POLITICS

Gibson Guitar loses $1M of wood, pays $350k to avoid DOJ prosecution

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Politics,Beltway Confidential,Joel Gehrke

Gibson Guitar Corp. ended a long-running battle with federal investigators by agreeing to pay $350,000 and renounce any claim to wood seized by the federal government, rather than face criminal charges for the alleged illegal purchase and importation of wood from Madagascar and India.

“As 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 overharvesting and conserve valuable wood species from Madagascar, a country which has been severely impacted by deforestation,”Assistant Attorney General Moreno said in a statement.

Under the agreement, Gibson must pay a $300,000 penalty and “a community service payment of $50,000 to the National Fish and Wildlife Foundation to promote the conservation . . . of protected tree species used in the musical instrument industry.” The company must also renounce it’s claim to the wood seized, which was reportedly valued at over $1 million.

The agreement ends Gibson’s vociferous opposition to the investigation. “The issue here is not illegal logging or some conservation abuse,” Gibson CEO Henry Juszkiewicz told Reuters and other reporters last October. “The laws that are being identified by the Department of Justice have to do with protectionism by the country of origin, keeping work in that country and therefore not allowing something that isn’t that value-added to be exported.”

Federal officials raided Gibson factories in 2009 and in 2011, confiscating wood on both occasions. “Gibson is a well-respected American company that employs thousands of people,” House Speaker John Boehner, R-Ohio, said after the 2011 raid. “The company’s costs as a result of the raid? An estimated $2-3 million. Why? Because Gibson bought wood overseas to make guitars in America. Seriously.” Boehner invited Juszkiewicz to sit in the Speaker’s box during President Obama’s speech to a joint session of Congress on the American Jobs Act last year.

The Justice Department accused Gibson of violating the Lacey Act, which makes it a crime to break U.S. or foreign laws in trading for plants and other materials. Indian law bans the export of unfinished fingerboards and Gibson was accused of knowingly importing wood that was not eligible for trade under Indian law.

“It is clear that Gibson understands the purpose of the Lacey Act, and understands that … fingerboard blanks are not finished fingerboards and thus Gibson is aware that its order for fingerboard blanks was an order for contraband ebony wood or ebony wood which is illegal to possess,” Fish and Wildlife Service Kevin Seiler said in an affidavit, according to the Nashville Business Journal.

“In other words, because Indian workers didn’t create the final product, it’s not legally eligible to be exported,” the Business Journal explained.

The Justice Department accused Gibson of committing the same crime with respect to Madagascar. “In 2008, an employee of Gibson participated in a trip to Madagascar, sponsored by a non-profit organization,” DOJ explained in the announcement.  “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.”

 

 

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