Bill Boyajian’s Fall From Grace
March 23, 06If the credit committee of the Bank of Public Opinion (BOPO Bank) were to meet to review the credit given a few months ago to GIA chairman Ralph Destino to bring about the needed reforms and “to clean up” the GIA, the committee’s conclusion would likely be that Destino has been rather good on taking a wide range of fundamental and/or incremental measures that were long overdue (and some should have been taken when he was still chairman of the board) but so far he has not effectively addressed a fundamental problem, - the governance and culture of governance at the GIA. This fundamental problem caused all the other ones – not the other way around!
The bank committee’s working papers would probably include an assessment that the change of governance will occur when the majority of the Board of Governance will finally recognize and have the courage to admit that personal friendships and loyalties must come secondary to the interest of the institution to which they owe a fiduciary responsibility to govern. The situation is clear to any objective observer. “
“What is most disturbing,” the document would say, “is that management is making great PR efforts to minimize the Certifigate problem, localizing it, and reducing it to “ethics violations of a handful of ex-GIA employees and diamond dealers”, to use the language used in a “dear valued customer” letter that trade lab head
Incidentally, with that letter GIA management is using the impeccable reputation of Moses to do what their spin-doctors probably advised them to do, which is ignore the catastrophic functioning of management that has led to the current jam. That sums up the Destino dilemma. But only if enough people on the board are persuaded by Bill Boyajian’s management that “the storm is over”, everything “is under control” and “the problem only exists in the minds of totally misguided and ill-motivated writers (such as Even-Zohar)”, they can all wait out the storm together. This distorted thinking would be a major mistake.
"Bill the Cat" – and an Ungrateful One
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Destino has replaced Boyajian de facto .Except for playing survival politics, Boyajian’s role and significance at the GIA seems to be fading into oblivion. The Board, by leaving the latter his title and salary, was anticipating that Boyajian would know how to do the right thing. They didn’t strip him of his function, nor fire him outright, to allow him to leave with honor. He was expected, at least by a number of board members, to make a nice speech: “Things have happened. I am the man in charge. The buck stops with me. I take responsibility. I go home. Thank you for having given me a terrific life.” Such speech would allow him to go in grace.
Time is running out for his leaving with honor. In a way, that’s a shame – a shame this cat brought on to himself.
Boyajian is an honest man, but he failed. However, as the cat of many lives, he was successful in blocking his own premature departure by handpicking board members (Destino included) that would not seriously question him or challenge his decisions, as well as board members who very much depended on the GIA for their own businesses. Though I have been tempted to see the GIA as a “culture of corruption”, and there are legal reasons for that (see below), I have been persuaded that it might be more appropriate to view the GIA as having a “culture of poor management.”
Bribery isn’t the Main Issue
The problem is not the bribery: I wouldn’t be surprised if the FBI is on its way to explore possible blackmail, or even extortion. Poor management (including cronyism) has made high executives in the grading community (both in
Why bring this kind of thing out into the open? I have no problems with that woman (and others like her) that are probably doing their utmost to survive in a jungle. I have serious problems with management participating in these and other kinds of activities, losing the respect of co-workers.
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.
We may never know if the phrase “give me an upgrade or I’ll call your wife” was ever used by a client or an employee. But no management should ever allow the possibility of such situations to arise. The GIA has, and for too many years.
The GIA lives in a world of euphemisms and make believes. Prima facie evidence of fraud, bribery, kickbacks, etc. are described as “ethical violations” – and let God have mercy on any employee or official caught for a minor ethical infringement, as the outside world will view him or her as nothing less than a briber or a fraudster.
The GIA is fond to refer to its “Code of Ethics” - but a code doesn’t solve anything if management doesn’t adhere to it or fails to implement its provisions.
“Poor management” is no crime. “A “corrupt culture” is. There are many working definitions of a “corporate culture” and it is important to be precise. We view it as the system of shared values (i.e. what is important) and beliefs (how things work) that interact with a company’s people, organizational structures, and control systems to produce behavioral norms (i.e. the way we do things around here.)
The president and the Board of Governors must realize that management or directors of a corporation are criminally liable, if it can be shown that a corporate culture existed within the body corporate that directed, encouraged, tolerated, or led to noncompliance with the relevant criminal (bribery, fraud, kickbacks prohibition) provision; or if it can be proven that the corporate body failed to create and maintain a corporate culture that required compliance with the relevant provision. The facts speak for themselves: the GIA, by its own actions, has proved that it failed to create and maintain a legally compliant culture.
But we want to go beyond that.
Management Tolerated and Encouraged the Abuse of Trust
We have reason to believe that GIA management knew, or had good reasons to be aware of, some, or many of the ethical violations (to stick to the GIA euphemisms) that led to the dismissal of several employees – and the filing of complaints with law enforcement authorities.
We have reason to believe that GIA management failed to report fully or accurately to the Board of Governors many of the complaints that industry stakeholders (including the DTC) have raised over many years. “Not knowing,” or “we were not informed,” is not an excuse that will defend the conduct of the board. The board failed in its oversight functions, which the articles of association (and the law) bestow on the governors. They cannot even claim that they are “volunteers” and not professional board members – they accept (a symbolic annual $5,000) payment for sitting on the board. They received money; they must deliver. They are responsible.
That the abyss continued over a period of many years – we can demonstrate well over a decade – was mainly because some of the staff (Boyajian refers to them as “bad apples”) perceived management as tolerating, condoning, knowing, tacitly or implicitly allowing or permitting the commission of offenses. We have letters from, and had conversations with, ex-GIA graders who sadly said that they left the GIA because they were rebuked and even threatened for raising such “ethical violations” with their supervisors.
The President’s Missed Opportunities
President Bill Boyajian cannot claim that he didn’t know, that he wasn’t told, or that he wasn’t alerted to the fact that there is a problem. It seems that Boyajian chose to look the other way – noise, bad publicity, etc. would affect fund raising. Boyajian was Mr. GIA. In his 17 years or so as president (far too long for any non-profit association) he identified himself totally with the organization. He was the organization. Any perceived wrongdoing by the organization was seen as a personal affront. Yes, he may have been “in denial” for a much longer period than some of us think.
I have never before stated unequivocally that Bill must go. Now I do. I believe that he must go because he is an honorable man. He is a responsible man and he is an ethical man. Bill Boyajian is an educator par excellence – he is not a corrupt man. He is simply a CEO who “messed up”. He has left his mark on the industry – he has impacted the lives of many. But his time is over.