The sudden resignation of Gemological Institute of America (GIA) President Donna Baker last month perplexed many and set off endless rumors. Oddly – or maybe not so oddly – quite a few stakeholders expressed relief or even joy with her departure. It was an open secret that her management style was viewed by some as autocratic, leaving too little room for either dissension or free-flowing dialogue. She was cordial, respectful – but insisted on doing everything her way – squarely in the best interest of the GIA. But the overwhelming reaction was one of profound sadness and shock. Donna was – and still is – very much admired, appreciated and loved.
Under her presidency, the GIA went global – something that previously had been resisted, partly to protect certain external interests. The GIA now has labs in Mumbai, Botswana, Israel, Tokyo, Johannesburg, Hong Kong – all in addition to its New York and Carlsbad laboratories. It provides take-in services in Dubai and continues to operate a research arm in Antwerp. In 2005, GIA had only the US labs and the Antwerp research activities.
However, she wasn’t an easy “boss”. Says one insider: “She wasn’t autocratic. She valued opinions and listened. There were some things where she had no compromises. Ethics violations, even minor ones, could get someone fired. And leaking sensitive info out of the building was another. She allowed a lot of input into policies, but once these policies were in place, they were strictly enforced for everyone.”
While ethics was Donna’s first priority, reducing turnaround time for grading was a close second. As soon as she ascended to the Presidency seven years ago, she and Senior Vice President Tom Moses promptly ended the lab membership system, improved customer service and, within a few months, got turnaround time down from 5-6 weeks, to 1 week or 10 days. [Turnaround time has gone up again to over 20 days in the past year but it is because of extremely heavy volume and import/export restrictions in Mumbai, not lack of interest from management.]
Donna was in many respects the antithesis of her predecessor. She wasn’t trying to win any popularity contests, nor did she seek to maintain the Chinese or North Korean-type leadership cult nourished previously.
She was appointed to do a virtually impossible job: to halt the abyss facing the GIA of what had become – at least in the certification area – a corrupt organization, to restore integrity to this great institution, and to make GIA’s grading system and gemological lab once again the most respected and treasured in the world. Though the vast majority of employees were ethical, honest and professional, those who abused (and endangered) the organization were quite senior and their shady activities were tacitly condoned from the top. There were powerful forces determined to make her fail. They failed – and Donna was successful. Today there is no better, no more trusted, no more reliable certificate in the market than the GIA’s.
No, she didn’t do it alone. She was helped by Tom Moses, and many others. But there remained some who longed for the “old days and ways.” The very fact that on this week’s Facebook profiles and online news forums there are those hunkering for a restoration of previous management, also from within the GIA itself, is a sign that some people still don’t get it – or have simply forgotten. Selective forgetfulness is a convenient disease. Let’s help these lost minds remember.
Search for successor set in motion
We have faith in the leadership and independent mind of the current GIA Chair, Borsheims President and CEO Susan Jacques. She participated in the May 2006 GIA Board of Governors meeting where a furious GIA President Bill Boyajian resigned after a (secret) ballot approved a document that contained some serious allegations about management conduct by an overwhelming majority of Governors.
A few months earlier, in late 2005, Donna had been appointed Senior Vice President and Legal Counsel with responsibility (shared with Linda Scholl) for compliance matters. She reported directly to the Board of Governors, while President Bill Boyajian was basically demoted to a non-active status. Donna served the newly appointed Chairman Ralph Destino in the GIA’s most difficult hours. Later in 2006, Donna was appointed Interim President and later that year Helene Fortunoff became the Chair of the Board. The current Chair, Susan Jacques, was elected to this position in 2009.
Donna didn’t continue the GIA’s daily routine and business practices after assuming office. There was no favoritism. There was zero tolerance for bribery. There were no favors to donors. She was a hard-working lawyer who (unfortunately) never developed a great love or compassion for gemology as such. She had a job to do – and she did it extremely well. In the process, she didn’t make too many friends and held a professional distance – but she was deeply respected by the industry at large. Everywhere. And, “by the way”, she also rescued the GIA. She went home because her mission was accomplished.
Chair Susan Jacques and her Board will start a systematic process of selecting a new President. The Board might even consider appointing an Interim President. The behind the scenes lobbying for candidates associated with the darker periods of the past have also been set in motion. There are many new international governors unfamiliar with these aspects of the previous days. They – and others – may need a gentle reminder and then, undoubtedly, Susan and her Board will do the right thing.
Bribery wasn’t the main issue
In those now selectively forgotten 2005/2006 days, I was writing and exposing ever more GIA Certifigate and management corruption stories week after week. Concrete cases – with enough identification enabling those who needed to know to take action. Diamond Intelligence Briefs, IDEX Online and IDEX Magazine were the main publication vehicles through which we got the story out. On a weekly basis, I battled with our publication company lawyer, Gadi Graus, who vetoed most texts – but we went ahead anyway. “It is the truth” would be our main journalistic defense. But we also had the evidence. There are still many documents which I didn’t disclose; some of these will be quoted later. Others need to wait for another time.
In late 2005, in my weekly column, I summarized: “The problem [at the GIA] is not the bribery, but rather the bribery-enabling culture. Poor management has made high executives in the grading community (both in New York and in Carlsbad) extremely vulnerable to outside pressures.”
There was cronyism: people were moved for personal expediency rather than for professional credentials.
“When management allows graders to accept holiday trips (courtesy of lab clients) and a range of comparable expensive goodies, it gives the wrong signal. Poor management makes employees and managers vulnerable. Poor management sets the wrong example and sends the wrong message. It creates the ‘bribing enabling’ environment. The four GIA New York traders who were fired for so-called ‘ethical violations’ didn’t operate in a vacuum. They operated in an enabling environment created, sustained, and tolerated by management, ” I wrote then.
The leadership cult
I didn’t talk to Donna after she abruptly resigned earlier this month, nor did she reply to my e-mail (something quite unusual for her). But I soon realized that I shared that silence with many others. It seems that Donna decided that “her job was over,” that it was time to move on – which means moving out without looking back. That is Donna.
I pulled out the “Legacy of Leadership” book, which provides the history of the GIA. Whoever updates the next edition of this title should simply add that Donna Baker’s seven years of leadership restored the historical greatness of the GIA, it returned integrity to the institute, and, consequently, it puts her in the very same league with both Robert Shipley and Richard Liddicoat. They were the institute’s creators and shapers. Donna halted its almost inevitable demise; she saved the institution.
If she was, indeed, occasionally non-compromising or resolute, bordering on the autocratic, these were probably the very characteristics needed to do the job. Let’s hope that those stakeholders who are critical of her, including some members of the current Board of Governors, and her colleagues and staff, will know deep in their hearts that without Donna’s seven years, there would have been no worthwhile GIA legacy left to note in an updated book – if it ever would be published.
My eyes caught the large bolded heading starting Chapter 12, covering the years of the previous GIA president. It starkly blares: “The Hallmark of Integrity: 1986-2003” [page 267]. These were the very years when the upgrading bribery developed in earnest in both California and New York. The years in which a multi-billion-dollar fraud against trusting diamond dealers and consumers was condoned and committed.
While, ostensibly, nurturing a North Korean or Chinese-type personality cult of charisma, loyalties and blind leadership, it was during the Hallmark of Integrity period that the organization sank into the deepest abyss. It had no future.
And it didn’t deserve to have one. However, Ralph Destino, Helen Fortunoff, Susan Jacques and some other noteworthy people thought otherwise. Donna Baker was entrusted with doing the impossible – and she did. No, justice wasn’t meted out – the focus was on rebuilding.
De Beers detected ‘problems’ as early as 2003
I was alerted to the GIA’s problems around the turn of the century – but had no evidence at that time. In those days, De Beers had a polished diamonds department – especially for price discovery purposes. Some American, Belgian and Israeli diamond merchants (including Sightholders) buying large rough diamonds in Antwerp were consistently grossly overpaying for rough stones. De Beers noticed that. The merchants saw that as well. Amazingly, some companies saw sudden unexplainable company growth.
It was only later that we understood that those diamantaires who had GIA upgrading (i.e. bribery) mechanisms in place were willing to outbid those who didn’t have that ability. The bribery was institutionalized. When buying the rough, you could decide on the final color and clarities.
De Beers knew on the highest level that something was wrong, that consumer confidence was at risk, but chose to sit idle and watch. According to documents in my possession, De Beers actually discovered the widespread “upgrading” of GIA certificates in 2002. On March 28, 2003, the DTC’s MANCO (management committee, chaired by Gareth Penny) held a meeting on the GIA certificate upgrade problem. It had become too widespread to ignore.
A discussion paper for that meeting was prepared by an accomplished De Beers polished diamond expert, P.A. Selby, who alerted his colleagues about various and most-disturbing aspects – and alerted them about the possible ramifications. “Such a [upgrade] pattern, when expanded to include the complete range of color, quality and, to some extent, size of polished that is produced from DTC boxes, could be one interpretation of why the premiums that our rough goods have enjoyed in the early part of this year have been so strong. One thing that we should be aware of, however, before we make any assumptions or take decisions based on the current situation, is that, just as there can be ‘upgrades’, so also can there be ‘downgrades’,” cautioned Selby in that discussion paper.
De Beers was less worried about the diamond traders than about the consumer market in the event the upgrading would stop. “Whilst the market’s reaction to any downward adjustment in assortment might simply be to reduce the trading discount, there would undoubtedly be a period of significant confusion during which the potential for business to be disrupted would be high. The resource-fullness of participants within the diamond industry with regard to dealing with this issue is not in doubt,” Selby wrote.
“The major concern has to be the potential impact should the current picture enter the consciousness of the consumer,” wrote the De Beers executive. “If the latter were to discover that the H color VS2 stone that he or she has just purchased for $6,000 is really an ‘inflated’ I color Si1 stone which is worth only $4,500, what could the damage be to the credibility and image of our product?”, Selby wondered.
“There is, as yet, no clarity on how this scenario will play out, and it is a complicated one, but, now that we are beginning to have a more complete grasp of how the current situation has come about, we are in a better position to understand and report on future developments,” reported Selby.
A hallmark of integrity?
From the document, it is also evident that the issue was discussed with the GIA at the highest levels. However, the upgrading was “dismissed” – at least in communications to De Beers – as being caused by GIA manpower shortages.
Others got less elegant replies. A report that we received in real time from a Geneva dealer who challenged Bill Boyajian on the updates around the same time is telling. “The GIA president [whom I met a trade show] was furious how I dared to question the impeccable integrity of the grading system,” he wrote to me.
Fortunately, there were many good people at the GIA concerned about their organization. Mainly through them I was able to collect the evidence showing that the bribery first started in California in the early 1990s and later spread to New York. The top of the echelon in California knew: they had seen that New York diamantaires having offices in the same building of the GIA New York’s lab were nevertheless submitting their stones in California. This inconvenience was solved when New York joined the practice – copying the California institutionalized model.
The disturbing dissonance between the “Hallmark of Integrity” image projected over the relevant period and reality was glaring. The time hasn’t come yet to write the whole history of these days –the names of some involved individuals can be found in the pictures throughout the Legacy of Leadership book.
Donna Baker’s management style
Let me come back to Donna Baker. Some of those who criticized her management style actually hinted that, in some instances, it was either going “the Baker way” or you were out. I don’t know if that is true. I also don’t know whether it should make a difference – the focused “Baker way” achieved a remarkable “clean up” in an astonishingly short time. It shook the cozy, comfortable life of many. Of course, it also created antagonism and resentment.
Because I know at least of some of the mess she inherited and because I realized what she was facing, I deeply admire and respect her. I remember an e-mail from October 2005 from a former quality supervisor at the GIA. Allow me just a brief quote without fully identifying names – because it is still too early for that.
“There are several ex lab people who left, as I did, since we knew there was so much dirty doings….if you raised a question [about strange grade changes] you were black balled in raises and treated so badly to force you out….I raised several points [to my superiors] and I was threatened [that] if I kept up I would be fired and they would sue me…..It scared the crap out of me at the age of 27…so I left a year later.”
Just realize what this testimony says: If you refused to assist in the fraudulent upgrading, you were risking your job. What a difference leadership can make! Donna Baker was a profoundly religious person. Chapter 12 of the GIA’s Legacy of Leadership book should have been titled “The Impenitent Sin of Sodom and Gomorrah” rather than the “Hallmark of Integrity”. The rot needed to be completely consumed by fire and brimstone.
Probably the greatest GIA president ever…
Outside my staff and myself, I expect that no one has as many sources, written testimonies, access to documents, on what happened within the GIA as we have. In the May 2006 Board of Governors meeting, where Bill Boyajian resigned, Governors – who were mostly, if not all, appointed by Bill – expressed considerable dismay on how a journalist, far away, had access to such intimate details on what had taken place within the GIA – or, actually, was still taking place at the time.
Chairman Ralph Destino did everything to contain the damage, to mitigate fallout, but didn’t replace the culture. Let’s not forget: we were talking about a multi-billion-dollar quite entrenched upgrading fraud that had taken place for well over a decade. It was a time bomb of a magnitude that could have destroyed the polished markets and destroyed confidence in our product, as Selby of De Beers had said to his management three years earlier.
On the very day Bill Boyajian resigned, I and my publications refrained from ever writing about Certifigate again. Donna and Tom needed a chance to turn things around. It was time for healing. So I didn’t write another word about it – until today, seven years later.
Bye, Bye, Donna
Donna managed to solve the legal challenges and changed the management culture. As far as I know (unfortunately) no one went to jail, (unfortunately) no one lost his DTC sight because of violation of Best Practice Principles (though Rio Tinto didn’t renew its contract with one briber). In several instances, consumers or traders were compensated by the bribers to reflect the “true grade” of their purchase. And yes, some people (loyal to previous management) within the organization were quite unhappy with new president, Donna Baker. Some individuals saw their careers “sidelined” or otherwise moved within the organization as part of the shake-out and corporate turnaround.
But the scandal was contained, there has been no negative fallout on consumer confidence, the GIA has come out greatly strengthened. It is now again the marvelous institution envisioned by its founders.
Thank goodness that the GIA had – and still has – many fantastic souls and dedicated ex-workers willing to risks their jobs by helping to get the truth out. These are unsung heroes who, one day, ought to replace some of the pictures in the next edition of the Legacy of Leadership book. That day will come; they deserve credit and recognition for what they did.
Yes, Donna has during her GIA presidency probably upset many of her colleagues and even some board Governors. The resignation statement that there were “differing views” is probably an understatement.
But I have no doubt whatsoever that without Donna Baker, her stubbornness, her legal mind, her management style, her resolve and resiliency, and her staunch belief in knowing what is right, the GIA would not have earned back the deep trust it enjoys today from the diamond community and the consumers.
She has performed miracles. If Donna has now decided that this is the right time for her to move on – then this is also the best time for the GIA to go forward and look for a highly motivated, excellent and compassionate leader to take the organization to ever greater heights.
Donna was probably the greatest GIA President the institution ever had. Without any disrespect, I kind of expect that the GIA’s legendary leaders, the late Richard Liddicoat and late Robert Shipley, if they are watching over their organization from the Heavens, would probably wholeheartedly agree.
Donna – Your name is etched in the history of the GIA as well as in the minds of those who had the privilege of having worked with you. You went home not just because your mission is completed, but undoubtedly to allow someone else to create the next chapter in the GIA’s Legacy of Leadership. As you left so suddenly, please allow me to say what many others would also have wanted to say if they had a chance: Thank you, Donna. Thank you very much.
Picture Israeli Diamond Industry
