SPECTRE OF SYNTHETIC STONES

The story had all the makings of a theatrical potboiler, an international conspiracy concerning diamonds, a fraud intended to be committed across intercontinental destinations, the potential for huge unscrupulous gains, multi corporate dealings, questions about the damage already caused and perhaps even business rivalry, all of which came to light by the vigilance of a simple individual in a laboratory, doing his job well.

May 2012. A summer afternoon in New York. A parcel of 145 seemingly high quality, large, type IIa diamonds purchased on the usual 60 day credit by the polished diamond dealer, as ‘natural stones’, was sent to the International Gemmological Institute (IGI) for certification as ‘natural diamonds’. A careful analysis revealed that these were not natural but synthetic or lab grown diamonds. The dealer was informed whereby he produced the batch of more than 600 stones, all CVD synthetics that he had bought through a diamond broker, as natural rough stones, under the full price. If this batch of diamonds had not been providentially discovered, the parcel would have flown out to consumers, marring the reputation of the seller and the integrity of the industry.

Alarmingly, the IGI found that around the same time, smaller parcels of synthetic stones had also been submitted to IGI’s Mumbai and Antwerp laboratories in addition to National Gems & Jewellery Technology Administrative Centre (NGTC) laboratory in China, for certification as natural diamonds. All these sets of goods were CVD synthetic diamonds, likely to have come from the same source as their characteristics were similar.

This was serious fraud discovered and nipped in the bud. IGI informed others in the industry, the Belgian Federation of Diamond Bourses (BFDB); DTC Research; and the Antwerp World Diamond Centre (AWDC). Additionally, IGI also shared detailed scientific information with other gemological laboratories around the world to keep them in the loop. Even as the parties deliberated the next course of action, DTC Research issued an alert to its sight holders informing them of this breach of trust in the industry.

This was followed by the IGI issuing an intra-laboratory alert warning members of the gemmological community to be vigilant, and treat with particular caution any parcel of stones containing an unusually high proportions of type IIa’s.

The DTC Research alert informed its members of the attempted fraud declaring that in each case, the CVD synthetic diamonds had similar characteristics and a common source, besides being heat treated post synthesis. The DTC also stated that “the combination of characteristics in the undisclosed stones was ‎strikingly ‎similar to that reported by the Gemological Institute of America (GIA) for 16 CVD synthetics ‎received earlier from ‎Gemesis Diamond Company.” DTC thus effectively implied that Gemesis Diamond Company, a key manufacturer of synthetic stones, was the owner of the undisclosed synthetic stones, and had deliberately and fraudulently heat treated the stones to make them look like natural diamonds.

Gemesis Diamond Company, CEO Stephen Lux then released a statement that “Yes, Gemesis had been on the brink of bankruptcy earlier but it was not involved in selling rough diamonds as mined. Also, there were several companies practicing the CVD technology. As DTC and IGI knew, CVD stones whether made by Gemesis or others would be indistinguishable from each other. Moreover, Gemesis had been the most open in terms of working with grading labs and going through certification of its synthetic stone through laser engraving.”

As reported by diamond analyst, Chaim-Even-Zohar, in Diamond Intelligence Briefs, in 2010 Gemesis, on the verge of bankruptcy, was bailed out by Indian diamantaire, Jatin Mehta of Su-Raj Diamonds, who acquired a controlling interest in the company through his son, Vishal. The name was changed to Gemesis Diamond Company and the production facilities were moved from Sarasota, USA to Malaysia, which today produces lab grown diamonds through the HPHT method while Gemesis in Singapore uses the CVD method for manufacturing synthetic stones.

The World Federation of Diamond Bourses (WFDB) President, Mr Avi Paz also urged members to identify synthetics and disclose any treatments used on diamonds failing which the rules relating to trading in misrepresented or undisclosed products, whether inadvertently or not, would be invoked. “Any violation of these rules could be grounds for suspension, expulsion, fine or other appropriate disciplinary measure,” he warned in the interest of maintaining transparency in global business so that consumers could receive full disclosure about the diamonds they purchased.

It was clear that someone was interested in passing off synthetics as natural stones along with an authentic laboratory certificate, thereby intending to cheat consumers and commit a huge fraud involving tens of millions of dollars. But there could be something more.

A source close to the diamond industry pointed out ‘in spite of a fraud being committed, no police complaint was made anywhere. Not in New York, Antwerp, Mumbai or even in China. Even the stones, presumably imported into these countries on fake documents as natural stones, had not been confiscated by any legal authority.”

When questioned, Mr Roland Lorie, CEO IGI, agreed, informing DW that “if only a few stones would have been brought for certification, one could assume that it was an accident. But over 600 stones is not an accident. In this particular case someone tried to cheat by selling a product stating it as another. This is illegal in business. A police complaint will maybe follow, but the question is who will make the complaint. Many meetings are taking place with all the major players of the industry.”

Without getting into the questions of who did what to whom and why, it is clear that just as the diamond industry was going from outright denial and opposition to a slow acceptance of synthetic stones, this incident has threatened to jeopardise trust and integrity, the corner stone of the global diamond industry. Reputed diamond dealers coming together on this issue agree that synthetics don’t pose a threat to the community as long as they are properly disclosed.

Disclosure Is The Key

Mr Russel Mehta, managing director of Rosy Blue (India) succinctly points out to Diamond World, “The diamond business is based on ethics and a certain code of conduct. We do not have any written contracts and work with a handshake and our words. If we 'shortchange' this ethics and sell synthetics without disclosure, we shall be eroding the value of diamonds completely.”

IGI expressed a similar sentiment in its statement. “Trading in misrepresented or undisclosed products, whether inadvertently or not, could cause irreparable damage to the industry’s reputation. Furthermore, such irresponsible practices could undermine the integrity of the diamond supply chain, damaging both trade and consumer confidence.”

Probably anticipating this dreadful prospect, the Gem and Jewellery Export Promotion Council (GJEPC) had conducted a seminar in February 2007, to understand the potential of lab grown diamonds in the long run and define the way forward. Following this incident, the GJEPC also issued a statement recalling the 3D norms of disclosure, differentiation and detection, which were made mandatory for the industry to follow while dealing with lab grown diamonds.

The bottomline was disclosure. “Only if we co-mingle them with natural and sell synthetics as natural, then we have a huge issue on our hands!” adds Mr Mehta.

Yet, the temptation not to do so, could be huge for unscrupulous manufacturers and dealers, considering the price and quality differences between a natural diamond and a synthetic stone and the difficulty of detection.

Natural V/s Synthetic

Natural diamonds are formed 100 miles below the surface of the earth, when pure carbon is subjected to high temperature and pressure and crystallises to be delivered to the surface through volcanic eruptions. While the earth takes millions of years to craft a diamond rough, synthetic diamonds are grown in a laboratory within a week, either through replicating the earth’s high pressure high temperature (HPHT) process or by the chemical vapour deposition (CVD) technique. In both these processes, a small diamond seed is placed in an environment that contains carbon, the atomic component of diamond. Under suitably controlled conditions, the diamond grows, atom by atom, recreating nature’s process in a laboratory.

Initially, synthetics were used to manufacture drill bits and abrasives for industry besides laser technology, medical and scientific equipment. In fact, the company Element Six, part of the De Beers group, is still focussed in this area, informs Ms. Lynette Gould, Head of Media Relations, De Beers Group.

But as the technology improved, synthetics entered the gem industry. Today, Gemesis Diamond Company avers to have lab created colourless and fancy yellow diamonds, the finest quality of Type IIa diamonds. Less than two per cent of the world’s natural diamonds are type IIa.

Stephen Lux informs, “lab production of smaller diamonds is not economically viable as the process requires exceptionally high capital investment. The majority of lab grown diamonds are between 50 points and 1.50 carats with fancy yellow stones being more than 2.50 carats each.”

Being composed of the same raw material, such lab grown diamonds have the exact identical hardness, specific gravity, refractive index, dispersion factor, chemical composition, besides physical and optical properties as naturally mined rough diamonds. Both are polished with the same equipment and have the same brilliance, sparkle and fire.

The Gemological Institute of America (GIA), which grades and certifies diamonds, acknowledges that synthetic diamonds are, in fact, real. The only difference is while a natural stone will have more inclusions and flaws in its crystalline structure, the lab grown diamond is more frequently of a high quality and costs less.

“Prices of synthetic stones being sold on the web are at least 30 per cent less than natural diamonds of the same certifiable characteristics,” informs Mr Lorie.

The diamond industry has accepted these stones, as it is possible for naturals and synthetic to coexist in the same market.

Co-Existence

“Diamonds and synthetics can coexist as these are two completely different propositions,” says Ms Gould. “Extensive independent consumer research demonstrates that people want the real thing to mark significant milestones, personal achievements and emotional moments for which synthetics will not suffice. If synthetics do enter the jewellery market we believe they will occupy a similar position in the market place to cubic zirconia, moissanite and other costume jewellery.

“The crucial point for the diamond industry is to differentiate the natural from the synthetics in order to leave the choice to the consumer. The consumer has the right to know what she is buying,” she adds.

The Flood Of Synthetics?

Currently only sophisticated laboratory equipment can distinguish between the two, not a diamond dealer with his loupes and microscopes. Also, considering that it is not economically viable to certify the smaller stones, only the large stones come for certification, which means that it is quite possible for the market to have been flooded by the smaller synthetic or lab grown stones.

Agrees Mr Lorie who informs, “We now suspect that the volume of colourless synthetic diamonds being released on the global markets has increased noticeably.”

To allow diamond dealers the power of detection, De Beers has developed a compact proprietary detection technology that can identify all synthetics, however small, informs Ms. Gould. “It is up to the industry to ensure that everyone uses this,” she adds.

It would be in the interests of the industry because as Ms. Gould points out, “FTC guidelines require full disclosure of any synthetics, simulants or treated diamonds at any point of sale along the supply chain. Additionally, the industry has adopted a number of standards such as the Responsible Jewellery Council that requires full disclosure of synthetics. Furthermore, compliance with The De Beers Best Practice Principles is a contractual requirement for DTC Sightholders. Non-disclosure of synthetics, treated diamonds or simulants could result in a termination of their supply contract.”

Even as the industry attempts to regulate the disclosure of lab grown stones, there is no doubt that these diamonds are here to stay. They are near perfect, affordable and environmentally safe, besides being sold with a replacement warranty. “It is up to the manufacturers to create the awareness and demand,” says Mr Lorie.

However, if such incidents repeat, and the consumer begins to doubt the authenticity of natural diamonds, India would be the biggest loser as it holds the largest stock of natural diamonds.