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Gibson Guitar to Pay $350K to Settle Federal Illegal Wood Dispute

Press Release from the U.S. Department of Justice; Aug. 6, 2012: 

Gibson Guitar Corp. Agrees to Resolve Investigation into Lacey Act Violations

Gibson Guitar Corp. entered into a criminal enforcement agreement with the United States today resolving a criminal investigation into allegations that the company violated the Lacey Act by illegally purchasing and importing ebony wood from Madagascar and rosewood and ebony from India.

The agreement was announced today 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 will also 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.

“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,” said Assistant Attorney General Moreno. “Gibson 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.”

“The Department of Justice is committed to enforcing the laws enacted by Congress,” said U.S. Attorney Martin. “Failure to do so harms those who play by the rules and follow the law. This criminal enforcement agreement goes a long way in demonstrating the government’s commitment to protecting the world’s natural resources. The agreement is fair and just in that it assesses serious penalties for Gibson’s behavior while allowing Gibson to continue to focus on the business of making guitars.”

“The Lacey Act’s illegal logging provisions were enacted with bipartisan support in Congress to protect vanishing foreign species and forest ecosystems, while ensuring a level playing field for America’s forest products industry and the people and communities who depend on it,” said U.S. Fish and Wildlife Service Director Ashe. “We’re pleased that Gibson Guitar Corp. has recognized its duties under the Lacey Act to guard against the acquisition of wood of illegal origin from threatened forests and has taken responsibility for actions that may have contributed to the unlawful export and exploitation of wood from some of the world’s most threatened forests.”

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. The facts establish the following:

Madagascar Ebony is a slow-growing tree species and supplies are considered threatened in its native environment due to over-exploitation. Both legal and illegal logging of Madagascar Ebony and other tree species have significantly reduced Madagascar’s forest cover. Madagascar’s forests are home to many rare endemic species of plants and animals . The harvest of ebony in and export of unfinished ebony from, Madagascar has been banned since 2006.

Gibson 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.

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.

This case was investigated by the U.S. Fish and Wildlife Service with assistance from U.S. Immigration and Customs Enforcement. The case was handled by the Environmental Crimes Section of the U.S. Department of Justice and the U.S. Attorney’s Office for the Middle District of Tennessee.

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Business and Economy Featured Liberty and Justice NewsTracker

VIDEOS: ‘We Stand With Gibson’

A rally thrown by Tea Party activists in support of Gibson Guitar Corp. in light of a recent federal raid on the company drew hundreds to Nashville Saturday to listen to music and speakers denounce government overreach.

Guests at the “We Stand With Gibson” rally included Gibson Guitar owner Henry Juszkiewicz, U.S. Rep. Marsha Blackburn, conservative radio talk show hosts Phil Valentine, Steve Gill and others. They urged the audience to let the federal government know their displeasure with the government over the Aug. 24 raid in which federal agents confiscated imported wood, guitars and files from Gibson’s Nashville and Memphis locations.

The U.S. Fish and Wildlife Service argues that the wood, grown in India, was illegally imported in violation of Indian law and the U.S. Lacey Act. Gibson maintains that the wood is, in fact, legal — and that the Indian government approves of its exportation to the United States where companies like Gibson and others use it in the manufacture of stringed musical instruments.

 

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Business and Economy Environment and Natural Resources Featured

Tea Partiers In Tune With Gibson

Organizers for Saturday afternoon’s “We Stand With Gibson” rally/concert in Nashville say the event is geared more toward people seeking a good time than looking for a political rant fest.

Clearly, though, with a line-up that, in addition to musical performers, includes conservative radio hosts Steve Gill and Phil Valentine, and Memphis Tea Party founder Mark Skoda — as well as U.S. Rep. Marsha Blackburn and Gibson Guitar’s CEO himself, Henry Juszkiewicz — there’ll no doubt be plenty of fire-breathing to accompany the cool harmonies.

The purpose of the event is, after all, to raise awareness and fuel outrage about an incident that one function organizer says has galvanized anti-government sentiment like no other in quite a while.

“I don’t think any other issue has captured the passions of tea partiers like this one has in the last year,” said Ben Cunningham, a blogger and spokesman for Tennessee Tax Revolt.

“There is near universal agreement among the tea party and conservative groups that the raids — the one that occurred in August and the one that occurred two years ago — were an overreach by the federal government. It was an abuse of power and authority,” said Cunningham.

The purpose of the “We Stand With Gibson” event is to say to the federal government, “Back off,” Cunningham said during a press conference Wednesday.

The gathering, which is scheduled to kick off at 1 p.m. at the Scoreboard Restaurant & Sports Bar, was also planned with the idea in mind of people coming together in support of others facing difficulty and uncertainty — like they did during the floods of 2010, Ken Marrero, a blogger and rally organizer, added.

The victims in this case, said Marrero, are Juszkiewicz and the employees of Gibson. Their place of work was inundated back in August with federal agents who allege Gibson illegally imported wood from India in violation of a recently amended U.S. law known as the Lacey Act.

The agents seized wood, guitars and other company property, according to the company. No charges have been filed, although the U.S. Fish and Wildlife Service, the agency conducting the investigation, is reportedly considering filing a criminal complaint.

In a sworn statement filed last month, U.S. Fish and Wildlife Special Agent Kevin L. Seiler wrote that after reviewing Juszkiewicz’s public statements in the wake of the raid on Gibson, “it is clear that Gibson understands the purpose of the Lacey Act, and understands that the (seized company property), which is 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.”

Marrero said he supports the idea of government regulating natural resource extraction and prohibiting Americans from violating the environmental and wildlife protection laws of other countries, which is ostensibly the purpose of the Lacey Act.

But he thinks the federal agents stepped way over the line in the Gibson case, both in the way they are interpreting the law and the way they executed the raid.

Marrero said it is his understanding that Indian law — at least according to the Indian government — has not been violated. India’s deputy director-general of foreign trade reportedly stated in a Sept. 16 letter, “Fingerboard is a finished product and not wood in primary form,” and that the “foreign trade policy of the government of India allows free export of such finished products of wood.”

Marrero wonders why the United States government “is enforcing a law that the Indian government doesn’t even consider is a violation.”

“How is that right?” he said.

Cunningham, too, condemns what he described as the “hideously complex” web of regulations that businesses and taxpayers have to understand, negotiate and abide by to remain in compliance with federal law.

“We have all kinds of these 2,000-page laws that empower bureaucrats to be petty tyrants,” said Cunningham. “Think of the IRS code.”

In any event, said Cunningham, when government officials do perceive that some nonviolent violation of a rule or regulation has occurred, the proper course is to “call (an alleged violator) up on the phone and say, ‘We are concerned about this law and your compliance with the law.'”

“You don’t send armed agents with their guns drawn into their corporate headquarters. That is an abuse of power, and that is our government abusing the power that we grant to them,” said Cunningham. “And that is why we are here — we are holding them accountable for this abuse of power. It’s got to stop. And we the people are coming here on Saturday to say that to our federal government.”

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Business and Economy Featured

Ramsey Supports Cost-to-Business Estimates for Proposed Legislation

Tennessee House Republicans made a point Thursday of declaring their interest in identifying burdensome regulations they can lift from businesses in the state.

In the same vein, the Senate’s top lawmaker wants to add one on government: A requirement that bills under consideration in the General Assembly include an estimate of the costs they’d potentially have on Tennessee employers.

Lt. Gov. Ron Ramsey says he wants legislators and the public to be fully aware of the price of new mandates and regulations before they’re passed on to the private sector.

“Right now we’re just ignoring it and putting it directly onto business,” the Blountville Republican said. “What does this cost a business when we pass a bill?

“In the long run, it will save the state money and save businesses money” to attempt to calculate those costs up front, he said.

The idea comes most recently from the Tennessee Center for Policy Research, which released a report last week detailing why the state should crunch the numbers to determine what kind of effect legislation has on commerce and industry.

“Legislation impacts business, and lawmakers need to connect the dots on that,” said Justin Owen, TCPR’s executive director.

Democrats might not necessarily balk at the idea. But the key is making sure any system for estimating those costs is accurate, objective and avoids “garbage in, garbage out” results, said Craig Fitzhugh, the House minority leader.

The Ripley lawmaker, a banker by profession, says projections as to how legislation would affect businesses in Tennessee could indeed be useful in formulating policy. However, he’d like to see a system for doing it phased in over time to ensure the processes for collecting relevant data are reliable — and that the Office of Fiscal Review has sufficient extra staff to effectively handle the added workload.

“I would hate to start trying to do something like that and skimp on the resources and end up with some bad data that leads us to pass legislation or not pass legislation,” Fitzhugh said.

Legislators express mixed opinions about fiscal notes, the price tags that attempt to detail how much pending legislation will cost the state or yield in tax, fee or fine revenues. Those estimates can end up killing a bill if a substantial cost to government is projected — even as politicians at the Capitol often questioned the scope or accuracy of the calculations.

Lawmakers from both sides of the aisle are spending the political off-season examining business regulations and methods for facilitating job growth as they approach the legislative session that begins in January.

The governor has spent his summer traveling the state looking for feedback and ideas about job growth. Meanwhile, House Republicans have begun meeting with small business owners to discuss their perceptions of problematic and unnecessary regulations at both the state and federal level in Tennessee, and Democrats from both chambers are embarking on a jobs tour later this month.

The biggest gripes from business owners center on regulations which they say are too stringent — such as the one the federal government sought to enforce when it raided Gibson Guitar Corp. in Nashville and Memphis last month for allegedly possessing illegally obtained wood from a foreign country.

While the state has control over only Tennessee regulations, Ramsey wants the federal government to account for its actions, which he says at this point appear to him a stark and possibly politically motivated example of regulatory abuse.