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Customer sues Genesis Diamonds, questions legality of certifications

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NASHVILLE, TN (WSMV) -

There's more legal trouble for Nashville's most talked-about jeweler.

A customer has sued Genesis Diamonds, saying it not only exaggerated the value of a stone but is using gem grading reports that could be illegal to bring into the U.S.

A recent Channel 4 I-Team investigation opened eyes when it comes to diamond grading and the certification, a sort of report card that accompanies some stones.

The lawsuit comes from a customer who bought a big diamond at Genesis just four months ago, a diamond graded by EGL International.

After seeing the Channel 4 I-Team investigation, he sent the two-carat stone off to be analyzed by another laboratory, GIA, considered to have the strictest standards, and he got a surprise.

"He found out, that in fact it was a, J color, four grades off, and an SI 2 in clarity, two grades off. Each one of these grades with a diamond of that size can affect its value by thousands, if not tens of thousands of dollars," said the plaintiff's attorney, Brian Manookian.

"The difference in value between what Genesis claimed he was receiving and what he actually received is more than $16,000," Manookian added. "He's pretty irritated, annoyed and feels like he's been taken advantage of."

The Channel 4 I-Team heard similar stories from customers, former employees and competing jewelers about diamonds with grading reports from EGL International.

Experts say that paperwork consistently exaggerates the quality of stones, especially in color and clarity.

The attorney for Genesis says this case is just an example of a professional difference of opinion.

"Interestingly they only disagreed on two of the 4 C's. The cut described by GIA was listed as excellent and the carat weight matched what Genesis said it would be," said Genesis Diamonds attorney Eli Richardson.

"Subjective determinations come into play when you're talking about color and clarity," Richardson added.

But the lawsuit goes beyond just one two-carat diamond.

The plaintiff's attorney says Genesis is "trafficking in what amounts to counterfeit certifications." That those grading reports from EGL International are "under a border ban by the United States Customs and Border Patrol."

"It would come as significant news to jewelers all over the country that somehow there is something wrong with them being in possession of EGL International certificates," Richardson said.

Manookian has gathered documents referring to the customs policy, one prong of what the lawsuit calls a "trifecta of fraud."

"They misrepresent the qualities of a diamond. They back it up then with certificates from a phony lab and they issue their own bogus appraisal that has no basis in reality of what the diamond is actually worth: it just confirms what Genesis oversold it to you," Manookian said.

"Not only is there not a trifecta of fraud, there is, is fact, no fraud," Richardson said.

Manookian, who once sued Genesis himself as a consumer, says he has many more cases ready to file.

"There could be thousands of individualized claims before this is through. The magnitude of this scandal is something I don't think Nashville's business community has seen in quite some time," Manookian said.

"Genesis Diamonds is more than prepared and looks forward to the opportunity to vindicate itself through litigation," Richardson said.

There's a 14-year-old trademark case, still in the courts, involving two labs and the name EGL. That's tied to the Customs policy on those foreign certifications. Again, the matter is still undecided.

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