Fraudulent EGL Lab Reports

[Todd Gray]

An alert has been posted on the RapNet diamond dealers trading network that the World Federation of Diamond Bourses (WFDB) issued a notice to its members on Friday, April 9, 2010 stating that “fraudulent EGL certificates have been traded on the Rapaport website.”

RapNet members are being urged to "carefully examine all laboratory graded diamonds to ensure that their accompanying certificates are not fraudulent and to immediately notify RapNet via email should they identify any fraudulent grading reports in the market."

Reports of counterfeit lab reports surface within our industry from time to time, I feel they serve as good reminders that it is important for diamond dealers and consumers to conduct their own due diligence when making a significant purchase, whether the product being purchased is a diamond or something else of value. Most of the prominent gemological laboratories provide a way for diamond grading reports issued by their laboratory to be verified online, but many consumers are not aware that this "report check" option is available... So I thought that this might serve as a good reminder

 

[Lorelei]

Date: 4/18/2010 1:01:40 PM
Author:Todd Gray
An alert has been posted on the RapNet diamond dealers trading network that the World Federation of Diamond Bourses (WFDB) issued a notice to its members on Friday, April 9, 2010 stating that “fraudulent EGL certificates have been traded on the Rapaport website.”

RapNet members are being urged to ''carefully examine all laboratory graded diamonds to ensure that their accompanying certificates are not fraudulent and to immediately notify RapNet via email should they identify any fraudulent grading reports in the market.''

Reports of counterfeit lab reports surface within our industry from time to time, I feel they serve as good reminders that it is important for diamond dealers and consumers to conduct their own due diligence when making a significant purchase, whether the product being purchased is a diamond or something else of value. Most of the prominent gemological laboratories provide a way for diamond grading reports issued by their laboratory to be verified online, but many consumers are not aware that this ''report check'' option is available... So I thought that this might serve as a good reminder

Thanks for the heads up Todd.

 

[oldminer]

I wonder what makes this particular group of reports fraudulent enough to worry about them. If it was accuracy that was the problem, then one might think the entire report of fraud might be a late April Fool's joke. Maybe it it is the wrong color ink or the paper stock was not quite the right color. Could it be the reports are too accurate? What could the problem of fraud be since these reports are regularly discounted by the trade anyway. Not enough discount??????

Do you think a diamond dealer looked at the grading and actually said, "This report is too liberal for me to even offer it with the diamond." Come on, if the first dealer said such a thing, the next dealer bought the stone and made money with it.

If it wasn't such a sad situation, it would be completely funny.

 

[oldminer]

A concerned Pricescoper professional just emailed me with their concern that I am a competitor with EGL. I don''t grade loose diamonds for the trade and have not for over two years now. AGA was sold to an employee in January 2008. Nearly all my work on unset diamonds is for consumers and my trade work is all mounted jewelry oriented. I did not make the post above to knock EGL, particualry EGL-USA which I have often been very complimentary of in recent years. I have defended the work EGL-USA has done to improve its grading and the professional way it has shared scientific lab information. However, EGL-USa is not the GIA. THe other EGL labs from other part of the world are not on the same plane as EGL-USA. They could be, but they have made their choices most evident. I wrote the above post with a good sense of sarcasm and humor which should be easy enough to see and enjoy.

If any lab wants to be in the category of GIA or AGS in the USA, they would have a very hard time of it. GCAL is a most serious competitor for this title and maybe EGL-USA would like to compete in that arena, too. There are many who''d like to be crowned with such an honor, but only a couple will ever have this prestigious position. The rest will be like Avis, number 2 always tries harder.

 

[denverappraiser]

Selling counterfeit goods is a crime. Rappaport is right to be concerned that they may be unwitting participants and to warn their customers of the same.

Any buyer who feels that they may be getting counterfeit merchandise from ANY lab is right to question the dealer over it. It’s a legitimate concern. If you’re not convinced, find a different stone and possibly a different dealer.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[kenny]

What I want to know is why aren't softer grading standards than GIA considered fraudulent?

An F VS2 that is actually not an F VS2 but is sold as an F VS2, and shown to all of her girlfriends as an F VS2 is . . . uhm . . . well . . . you tell me.

If a diamond GIA said was 1 carat was reported to be 1.2 carat by EGL there would be outrage.
Color and clarity also set the price, so how do these labs get away with calling an H SI2 an F VS2, while everyone just turns their heads?
Where is the outrage?

Yes grading involves human judgement but GIA and AGS use humans and they both manage to maintain a highly respected degree of grade integrity.

 

[Karl_K]

Date: 4/18/2010 3:12:09 PM
Author: kenny
What I want to know is why aren''t softer grading standards than GIA considered fraudulent?


An F VS2 that is actually not an F VS2 but is sold as an F VS2, and shown to all of her girlfriends as an F VS2 is . . . uhm . . . well . . . you tell me.


If a diamond GIA said was 1 carat was reported to be 1.2 carat by EGL there would be outrage.

Color and clarity also set the price, so how do these labs get away with calling an H SI2 an F VS2, while everyone just turns their heads?

Where is the outrage?


Yes grading involves human judgement but GIA and AGS use humans and they both manage to maintain a highly respected degree of grade integrity.

The grades are not legally defined by law like they should be.

 

[kenny]

Maybe we need a President, Senator or Supreme Court Justice to get her edjumacation by finding out her EGL F VS2 (which she got at such a "great price" compared to those expensive GIA diamonds) is not actually an F VS2.

 

[WinkHPD]

All of the above conversation makes a good case for why a consumer might want to use someone who actually looks at the diamonds they ship rather than a drop shipper.

Wink

 

[denverappraiser]

Date: 4/18/2010 3:12:09 PM
Author: kenny

Where is the outrage?

There’s plenty of outrage. The classic advice given over and over again here is to never rely on a Non-GIA or non-AGSL lab grade for a shopping decision, regardless of the grade claimed and regardless of the price for the same reason that people are told not to rely on a dealer in-house grading. It’s not that the dealer is wrong, and it’s not the lab that makes a beautiful diamond beautiful, it’s a matter of deciding where to place your trust.

I disagree with Karl that we need this to be written into law. We’ve got plenty of laws. For starters, the grades are far to judgment based to make a rational law. A cynic would suggest that this is designed into the system. There are dozens of industries that talk about color, for example, ranging from fabrics to printing to optics. They have well defined and scientific approaches to it, they’re generally pretty similar to one another, and even THOSE aren’t codified into law. The D-Z scale that we use for diamonds is way outside of the norm. Clarity is even worse. Our definition of ‘flawless’ would be worse than useless for the people who make lenses or microchips.

The solution is exactly what happens here on Pricescope... Consumer education. If people refused to buy stones with unreliable paperwork, the industry of producing these documents would evaporate.

What, as a thought, would happen if PS stopped listing stones from labs other than GIA and AGSL? That would surely reduce people’s reliance on them, at least in this little microcosm. Maybe it’s not so little. They already do this for stones from most of the ‘2nd tier’ type labs as well as dealer graded stones. It would be easy to do. It’s relatively recent that they added IGI to the approved list for example. Does this count as some sort of an endorsement of EGL, EGL-USA and IGI over, say, AGA, PGS, DCLA or others? I think it does, and they do it for the same reason that many of the dealers do it. Customers like the illusion. They want to believe, and the dealers want to deliver what the customers want (or at least what they think they want). I don’t know the figures but I’ll bet we’re talking about half of the stones in the PS database and I further suspect that the size of that database is directly related to Pricescope’s revenue. As they say, money talks.

We’ve got dealers here, Blue Nile, HPD and NiceIce come to mind but I’m sure there are more, who simply don’t list EGL graded stones for sale. They’ve all made decisions about this, including the ones that choose to list the other labs. Those who limit their selection have access to and could sell many of those same stones that are listed here but they pick and choose what they want to be involved with. They won’t rely on these other labs and they don’t want to ask their customers to do so either. Others insist that the stones be shipped to them first so that they can provide an in-house exam rather than relying on the lab at all. It’s their reputation on the line as well as that of the lab. Still others count it as a ‘buyer beware’ situation and point out that it’s offset by the lower prices of similarly graded stones by different labs and want to offer their clients the biggest selection possible. Who’s right? I don’t know, They all have a point but I think this endorsement makes Pricescope an active participant in which labs are, and which aren’t accepted. We have a remarkably powerful voice here.

It’s not all Pricescope. On the scale of things this is still a tiny marketplace. The labs could fix this if they wanted to although some have a difficult legacy to overcome. It would take years but it IS possible. GIA was the first but AGSL isn’t even 15 years old and has built a considerable reputation in that short time. PGS and GCAL are both examples of other well regarded newer labs that are not often discussed here, at least in part, because they aren’t included in the database. The lab industry isn't nearly as static as you might think.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[Todd Gray]

Date: 4/18/2010 8:25:03 PM
Author: denverappraiser
Clipped...

We’ve got dealers here, Blue Nile, HPD and NiceIce come to mind but I’m sure there are more, who simply don’t list EGL graded stones for sale. They’ve all made decisions about this, including the ones that choose to list the other labs. Those who limit their selection have access to and could sell many of those same stones that are listed here but they pick and choose what they want to be involved with. They won’t rely on these other labs and they don’t want to ask their customers to do so either. Others insist that the stones be shipped to them first so that they can provide an in-house exam rather than relying on the lab at all. It’s their reputation on the line as well as that of the lab. Still others count it as a ‘buyer beware’ situation and point out that it’s offset by the lower prices of similarly graded stones by different labs and want to offer their clients the biggest selection possible. Who’s right? I don’t know, They all have a point but I think this endorsement makes Pricescope an active participant in which labs are, and which aren’t accepted. We have a remarkably powerful voice here.

Neil Beaty

GG(GIA) ICGA(AGS) NAJA

Professional Appraisals in Denver

I can't speak for the other vendors, but we don't list EGL graded diamonds for sale, because, I personally, can't wrap my head around their grading... As I tend not to agree with the grades which I have seen assigned to diamonds graded by the EGL, I do not feel that we can represent EGL graded diamonds and maintain our integrity... This is not to say that I always agree with the grade of a diamond assigned to it by other laboratories such as the AGS, GIA, or HRD, but I find that I do much more often than not.

 

[Modified Brilliant]

Before making a major purchase of anything, a consumer should do a little research.
As an example,
coin grading services vary from the conservative (accurate) grading to liberal (inaccurate) grading.
The dealers and retailers know who does what and the educated consumer also knows and makes their
decision. Sound familiar? Coin dealers and grading service companies are not federally regulated and there are
dozens of qualities (much more subjective) than diamond grading.
It is indeed troubling to those of us in these industries but nothing ever changes. When asked.....
my "mantra" to novice diamond buyers is before you spend your hard earned money...do some research!
And I get asked frequently..."Where is a good place to buy a diamond?"
Educate. Research. Compare. And you will answer your own question.