The Music Didn’t Die After All

It turned out that the music didn’t die after all and the U.S. Fish and Wildlife enforcement of the Lacey Act against Gibson Guitar Corp. was justified.

On August 6, 2012, the Department of Justice announced it had reached a resolution of charges against Gibson Guitar for violations of the Lacey Act, which a 111-year-old law, that originally enacted to protect wildlife. It was expanded in 2008 to cover wood products. This expansion of the Lacey Act requires companies to “make detailed disclosures about wood imports and bars the purchase of goods exported in violation of a foreign country’s laws.”

In the DOJ’s Press Release it stated that “from October 2008 until September 2009” the Gibson Guitar Corp “purchased “fingerboard 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.” Further Gibson Guitar was made aware of this Madagascar law by an employee and took no steps to institute compliance with the law.

Gibson Guitar agreed to a Deferred Prosecution Agreement, a penalty in the amount of $300,000 and a community service payment of $50,000. It also agreed to a withdraw claims to for wood seized by federal agents in the course of the criminal investigation, specifically “including Madagascar ebony from shipments with a total invoice value of $261,844.”

All of this was made even more interesting by the very loud protestations of the President of Gibson Guitar, Henry Juszkiewicz, in a piece appearing in the July 20, 2012 edition of the Wall Street Journal, entitled, Gibson’s Fight Against Criminalizing Capitalism that on August 24, 2011, “Without warning, 30 federal agents with guns and bulletproof vests stormed our guitar factories in Tennessee. They shut down production, sent workers home, seized boxes of raw materials and nearly 100 guitars, and ultimately cost our company $2 million to $3 million worth of products and lost productivity. Why? We imported wood from India to make guitars in America.” Juszkiewicz even noted that there is now a “proposed bill in the House—the Retailers and Entertainers Lacey Implementation and Enforcement Fairness (Relief) Act—could reduce the chances of citizens accidentally running afoul of the Lacey law.”

I guess he just had it all wrong, Gibson Guitar did not “accidently run afoul of the law” and the music didn’t die after all.

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Thomas Fox, a contributing editor of the FCPA Blog, is the creator and writer of the widely-read FCPA Compliance and Ethics Blog. His book Lessons Learned on Compliance and Ethics topped Amazon’s bestseller list for international law. He can be contacted here.