Gibson Guitars To Pay $350,000 To Settle Claim Over Illegally Imported Ebony

Gibson Guitars has agreed to pay $350,000 in penalties and to donate $50,000 to the National Fish and Wildlife Foundation to settle federal charges that it illegally imported ebony from Madagascar to use for fretboards.

The settlement was reached after a year-long criminal investigation into the matter. In return, the government deferred prosecution of the corporation for criminal violations of the Lacey Act, which since May 2008 has made it illegal to import wood that was harvested and exported illegally under another country’s laws.
 
In a statement, assistant attorney general Ignacia S. Moreno said that Gibson had acknowledged its wrong doing. “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.”
 
However, Gibson’s chief executive, Henry E. Juszkiewicz maintains that the company acted within their rights and is only settling on the matter because it allows Gibson to continue importing wood from India, which is the major supplier of rosewood used in many fretboards.
 
Alternatively, Juszkiewicz said the company would be forced to continue making guitars with laminated fret-boards or fingerboards made of woods not traditionally used in guitars from sources outside of Madagascar and India, as Gibson has been doing for the past year.
 
“The alternative was pretty onerous,” he conceded. “We would have had to have gone to trial and we would have been precluded from buying wood from our major source country. For the ability to carry on with the business and remove this onerous Sword of Damocles, if you will, we feel this is about as good a settlement as we can get.”
 
On August 24 last year, Gibson’s facilities in Nashville and Memphis were raided by armed agents of the U.S. Fish and Wildlife Service, who executed four search warrants for ebony and rosewood that had been imported from India. In the raid, the agents seized several pallets of wood, electronic files and guitars. Claims that the government was “over-reaching” came from Tea Party activists and some Republican lawmakers, including House Speaker John A. Boehner shortly following the raids.
 
Gibson argued that the shipments were legal and disputed the government’s interpretation of Indian and Madagascar laws, stating that both country’s laws allow the exportation of “fingerboard blanks,” which are in layman’s terms, a piece of hardwood cut to the dimensions of a guitar fretboard. Despite Gibson’s claims, federal officials defended the raids, stating that Gibson hadn’t complied with the Lacey Act and its officials had ignored the evidence to the fact that the exports were illegal.
 
The settlement, which was announced on Monday (August 6) frees Gibson from the criminal charges as long as the company doesn’t violate the agreement over the next year and a half. As part of the deal, Gibson agreed to withdraw a suit seeking to recover about $261,000 worth of ebony and rosewood seized during the raids last year.
 
Mr. Juszkiewicz said the government had also agreed to return the Indian fingerboard blanks it seized last year and to allow future imports of the blanks from India. “We entered into the settlement voluntarily,” he said. “It allows us to continue on with life and manufacture guitars.”
 
Gibson.com posted some “Possible Questions and Answers” on its site this morning. They can be read below:
 
In light of your previous outspoken condemnation of the Government’s conduct in this case, why are you taking such a moderate, mild-mannered approach in your official statement?
 
“The company is gratified that the Government ultimately saw the wisdom and fairness in declining to bring criminal charges in this case. The “Criminal Enforcement Agreement” we have entered into straightforwardly recognizes that it was inappropriate to criminalize this matter.”
 
In light of the Government’s lenient treatment here, does Gibson still believe that amendments to the Lacey Act are necessary to make the law more fair and reasonable?
 
“Yes. The outcome here deals only with the particular controversy about the particular fact pattern. A true legislative reform is necessary to avoid systemic criminalization of capitalism, as I explained in my recent Wall Street Journal article.”
 
Wasn’t the Government’s conduct here, with its armed raid on your headquarters and manufacturing facilities, so outrageous and overreaching as to deserve further Congressional investigation, just calling a spade a spade?
 
“I don’t retreat from any of my prior commentary, but I am gratified that this resolution puts the matter behind us. We are a forward-looking company hoping to move our business ahead in an environmentally forward-thinking way.”