DOJ hits Gibson with $300K fine in settlement over exotic wood raids

posted at 1:21 pm on August 7, 2012 by Mary Katharine Ham

Did you get here Googling “exotic wood raids?” Is this not what you expected? I’m sorry. Settle in for some hot public policy.

Last we checked in with Gibson, the famed Tennessee guitar maker had been raided twice by armed federal agents, who seized almost $500,000 in exotic wood imported from India and Madagascar and shut down production. The ebony and rosewood in question have been used for decades to make the instrument’s fingerboards and are integral to their style and sound, the company said. (Great video background from Reason, here.)

This week, Gibson settled with the government in a “criminal enforcement agreement,” which means the feds won’t bring criminal charges after their three-year investigation. In exchange, Gibson acknowledged some of its imports from Madagascar violated environmental laws and agreed to pay a fine of $300,000 plus $50,000 to the National Fish and Wildlife Foundation, to be directed to preserving forests. It will also step up compliance efforts.

The admission of wrongdoing only applies to Madagascar wood imported and seized in 2009, not to Indian wood imported and seized in 2011. Gibson will be able to recover the wood seized in the 2011 raid, suggesting there was no evidence of wrongdoing in that raid.

The government admits as much in the agreement, which Gibson has posted in full on its website, along with the evidence against it:

The Government and Gibson acknowledge and agree that certain questions and inconsistencies now exist regarding the tariff classification of ebony and rosewood fingerboard blanks pursuant to the Indian government’s Foreign Trade Policy. Accordingly, the Government will not undertake enforcement actions related to Gibson’s future orders, purchases, or imports of ebony and rosewood fingerboard blanks from India, unless and until the Government of India provides specific clarification that ebony and rosewood fingerboard blanks are expressly prohibited by laws related to Indian Foreign Trade Policy. The Government agrees to provide Gibson notice of any such clarification from the Government of India in the future and a reasonable period of time (60 days or as otherwise agreed) to address the potential change in the understanding of the law as it relates to shipments received by or en route to Gibson.

Gibson invites everyone to check out the full report and evidence for themselves. It’s not a long read, and really gives you a feel for the complexity inherent in our regulatory system. Here, from the DOJ report is Gibson’s violation, which prompted two armed raids and three years of investigation:

Between June 20, 2008, and November 17,2009, Gibson did not ask for or obtain paperwork or official assurances from officials in Madagascar that the wood it was purchasing from Madagascar through its German supplier was legally harvested and exported from Madagascar, notwithstanding the information received by Gibson during the June 2008 trip to Madagascar. Before November 2009, Gibson further did not ask for additional paperwork or other confirmation from its supplier that the wood it was purchasing from Madagascar was legally harvested and exported, although the execution of the search warrant. Instead, Gibson relied on the fact that T.N.(the German supplier) was an established, FSC (Forestry Stewardship Council) chain of custody certified supplier. Before ordering or accepting delivery of the fingerboards, Gibson should have taken a more active role and exercised additional diligence with respect to documentation of legal forestry practices in the areas of Madagascar from which those shipments from its wood supplier may have originated. Information received by the Gibson representative during the June 2008 trip to Madagascar was not further investigated or acted upon, prior to the continuing placement of orders with the supplier, T.N. Information sent to company management by the Gibson representative and others following the June 2008 trip to Madagascar also was not further investigated or acted upon, prior to the continuing placement of orders with the supplier, T.N. Instead, Gibson continued to purchase Madagascar ebony after June 20, 2008.

Translation (allowing for the fact that I’m not a lawyer): A Madagascar law allows the export of finished fingerboards but not unfinished “fingerboard blanks,” which would leave the finishing work to Gibson, adding frets and shaving fractions of an inch off the wood pieces. A Madagascar company was given a special dispensation to export existing stocks of rosewood after the passage of this Madagascar law, and Gibson received that company’s wood through a German company, which was also certified by an outside environmental group as forest-friendly. It turns out, the Madagascar company did not have a dispensation for ebony, but Gibson was getting the wood through two respected dealers, as far as it was concerned. Because a Gibson employee visited Madagascar with Greenpeace in 2008 and prepared a report, which went to higher-ups, addressing some of the risks of violating Madagascar law, Gibson should have taken additional steps to prevent the import of this Madagascar ebony.

Is there technically a violation of the Lacey Act somewhere in there? Sure, arguably, and that’s the fun of very complex U.S. laws dependent on the interpretation of unclear foreign laws and enforced via byzantine reporting requirements.

The WSJ explains what businesses are up against in dealing with these laws, even when making good-faith efforts to comply:

Gibson’s predicament, which raises concerns for musical-instrument makers and other importers of wood, illustrates the pitfalls of complying with U.S. law while dealing with middlemen in faraway countries whose legal systems can be murky.

But why, if the 2009 raid’s Madagascar wood is the wood that violated the Lacey Act, were there no criminal charges brought between the 2009 raid and the 2011 raid? Could it be there wasn’t much of a criminal case, here?

In that case, shutting down production in a second armed federal raid seizing hundreds of thousands of dollars in wood, which (oops!) didn’t violate any laws would be a pretty keen way to get someone to cop to the violations of the first raid without a trial, wouldn’t it?

Gibson contends it had to settle to save money and move on with the company’s business:

“We felt compelled to settle as the costs of proving our case at trial would have cost millions of dollars and taken a very long time to resolve. This allows us to get back to the business of making guitars. An important part of the settlement is that we are getting back the materials seized in a second armed raid on our factories and we have formal acknowledgement that we can continue to source rosewood and ebony fingerboards from India, as we have done for many decades.”

Despite the fact that, “…the government acknowledges that Gibson has cooperated with the Government and the investigation conducted by the Fish and Wildlife Service”, Gibson was subject to two hostile raids on its factories by agents carrying weapons and attired in SWAT gear where employees were forced out of the premises, the production was shut down, goods were seized as contraband, and threats were made that would have forced the business to close.

CEO, Henry Juszkiewicz commented, “We feel that Gibson was inappropriately targeted, and a matter that could have been addressed with a simple contact a caring human being representing the government. Instead, the Government used violent and hostile means with the full force of the US Government and several armed law enforcement agencies costing the tax payer millions of dollars and putting a job creating US manufacture at risk and at a competitive disadvantage. This shows the increasing trend on the part of government to criminalize rules and regulations and treat US businesses in the same way drug dealers are treated. This is wrong and it is unfair. I am committed to working hard to correct the inequity that the law allows and insure there is fairness, due process, and the law is used for its intended purpose of stopping bad guys and stopping the very real deforestation of our planet”.

Juszkiewicz and others in the music industry remain worried about those, including individual musicians, who might get ensnared in Lacey Act violations:

George Gruhn, who owns a vintage guitar shop in Nashville, said he wasn’t surprised that Gibson officials accepted the settlement.

“Regardless of the merits of the case on either side, it would have cost more than that by far to pursue it,” he said. “Even if they thought they conceivably they could win, it would have probably cost more than $1 million to do it…

“The problem is that virtually every instrument prior to 1970 contains Brazilian rosewood,” he said. “Even on a Gibson LGO, which was their cheapest student guitar.”

The government has said it won’t go after individual guitar owners, but the law does not prevent it. Early this year, Sen. Rand Paul introduced a law that would strike references to “foreign” law from the Lacey Act and substitute a civil penalties for the law’s criminal ones.

For now, Gibson will pay its $350,000 after a three-year investigation that cost us God knows how much to make amends for four shipments of wood totalling $262,000.


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Justice for the Trees!

(runs outside and hugs a maple)

Why do I hear Rush’s “The Trees”?

shick on August 7, 2012 at 3:22 PM

I’ll also add that the Seymour Duncan Seth Lover pickups I put into it coupled with the heft of the body (Ooooooh Noooooos!! What would TEH TREES think!?) played through my Marshall stack is one of the thickest sounds I think I’ve ever heard.

crazy_legs on August 7, 2012 at 3:16 PM

They key is the solid, heavy slab of mahogany with the arch carved maple top bonded to form the body.

People gripe about the weight, but I say get a wider cushioned strap and quit whining wussies! lol

Check this short video of Zakk playing the Epiphone version of his signature Paul. Love this.

Zakk wylde – ‘farewell ballad’ solo – Original

Brian1972 on August 7, 2012 at 3:23 PM

I think it’s the best guitar on the planet.

Agreed. I may ask to be be buried with mine. ;-)

I have lusted after them since I was seven years old seeing KISS Alive II for the first time

It was seeing Jimmy Page’s ’59 on a bootlegged tape of “The Song Remains The Same” when I was in High School that did it for me.

Page remains my favorite guitarist nearly 30 years later. Les Pauls remain my favorite guitar, so I guess the song does remain the same.

crazy_legs on August 7, 2012 at 3:25 PM

It was seeing Jimmy Page’s ’59 on a bootlegged tape of “The Song Remains The Same” when I was in High School that did it for me.

Page remains my favorite guitarist nearly 30 years later. Les Pauls remain my favorite guitar, so I guess the song does remain the same.

crazy_legs on August 7, 2012 at 3:25 PM

Page is a legend. He’s got a Custom Shop Signature model as well:

Jimmy Page “Number Two” Les Paul

Brian1972 on August 7, 2012 at 3:28 PM

No mention of the fact that CF Martin & Co. makes guitars using the same wood, and that they are democrat contributors.

CurtZHP on August 7, 2012 at 3:28 PM

Dang, messed up the link.

Jimmy Page “Number Two” Les Paul

Brian1972 on August 7, 2012 at 3:30 PM

It was cheaper in the long run to settle than to fight.

The Lacey Act is one of the reasons given to Never Talk to the Police – one of many reasons even an innocent person should always lawyer up.

Adjoran on August 7, 2012 at 3:30 PM

Page is a legend. He’s got a Custom Shop Signature model as well:

Wish I had the cash for some of these. Alex Lifeson (a close #2 to Page) has one now too.

Anyway, s much as I’d love to hang around this thread, I’ve got to do some work for the last hour of the day. Have a good one.

crazy_legs on August 7, 2012 at 3:33 PM

affenhauer on August 7, 2012 at 1:56 PM

Excellent piece. One of my favorite passages from AS.

UltimateBob on August 7, 2012 at 3:34 PM

At least now we can say for certain that 100% of all items sold in the US are now 100% certifiably compliant with all laws that exist on planet Earth. Whew, that was close.

Oh, please ignore 50% of the imports from China and 50% of food imports from all of Asia. Those are just peachy.

sdbatboy on August 7, 2012 at 3:37 PM

Page remains my favorite guitarist nearly 30 years later. Les Pauls remain my favorite guitar, so I guess the song does remain the same.

crazy_legs on August 7, 2012 at 3:25 PM

People rag on Stairway to Heaven because the radio DJ’s wore it out for so long, but that solo, and the rest of the playing is just brilliant. The man is a genius.

Gibson SG double neck 6-12 string

Brian1972 on August 7, 2012 at 3:38 PM

I’ve got to do some work for the last hour of the day. Have a good one.

crazy_legs on August 7, 2012 at 3:33 PM

Gotta make some bank, Gibsons ain’t cheap! lol

Have a good one yourself.

Brian1972 on August 7, 2012 at 3:39 PM

Extortion.

besser tot als rot on August 7, 2012 at 2:07 PM

“If you mention extortion again, I’ll have your legs broken.”

– Mayor Carmine DePasto to Dean Wormer

– or, 0bama to Gibson Guitar Co.

UltimateBob on August 7, 2012 at 3:40 PM

SHAKE DOWN!

BigAlSouth on August 7, 2012 at 3:47 PM

Absolutely love my Taylor Auditorium Grand CE414 but I may have to swing by the guitar shop tonight and check out a Gibson. I love me some rare exotic wood! Yeah I just set myself up for sarc. :D

Buttercup on August 7, 2012 at 4:23 PM

if my older les paul( which is extremely heavy- one could stun an ox with one swing of it) pays a $400 fine can she stay in the country and get a work permit? hell, if i had known about her potentially questionable status i would have gotten her an EBT card and its free cell phone.

but, better yet, even if she doesn’t get any of barry’s precious illegal payoffs, she’s voting in the next election. because along with the dead pets i plan on enrolling any musical instruments… because voter id laws are bad so best to live in the now instead of living in and being disenfranchised in a modern jim crow backwater or something.

boycott/ buycott whatever. the point needs to be to vote this despicable filth out of office. and then put the DemonRat mobsters and RINOs left swanning about on notice that we are not putting up with a champagne socialist gangsta government using its power to punish those with whom it disagrees.

mittens on August 7, 2012 at 4:25 PM

DOJ hits Gibson with $300K fine in settlement over exotic wood raids

BS!!!!

Dr. ZhivBlago on August 7, 2012 at 4:27 PM

The queers gonna have a kiss in?

Wade on August 7, 2012 at 4:32 PM

Absolutely love my Taylor Auditorium Grand CE414 but I may have to swing by the guitar shop tonight and check out a Gibson. I love me some rare exotic wood! Yeah I just set myself up for sarc. :D

Buttercup on August 7, 2012 at 4:23 PM

A good friend of mine has a really fantastic Taylor acoustic that is the best acoustic I have ever played. Retails around $4,000.

By the way, it sports a bound ebony fretboard with mother of pearl inlay, much like a Gibson Les Paul Custom.

Wonder why they never got raided?

Unions, and publicly available political donation records.

That’s my guess.

Brian1972 on August 7, 2012 at 4:35 PM

We have a treasure here in STL. Killer Vintage.

Dave Hinson is one of a few people that can make appraisals on guitars.

tom daschle concerned on August 7, 2012 at 4:41 PM

To MKH: Love your stuff! Glad you’re here!!

To Gibson CEO, I offer this quote: “Peace in our time.”

Each of us has to stand up to this stuff all the time.

Pablo Snooze on August 7, 2012 at 4:48 PM

tom daschle concerned on August 7, 2012 at 4:41 PM

Looking at the Gibson inventory page for Killer Vintage.

The’ve got some nice stuff in there, might have to pay them a visit.

I’m only about 4hrs away, in West Tennessee.

Thanks for the link!

Brian1972 on August 7, 2012 at 4:48 PM

Also notice that Martin, who uses the same woods in its fretboards, was not bothered by this.

PatriotGal2257 on August 7, 2012 at 2:50 PM

No mention of the fact that CF Martin & Co. makes guitars using the same wood, and that they are democrat contributors.

CurtZHP on August 7, 2012 at 3:28 PM

Yep, exactly. That little inconvenient fact came out shortly after Gibson was raided.

PatriotGal2257 on August 7, 2012 at 4:51 PM

Although I’m a Fender guy, I support Gibson in their resistance to Obnoxious Federal Oppression.

Here’s my gracenote for Obama.

profitsbeard on August 7, 2012 at 5:12 PM

Ummmm…ahhhhh…ummmm…Nope. I got nothin.

timberline on August 7, 2012 at 5:27 PM

Also notice that Martin, who uses the same woods in its fretboards, was not bothered by this.

PatriotGal2257 on August 7, 2012 at 2:50 PM

No mention of the fact that CF Martin & Co. makes guitars using the same wood, and that they are democrat contributors.

CurtZHP on August 7, 2012 at 3:28 PM

Yep, exactly. That little inconvenient fact came out shortly after Gibson was raided.

PatriotGal2257 on August 7, 2012 at 4:51 PM

In fact what will the government do with the stolen Madagascar wood? Probably sell it to Martin at a bargain-basement price.

slickwillie2001 on August 7, 2012 at 6:00 PM

Hugo Chavez would be so proud.

Speakup on August 7, 2012 at 8:28 PM

This is the most corrupt administration ever, why they went after Gibson is a joke.
DOJ only takes cases against Republicans.

carolt2 on August 7, 2012 at 9:07 PM

We’re in an “Obama Haze”.

http://youtu.be/EC9VR3AdR9o

Take my Gibson guitar from my cold dead hands.

Blue Collar Todd on August 7, 2012 at 10:30 PM

It is clearly unconstitutional for our government to impose foreign laws upon its citizens. There is absolutely NO “enumerated power” which allows this.

No legislative process, no due process, no review. THIS IS PURE TYRANNY!!!

If the courts were not broken, this would have been thrown out with prejudice, and the rogue agency would pay a huge compensatory fine to the victim. Too bad our court system is polluted with hacks who don’t care about the law or the constitution.

landlines on August 8, 2012 at 12:28 AM

The fix is in: one can now always be found guilty of doing something wrong.

The Feds are the regulators and they have you by the balls at all times.

Welcome to Amerika.

Sherman1864 on August 8, 2012 at 12:53 AM

We’re in an “Obama Haze”.

http://youtu.be/EC9VR3AdR9o

Take my Gibson guitar from my cold dead hands.

Blue Collar Todd on August 7, 2012 at 10:30 PM

I wish I had a Gibson. I do have a pretty sweet 1978 vintage Alvarez-Yairi DY74 that I can’t play for sh!t but I will never part with in life (my daughter gets it when I’m dead). If I can afford a Gibson before I die I will buy one, even though my playing sucks. Why? It’s a Gibson…why else?

swinia sutki on August 8, 2012 at 7:24 AM

Since Gibson didnt build that, I wonder if they can recoup some of their losses from their governmental partners.

Business friendly administration indeed.

OpportunityCost on August 8, 2012 at 9:40 AM

The United States Congress, and I have this in common: we both hold Eric Holder in contempt.

uncle_fweddy on August 8, 2012 at 1:57 PM

I wonder…when those members of The New Black Pantspisser Party were threatening would be voters, outside the polling place…where the clubs they were brandishing fashioned from the woods of Madagascar? Because that would make two illegal things they were doing, both of which were ignored by this phony adminsitration.

uncle_fweddy on August 8, 2012 at 2:03 PM

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