In the fall of last year, Antwerp s International Gemological Institute. Antwerp Lab Discovers and Reverses Undisclosed Temporary Color Enhancements

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1 Diamond Intelligence Briefing By Chaim Even-Zohar Vol.30 No.858 N16 June 2015 Antwerp Lab Discovers and Reverses Undisclosed Temporary Color Enhancements IGI s Findings Alarmingly Similar to Fraudulent Treatments Exposed by GIA EXCLUSIVE DIB EXPOSÉ In the fall of last year, Antwerp s International Gemological Institute (IGI) encountered multiple submissions for grading reports of a number of large temporary color enhanced stones, mostly in the low color ranges. While the Gemological Institute of America (GIA) recently went public in a major way identifying submitters of temporary color enhanced diamonds and recalling well over 400 certificates, Antwerp s IGI decided to inform relevant trade bodies in real time and let these decide on taking the required disciplinary actions, if any. They kept silent until DIB found out about it. However, before airing any charges with the appropriate authorities it made sure it had a reliable method to reverse the treatment and also was able to present solid proof that would withstand any legal challenge. It also reviewed all its internal quality controls and procedures, which allows IGI co-partner Zwi (Herman) Brauner to state with confidence that there is no evidence that any such [temporary color enhanced] diamonds were sold into the market with IGI certificates. Whether that is indeed the case time will tell, as there are growing indications that the fraudulently treated diamonds have been coated with an extremely thin film that may only become visible at 500 times magnification, if at all. The temporary enhancement treatment of the stones in Diamond Intelligence Briefing 1

2 the IGI lab was positively identified as a coating. There are growing indications that the color enhanced submissions made to the GIA [see previous DIB] were also coated. The IGI discoveries came around the same time the GIA was realizing that there was a problem. The coincidence of timing is suspicious but DIB was cautioned that it does not necessarily mean that the source and/ or method of the treatment is the same. Says Brauner: We had a few suspicious cases from several of the diamond centers. One of our clients alleged his coated stones originated from India. So far, none of the stones which were clearly found by the IGI to have this undisclosed fraudulent treatment came from any of the same parties that have been identified by the GIA. IGI s Roland Lorie GIA and IGI: Same Source? But the similarities are alarming. In the Antwerp IGI lab, recalls Brauner, to date, when identifying coated stones, a diamond s false (enhanced) color rarely exceeded H. Indeed, G color is the highest we ever observed. At the GIA there were also F, G, or H colors in the suspicious grading certificates that were recalled. GIA s Tom Moses cautions there are many types of coating, some simple and others more complicated and easier to see. The first coatings were developed in the 1940 s and we examined the first stone in We were involved with the courts in cases in New York in 1962 and 1963 where many stones were coated in New York and the perpetrators were prosecuted. Likewise, Zwi Brauner remembers that 25 years ago two stones GIA s Tom Moses submitted by the same company were found to be coated; initially grade as H color, they turned out to be K. We reported this to the police. The client was subsequently expelled from the diamond bourse. Treatment may not be Sophisticated Concurring with Moses, Brauner says there are several ways to coat diamonds. The simple and rudimentary coating can easily be removed with alcohol. The purportedly more sophisticated coating might not be removed as easily. Both IGI and GIA experienced that Author s Acknowledgments THE YET UNTOLD REVELATIONS... The IGI laboratory is one of the world s largest privately owned gemological laboratories operating in Antwerp, New York, Hong Kong, Mumbai, Bangkok, Tokyo, Dubai, Tel Aviv, Toronto, Los Angeles, Kolkata, New Delhi, Thrissur, Jaipur, Surat, Chennai, Ahmedabad and Hyderabad. It is a successful partnership between the families of Roland Lorie (60%) and of Zwi and Marc Brauner (40%). In the United States, the IGI has a local partner Jerry Ehrenwald. In writing this story, which has also considerable commercial and legal implications, I received invaluable help, guidance and advice from Roland Lorie and from Marc and Zwi Brauner. Roland Lorie has been the partner on the frontline confronting the official trade bodies which have the tools to take the disciplinary steps needed. Lorie has confided in us in great detail on these immensely significant aspects of the story. Following legal advice, DIB has decided to postpone disclosing many of these salient issues to avoid inadvertently obstructing ongoing investigations or jeopardizing the legal positions of the parties and ourselves. As journalists we wish to acknowledge Lorie s vital input which, in the end, remained quite invisible in this exposé at least for now. Chaim Even-Zohar the color enhancement is reversed through an acid boiling process but that doesn t necessarily mean that indeed the acid caused the removal of the coating. It might also be that a certain temperature level triggered the change. Diagnostics of a Fraud Discovery IGI partner Zwi Brauner was willing to be interviewed by DIB and share with our readers this remarkable story. Last fall we received several stones from a client who generally deals in large diamonds. We noticed a change of color, but at that time there was no longer proof, since the coating was removed during our analytical [grading] processes, says Brauner. [As reported in our previous issue, that s also what happened at the GIA it reported an Diamond Intelligence Briefing 2

3 instance where the original (true) color returned during the grading process.] Suspicious Client Behavior Any diamantaire submitting large (or any) stones to a lab has a pretty good idea what grade he will get, or might expect. When the reversal of color takes place during the grading process, and the lab reports a significant 3 or 4 lower grades, the client should get upset or, for starters, submit the stones for a recheck. When this doesn t happen, this by itself raises suspicions. By keeping silent the submitter clearly doesn t want to draw attention to the stone the lab itself may not be aware that the grade reversed during the grading process. Why tip them off? In the IGI case, about a week later the same client submitted a large stone, along with smaller stones, that appeared to be coated. Moreover, the IGI recognized that it had seen this stone four months earlier and then it looked different. Therefore, before commencing the grading, the IGI called in a deurwaarder, the Flemish word for a bailiff or a marshal s sheriff a judicial officer competent under the laws of Belgium to serve processes and whose statements [affidavits] are accepted by the courts as evidence, explains Brauner. Bailiffs Called to Witness Grading The deurwaarder [bailiff] who would witness all the suspect stone s grading procedures was Roger Dujardin, from the Marcel Briers & Roger Dujardin Company, who was assisted by his colleague Gaëlle Dujardin. These two officers trusted by courts issued and signed a sworn affidavit describing the grading and discovery of one of the temporary color enhanced diamonds, a copy of which was obtained by DIB. The following is based solely on the affidavit. Legal Proof of Temporary Color Enhancement The court officers [hereinafter: bailiffs] arrived at the Antwerp IGI lab on October 31, 2014, at 11:00 a.m., for the specific purpose of witnessing and reporting on the grading process of a 3.03 carat, submitted to the IGI by a client named J.H., who specializes in large diamonds. [Full name appears in the report.] The bailiffs were briefed by Herman [Zwi] Brauner and another gemologist identified as lab director Benoit Scheyvaerts. They were shown a round brilliant cut diamond of a G color and clarity of VVS2. The gemologists expressed their suspicion that the stone was coated, with a product that absorbs the yellow color in the diamond and therefore will give the stone a whiter appearance, says the affidavit. This enhancement would result in an overvalue for the stone of about US$40,000 states the affidavit, adding that their witnessing all the activities of the lab in the color grading process as the specific purpose for their presence at the IGI. Brauner declared that the client submitted the stone as a G+ color, but an earlier grading of the same diamond in Any diamantaire seeking a grading report knows what grade to expect. When the grade turns out to be much lower he will request a recheck. Keeping silent seems suspicious. IGI co-partner Zwi (Herman) Brauner July 2014 resulted a J color [which is four grades lower]. The same diamond has now been resubmitted by a different client, states the affidavit. Zvi Yehuda Colorimeter: Used for Polished? The approximate [original] color is also indicated by the Zvi Yehuda Colorimeter where a test of the stone results in a K color, notes the affidavit. Zwi Brauner explains that the Yehuda colorimeter isn t used for polished grading, but in suspicious situations, it is a good way to evaluate whether there is a cause for alarm. The colorimeter usually indicates the same (or within one-grade) color compared to the color assigned by our gemologists. The only possible exceptions where the instrument could be misreading are where there is a strong fluorescence or it involves Type IIa diamonds, says Brauner. Our findings show that the Yehuda instrument cannot be fooled by coatings of any kind, he adds. [IGI s Principal Roland Lorie, whom we also contacted, notes that the Yehuda rough colorimeter cannot be used for deciding the color of a polished diamond but it will tell you if you are close. In the case of suspicions of coating, a fraud that can increase the color by three or more grades, a check with the colorimeter can be useful. Diamantaires can also do that in their own offices. ] Diamond Intelligence Briefing 3

4 Manual Checking of Suspect Stone Back to the affidavit. Witnessing the manual grading process, I am shown master stones which compare the G+ stone with the color J. Even as a non-professional I can clearly establish the difference, states the affidavit. Subsequently, my assistant and I accompany the IGI gemologists to the Charlotte Quality Boiling BVBA located at the same floor in the building complex at Schupstraat 1, Antwerp. There we are met by manager Samuel Ollech and his employee Kenneth Van Boven who submit the stone for boiling, says the affidavit, stating that 99% sulfuric acid and 1% potassium nitrate (salt) is used in the process. The diamond is boiled during five minutes at a temperature of about 100 o Celsius, states the document. To make a long story short, after going back to the IGI lab it is clearly established that the G+ color was changed to J color. That was confirmed by all gemologists present and even a non-professional (amateur) could clearly see this, concludes the sworn affidavit, which was duly signed by both bailiffs on November 5, So far the sworn affidavit. Is it customary for a lab to take a diamond to boiling? Explains Brauner: If the Colorimeter assigns K instead of H graded by our gemologists, then we must seriously consider this as a possibility of coating of some kind. If cleaning the stone with acetone or with 98% pure alcohol does not change the perceived color (being H in this example), then we will boil the diamond in acid. This has happened only very rarely so far, but the above described procedure is precisely how we identified diamond coatings in the past, and is reason to believe that this is a meaningful identification method. Coating through Wrapping the Stone Coating usually consists of a microscopically thin layer applied on the surface of the stone; the improvement in color can often be dramatic. This is why we systematically carry out these tests, elaborates Brauner. Almost as an afterthought he adds that Type IIa diamonds are extremely rare, and special attention is required with such stones, especially when these are colorless and near-colorless. With these rare stones it is always preferable/advisable to boil such stones before gemological analysis. [As is known, virtually all CVD gem synthetics are also Type IIa.] The Zvi Yehuda Colorimeter The GIA is inclined to believe that its discoveries also are coatings, possibly in conjunction with some other treatment that changes the internal structures in the stone. At the time of writing, the GIA had not yet conclusively established whether the temporary enhancements it identified in its (May 12, 2015) alert also was a coating method. In a personal conversation, Moses says that there seems to be evidence that a coating was applied, but it may well be that it was in conjunction with some other treatment that may have impacted the composition of the lattice of the stone. I believe we will have diagnostic information soon. I like to make sure we have solid facts and clear evidence prior to releasing information. When we do release information, I want to make sure we are able to let the industry know not only what the treatment is, but how to detect it and protect themselves from purchasing such stones. IGI: It is Coating! In the case of the dozen or so instances of color enhancement recently encountered by the IGI in submissions by clients, the gemologists have established with certainty that it is a coating process. Not all known coating treatment processes necessarily are applied to the entire stone, but this is precisely what the IGI suspects in this recent wave the enhanced stones all feature an all-around film wrapping of some sort. Both the IGI and the GIA, at the time of writing, have not been able to determine the material (the ink or pigments ) used. If it is some kind of organic material, detection is extremely complicated. Diamond Intelligence Briefing 4

5 SEVERAL PICTURES FROM THE BAILIFFS AFFIDAVIT DESCRIBE THE SEQUENCE OF DOCUMENTED EVENTS Diamond Intelligence Briefing 5

6 Catching the Fraud Perpetrators Indeed, Zwi Brauner confirms that at this time we do not yet know what the exact chemical composition is of the coating, or the techniques used to apply these more sophisticated coatings to diamonds. Do you think the inventor or treating parties were aware of the temporary nature of the treatment, or would you call this unintended consequences? A criminal s accident? Anyone applying a film-like layer onto the skin of a diamond, does it for a good reason. Inventors generally know the strengths and weaknesses of their own inventions. What explanations did the submitter of these coated stones give you?, we asked. Says Brauner: We did not ask for an explanation, and none was given. What makes the IGI story so important, also (or maybe especially) from a legal perspective, is that one seldom has an opportunity to see a fraudulently coated stone before and after grading and document the reversal process. In every instance! Seeing a before and after is exactly how you detect a coating, concludes Brauner. What counts, however, is that we did establish various possible ways for identification, and devised, we believe, a most meaningful detection and reversal procedure that is applied in all IGI labs. Looming Lawsuits and Criminal Investigations In disclosing information on suspected criminal Everybody is walking on eggshells, carefully hedging every word, every statement. But by keeping the silence, the fraud will not dissipate and the threat to the industry won t go away. activities, gemological laboratories must carefully weigh the sometimes contrary stakeholder interests in both warning the public and at the same time allowing law enforcement agencies to conduct their investigations in an effective manner. Talking in a most general way, and not specifically about the present color enhancement cases, diamond companies will not hesitate to take their laboratories to court and claim mammoth damages. That doesn t necessarily mean that they have not committed a fraud, but rather expect that the lab may not be able to prove their allegations. Knowing something for sure is one thing; proving it in a court of law beyond any reasonable doubt is an entirely different matter. The way IGI decided to create legal before and after evidence is exceptional and commendable. It proves the enhancement beyond any doubt. But it doesn t necessarily mean that the submitters were either aware of the enhancement, or were themselves involved in applying the treatment. Apparently every involved party is acutely aware of the enormous reputational, legal, commercial and financial ramifications at stake in a fraud of mammoth proportions and that lawyers may well be brought in at the earliest stages. Everybody is walking on eggshells, carefully hedging every word, every statement. But by keeping the silence, the fraud will not dissipate and the threat to the industry won t go away. Stay tuned there inevitably will be more developments shortly. DIAMOND INTELLIGENCE BRIEFING (formerly Diamond Intelligence Briefs) is published on an occasional basis (between issues a year, depending on the subjects) to provide significant news, background information and research indispensable to executives in the diamond and diamond jewelry business. While the information herein is carefully compiled from sources believed reliable, no responsibility for its accuracy can be assumed and no representation of warranty expressed or implied is made as to their completeness or correctness. Diamond Intelligence Briefing may not be reproduced, distributed, published or used otherwise for any purpose but for the personal information of the subscriber without the prior written consent of the publisher. 1 year subscription - US$590 * Individual issues of DIB are available for purchase online at: Editorial and Research Management: Editor: Chaim Even-Zohar, Graphics: Anat Hod, Subscription and Circulation: Jacqueline Reardon CEZ Holdings Ltd. PO Box 3441, Ramat Gan 52136, Israel Tel: , Fax: office@tacy.co.il Copyright 2015 by CEZ Holdings Ltd. Diamond Intelligence Briefing 6