Gibson to Pay $350K Lacey Fine

August 7, 2012  by in UnCategorized   

By Home Furnishings Business in Legal on August 8, 2012

Gibson Guitar Corp. will pay $350,000 to settle a U.S. Department of Justice and Fish & Wildlife Service investigation into alleged violations of the Lacey Act.

The settlement also indicated a need to resolve classification and scope issues associated with the Lacey Act, according to an industry group.

The case, the first to test the Lacey Act amendments' "teeth," dates back to November 2009, when agents of the U.S. Fish and Wildlife Service searched Gibson's Tennessee manufacturing facility as part of an investigation under the Lacey Act into the use of endangered rosewood from Madagascar.

The agreement was announced Monday by Assistant Attorney General Ignacia S. Moreno of the Justice Department€™s Environment and Natural Resources Division; Jerry Martin, U.S. Attorney for the Middle District of Tennessee; and Dan Ashe, director of the Department of the Interior€™s U.S. Fish & Wildlife Service.
 
The criminal enforcement agreement defers prosecution for criminal violations of the Lacey Act and requires Gibson to pay a penalty amount of $300,000. The agreement further provides for a community service payment of $50,000 to the National Fish and Wildlife Foundation to be used to promote the conservation, identification and propagation of protected tree species used in the musical instrument industry and the forests where those species are found.

Gibson also will implement a compliance program designed to strengthen its compliance controls and procedures. In related civil forfeiture actions, Gibson will withdraw its claims to the wood seized in the course of the criminal investigation, including Madagascar ebony from shipments with a total invoice value of $261,844.

In light of Gibson€™s acknowledgement of its conduct, its duties under the Lacey Act and its promised cooperation and remedial actions, the government will decline charging Gibson criminally in connection with Gibson€™s order, purchase or importation of ebony from Madagascar and ebony and rosewood from India, provided that Gibson fully carries out its obligations under the agreement, and commits no future violations of law, including Lacey Act violations.
 
€œAs a result of this investigation and criminal enforcement agreement, Gibson has acknowledged that it failed to act on information that the Madagascar ebony it was purchasing may have violated laws intended to limit over-harvesting and conserve valuable wood species from Madagascar, a country which has been severely impacted by deforestation,€ said Moreno. €œGibson has ceased acquisitions of wood species from Madagascar and recognizes its duty under the U.S. Lacey Act to guard against the acquisition of wood of illegal origin by verifying the circumstances of its harvest and export, which is good for American business and American consumers.€
 
Since May 2008, it has been illegal under the Lacey Act to import into the United States plants and plant products (including wood) that have been harvested and exported in violation of the laws of another country. Congress extended the protections of the Lacey Act, the nation€™s oldest resource protection law, to these products in an effort to address the environmental and economic impact of illegal logging around the world.
 
The criminal enforcement agreement includes a detailed statement of facts describing the conduct for which Gibson accepts and acknowledges responsibility. According to a DOJ release, the investigation established that Gibson purchased €œfingerboard blanks,€ consisting of sawn boards of Madagascar ebony, for use in manufacturing guitars. The Madagascar ebony fingerboard blanks were ordered from a supplier who obtained them from an exporter in Madagascar. Gibson€™s supplier continued to receive Madagascar ebony fingerboard blanks from its Madagascar exporter after the 2006 ban. The Madagascar exporter did not have authority to export ebony fingerboard blanks after the law issued in Madagascar in 2006. 

In 2008, an employee of Gibson participated in a trip to Madagascar, sponsored by a non-profit organization. Participants on the trip, including the Gibson employee, were told that a law passed in 2006 in Madagascar banned the harvest of ebony and the export of any ebony products that were not in finished form. They were further told by trip organizers that instrument parts, such as fingerboard blanks, would be considered unfinished and therefore illegal to export under the 2006 law. Participants also visited the facility of the exporter in Madagascar, from which Gibson€™s supplier sourced its Madagascar ebony, and were informed that the wood at the facility was under seizure at that time and could not be moved.   
 
After the Gibson employee returned from Madagascar with this information, he conveyed the information to superiors and others at Gibson. The information received by the Gibson employee during the June 2008 trip, and sent to company management by the employee and others following the June 2008 trip, was not further investigated or acted upon prior to Gibson continuing to place orders with its supplier. Gibson received four shipments of Madagascar ebony fingerboard blanks from its supplier between October 2008 and September 2009.

According to the Lacey Act Coalition, an industry group that includes the American Home Furnishings Alliance, the settlement makes clear the need for clarification of the Lacey Act€™s scope "and has strengthened our resolve to work with Congress to develop a practical and targeted solution to the Lacey Act€™s unintended consequences."

In addition to the Madagascar wood, agents had hauled away 24 pallets of Indian rosewood and ebony.

The LAC release cited the settlement" €œThe Government and Gibson acknowledge and agree that certain questions and inconsistencies now exist regarding the tariff classification€ of the confiscated wood.

The release continued: "This cuts to the heart of the Lacey Act€™s problems: How can a business be expected to know with absolute certainty that a wood product was harvested, shipped, and imported in compliance with a nearly limitless number of foreign laws when the United States government itself does not know how to classify or treat that product under the Lacey Act?

"Inconsistencies in tariff classification should not trigger Lacey Act enforcement actions that result in questionable product seizures and business-destroying litigation. As this settlement demonstrates, the Lacey Act€™s scope is far too broad and amendments are necessary to ensure that the Act effectively eliminates illegal logging without stifling economic growth and job creation. We look forward to working with Congress to enact legislation that strengthens and improves the Lacey Act."

The Lacey Act Coalition was formed to ensure that the U.S. government's implementation of amendments to the Lacey Act are applied in a transparent, predictable manner that focuses scarce resources on the amendment's intended goal--stopping illegal logging--while not arbitrarily impeding trade.