Gibson Settles with US Department of Justice on Lacey Act Violations: $600,000+ in Penalties

Gibson entered into a criminal enforcement agreement with the US Department of Justice, effectively admitting their Lacey Act violations.

Malagasi worker cutting a rosewood tree

This settlement stemmed from the allegations that Gibson illegally purchased and imported ebony wood from Madagascar and rosewood and ebony from India.

Illegal logging in Madagascar has been a very big problem. Even with the high market value attached to the precious woods from Madagascar, the workers that extract the trees are said to be paid less than $4 per day. These workers are local villagers that have little experience in forestry, their inexperience cause them a lot of injuries and destroys many of the surrounding plants. Their lack of experience also causes much of the wood to be wasted during extraction. For this reason and for its environmental impact, exporting of specific Madagascar woods was banned.

Assistant Attorney General Moreno of the Justice Department’s Environment and Natural Resources Division was quoted saying: “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. 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.”

According to the settlement agreement, Gibson knew that Madagascar banned the harvest and export of ebony products, but still they continued to acquire the said illegal wood. These purchases were investigated on by the U.S. Fish and Wildlife Service with assistance from U.S. Immigration and Customs Enforcement, this prompted the previous raids, with which they did find banned woods in the hands of Gibson. The criminal enforcement agreement comes with all the juicy details that describe the conduct for which Gibson accepts and acknowledges responsibility. We quote the established story below:

“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.”

Gibson Hummingbird True Vintage with Madagascar Rosewood Fretboard

This settlement agreement defers prosecution for criminal violations, but will require Gibson to pay a penalty amount of $300,000. Gibson is also required to pay the National Fish and Wildlife Foundation an amount of $50,000 as community service. Gibson is also expected to implement a compliance program designed to strengthen its Lacey Act compliance controls and procedures. Finally, Gibson will also lose its claim to some of the wood seized by the government, including Madagascar ebony from shipments with a total invoice value of $261,844.

Gibson has previously been crying foul that the Justice Department is bullying them. They said that they have been fully cooperating with the government providing the documentation related to their wood-buying activities over the years. They were surprised as to why the Government had to do a raid, when they could have given them what they needed if they asked.

Gibson CEO Henry Juszkiewicz commented, “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.”

Although the settlement will cost Gibson some serious penalties, it did allow Gibson to avoid criminal charges and continue to make guitars – provided that they avoid further violations.

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