence the grading process. Period.

I know that after an issue like this is brought to light, the only real remedy is in the actions we take. And that is how I ask you to judge us – by the actions we have taken to date, and the many more we will take in the near future.

I also want to take this time to say that we are thankful for the many expressions of support we are receiving from around the world. Many clients have contacted us to express their support and appreciation for what we are doing.

While we are sensitive to the criticism, at this time there is very little more I can say while the litigation is ongoing. Therefore, I am going to close, and I will not be able to take any questions at this time.

Thank you very much for your time and attention.