GIA Mystery Treatment Case Arrives in Court in New York

31/05/2016 08:51

Two Israeli diamond firms – LYE Diamonds Ltd and ESGD Diamonds Ltd belonging to Gaby and Yossi Yelizarov – have laid down a lawsuit in New York against the Rapaport Group and the GIA relating to a case of a mystery treatment that the GIA said temporarily improves a diamond’s color. The GIA said it discovered the treatment last year which it claims temporarily improves a diamond’s color. The lawsuit case relates to a case a year ago when the GIA said that it discovered around 500 diamonds that, in its view, had been treated by a previously unknown color-improving process, JCK explains. It also banned and publicly named the four Israeli companies that it claimed submitted the diamonds.

The GIA said at the JCK Show Las Vegas last year that it was “close” to figuring out what the treatment was. Since then, there has been almost no word about the case, until last month, two of the named Israeli companies—L.Y.E. Diamonds and E.G.S.D. Diamonds—filed suit in New York state supreme court charging GIA and Rapaport Corp. with defamation, trade libel, tortious interference with a contractual relationship, and other charges. The case was subsequently moved to New York federal court. The suit calls the GIA’s statements, as well as Rapaport’s publication of them, “defamatory and false,” JCK reports.

“[The two companies] never treated any diamonds submitted to GIA with a process that temporarily masks the inherit color of a diamond and can lead to a higher grade,” it says. “GIA could not have reasonably suspected that [the] diamonds submitted were treated…. No such treatment was ever used.” The companies further claim that GIA contacted the Israeli police about the case, who investigated but eventually closed the case. An arbitration at the Israel Diamond Exchange found GIA lab director Tom Moses’ testimony “unpersuasive,” according to claims in the same legal papers.

Doron Leiby, lawyer for the plaintiffs, tells JCK: “To be very clear, our clients did not treat their diamonds in any way, and were completely shocked by this entire episode.… The Ylazarov family [owner of the two companies] is eager to be vindicated by the court of law, to remediate the damage done in such an unfounded way by GIA and Rapaport in the court of public opinion." A separate report says the firms are suing the GIA and Rapaport for $180 million.

According to an Israel bourse arbitration report, the GIA's Tom Moses testified that 252 of the 500 diamonds were received back from GIA and then retested. The report says the GIA found that 24 percent showed no change in color, 40 percent had their color downgraded one grade, 29 percent had their color downgraded two grades, and 7 percent had their color downgraded three grades. GIA told JCK's Rob Bates that it is aware of the suit and plans to “mount a vigorous defense.” It had no updates on the nature of the treatment, and has not filed a response at press time. Rapaport Corp. chairman Martin Rapaport did not respond for a request for comment, but legal papers filed by company counsel says the division being sued (Rapaport Diamond Corp.) does not publish the site or price list.