Shareholder Goes After|Gem Institute CEO

     MANHATTAN (CN) – A CEO of the International Gemological Institute took millions of dollars by using the gem authenticator as his “personal piggy bank,” a major shareholder claims in court.
     Vazon Investments sued the International Gemological Institute and its co-CEOs Roland Lorié and Jerry Ehrenwald in a derivative complaint in New York County Supreme Court.
     Lorié also owns 60 percent of the shares of Vazon, a Luxembourg corporation that owns 50 percent of IGI. However, a Luxembourg court appointed a provisional director to temporarily manage Vazon due to Lorié’s alleged misconduct, according to the June 4 lawsuit.
     Vazon claims that Lorié’s mismanagement extended to IGI, which he used as “his personal piggy bank.”
     Ehrenwald told Courthouse News: “My attorneys advise me to give no comment. The lawsuit has no merit.”
     The International Gemological Institute describes itself as “the world’s largest independent laboratory for testing and grading diamonds,” with 19 offices worldwide.
     “Among other things, Lorié has transferred and misappropriated funds from the corporate accounts of one or more IGI Group companies to his personal accounts and accounts of third parties, and forgiven loans from one or more IGI Group companies in favor of defendant Ehrenwald (who, along with Lorié, is one of IGI’s only two directors and owns 50 percent of its equity). Lorié even admitted to having stolen more than $7.1 million from the IGI Group,” the complaint states.
     Lorié repaid the money, but it caused a rift with another owner of IGI, Marc Brauner, who owns 40 percent of IGI’s shares, according to the complaint. Vazon claims that Brauner discovered other suspicious transfers authorized by Lorié.
     “For instance, at Lorié’s behest, an IGI Dubai employee was paid to allow $535,000 to pass from IGI Dubai to his personal account and then to a third party located in the United States. There were also unexplained transfers of millions of dollars from the accounts of IGI Dubai to Lorié’s personal accounts,” the lawsuit states.
     “One or more loans were also made to Ehrenwald for unknown reasons. For instance, an amount of $857,281 was transferred to Ehrenwald as a ‘loan’ from IGI Dubai. However, Lorié later admitted to Brauner that the loan was fake and that Ehrenwald was simply given the money. Upon information and belief, this was a method of compensating Ehrenwald for his share of the funds that he and Lorié were improperly diverting from IGI.”
     Vazon claims that Brauner also found that $4 million in royalties that should have been paid to IGI Antwerp were sent to IGI Dubai, and paid as “consulting” fees to Lorié.
     Vazon call it part of a pattern of misconduct and mismanagement by Lorié, who continues to “strip assets out of the company to this day.”
     Vazon asked the court to appoint a temporary receiver for IGI, and seeks punitive damages for breach of fiduciary duties, reckless misconduct, waste of corporate assets, unjust enrichment, abuse of control and other charges.
     Vazon is represented by Michael Elkin with Winston & Strawn.

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