Grading Company bans dealers for bribery.

ndleo

GIA Scandal

Anyone who has been suckered into buying a diamond with a GIA cert (the 4 C's as they call it) may have been scammed. I guess several large national diamond wholesalers were bribing graders for higher grades. The scandal broke when a Saudi prince bought $15 million worth of diamonds with GIA certs and his independent grader said that the diamonds were overgraded.

The banned dealers supplied many retail chains, so it is likely that a lot of people out there have an overgraded diamond. GIA has offered to regrade any customers' diamond for free. (What idiot would want to have a diamond regraded so that he can lose money?). PSA just bought a gem grading company (not GEM), so we could be seeing PSA certs at Zales.

This would never happen in our hobby.

RipublicaninMass

very interesting, this could never happen with cards though

1420sports

very interesting, this could never happen with cards though

GAI ... I mean GIA certified diamonds are overrated anyhow

kennylow

Thanks for the link. I would not be surprised if something like this happened with one of the big, reputable grading companies...and I mean any of them. I would be very disappointed and sad, but it wouldn't be shocking.

Let's hope the grading companies read this article and always keep these things in mind so they can nib anything in the bud.

ndleo

The diamond industry is much larger than sportscards and I assume more sophisticated. In another article I read, some dealers are telling customers to put off any diamond purchases for six months to see how this all shakes out. This could hurt the entire industry for a while and maybe forever damage the trust.

It is interesting to note that the scam dealers were buying up raw diamonds at 20-30% higher than market value because they knew they would get higher grades on them.

Munchjs

Hi Folks,

I am a gemologist and I have solded and verified many diamonds graded by GIA. The scandal involves such a tiny portion of the diamonds market. In my experience, GIA has been the strictest dimaond grading lab. The scandal involves a few wholesalers that bribed the diamond graders. The other labs have far worse histories for overgradings (EGL, IGI). Funny thing is that you can also rebsubmit a diamond to any of the labs hoping for a better grade, although diamond grading has better definitions than card grading. You can rebsumit a PSA 8 five times and it can come back a 10 (I did this once). IS that worthy of a scandal?

Jason

ndleo

GIA wouldn't give names, but according to a story in Wednesday's Wall Street Journal, sources told the paper that the new group includes at least three more prominent dealers who sell to larger retailers or private clients.
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If this scandal is so small, why doesn't GIA release the name of the dealers and the cert numbers affected? So far the only offer has been a free re-grade, which would actually hurts the consumer. This story broke last year and it keeps getting bigger.

I'm sure that GIA has a good system, but this scandal proves they are no better than PSA or any other grader. The difference is that most collectors can tell if a card is over-graded and bid accordingly. With diamonds, most customers are at the mercy of the seller and GIA when it comes to grading. IMHO, this scandal is worse than a card grading scandal.

Munchjs

The scandal is not small. The percentage of diamonds misgraded is small. I am saying this as an industry insider. GIA can't release the dealer names due to lawsuits of slander and libel. I wish they would release them, though...

DeutscherGeist

ndleo is right. We can usually tell if a card is overgraded, but a diamond is not something that people will learn or know to grade. We are at the mercy of graders on that one. It is scandals like this that make me hate diamonds more and more. I mean, they do not have any intrinsic value in the first place--or they are super inflated due to artificial market pressures (monopoly of De Beers).

When I get engaged, I rather just have custom made gold jewelry in old Celtic/Norse style. $5000 can get a very fine tiny diamond, but it can also get about 9 ounces of gold--think about the possibilities on that one. Decent sized braclets, cloak pins, brouches, necklaces, tiaras, etc.

ndleo

Funny that DeBeers is pressuring GIA to identify the dealers involved. I find this very hypocritical on DeBeers' part. They actually benefitted from the scandal since the raw diamonds they auction off went for above normal market prices. They didn't question it when large dealers were bidding up prices because of the paid grades. Now they are acting like the Dick Tracy trying to find the crook.

I wonder if the mainstream TV media will pick this story up. That would force GIA to release the names and correct the situation. The sad part is that no one who can do anything about it has any interest in making this scandal more public. It will take action from a state Attorney General to fix the problem.

DeutscherGeist - I'm with you, but the diamond cartel marketing has worked wonders on women. To most women diamonds = degree of love. Also once you buy one, you have no interest in watching its value decline, so you perpetuate the scam. It's a pretty good system. PSA/BGS could learn a few things from these guys.