For Gibson Guitars, it’s becoming a familiar tune: federal investigators storming its manufacturing plants. That’s what happened for the second time in three years last August, when U.S. Fish and Wildlife Service and Homeland Security agents raided the company’s Nashville and Memphis facilities. As that case proceeds, one wonders about its relationship to the November 2009 seizure of wood products, when Gibson was said to have purchased ebony in violation of Indian law. That case is now in the forfeiture stage, with the government seeking to dispose of the wood, and Gibson fighting to get it back. The government has asked the judge to stay both cases while it decides possible criminal charges.
In the 2009 case, the Fish and Wildlife affidavit states there was a violation of 16 U.S.C. 3372(a)(2) of the Lacey Act, which makes it illegal “to import, export, transport, sell, receive, acquire or purchase in interstate or foreign commerce — (A) any fish or wildlife taken, possessed, transported, or sold in violation of any law or regulation of any state or in violation of any foreign law.” If Fish and Wildlife is correct, and the ebony was obtained and shipped in violation of Indian law, Gibson would be liable under U.S. law, even if it didn’t know about the impropriety.
Last August’s raid came after claims Gibson purchased ebony and rosewood that was exported illegally from Madagascar. Assuming this to be true, Gibson again would be in violation of U.S. law. In both instances, the exports originated in Germany, the importer was a third-party customer, and Gibson was the ultimate consignee.
Fish and Wildlife makes a big deal about the wood not being properly classified when exported by the seller, and again when imported by the middleman. These missteps, if correct, are being used to infer Gibson and its business partners were trying to hide the true identity of the woods to evade Lacey Act requirements. Gibson’s defense centers, in part, on claims the wood came from suppliers that abide by Forrest Stewardship Council principles. FSC members issue certificates attesting the wood being shipped wasn’t illegally harvested and doesn’t violate traditional or civil rights.
Even if Gibson’s statements are true, the company could have been duped through the issuance of phony FSC certificates, even if issued by a legitimate FSC source. If not, the Lacey Act is a strict liability law, meaning Gibson could be in violation, even without knowing it.
The 2011 case is still new. It’s clear from the search warrant that the issuing judge relied on the interpretation of Madagascar law provided by the Fish and Wildlife agent. The 2009 search was based on a similar reliance on the agent’s explanation of Indian law. In neither case was a copy of the foreign law provided with the search warrant affidavit, only a summary of its purported contents.
Gibson has an affidavit from the relevant Indian authorities refuting Fish and Wildlife’s position on the first case. The government, however, doesn’t like being publicly embarrassed, so likely is looking for other ways to undermine Gibson’s position. Hence, the second raid. Gibson has produced its evidence regarding the Indian shipments to the court. It is too soon in the process for similar evidence to be due regarding the Madagascar wood, but it seems reasonable to expect similar efforts by Gibson to get those goods back.
It is entirely possible the government is wrong. That’s certainly been true in numerous recent cases; the government has lost, left with little or no evidence to support its original claims.
About 95 percent of all cases settle. Given the acrimony on both sides, it’s not clear settlement is possible between Fish and Wildlife and Gibson. Only time will tell, but Gibson’s travails serve as a reminder: You have to be careful how you confront any government agent. Individual agents often proceed with little oversight. U.S. Attorney’s Offices work closely with those agents and are loathe to turn down their cases, so being careful is important and can be the difference between a resolution and a costly trial. The best defense is to redouble your efforts to ensure your compliance program is solid up and down your supply chain. Of course, sometimes a good fight is the only way to prove them wrong.
Just ask Lindsey Manufacturing, Keith Lindsey and Steven Lee, who had to endure their own version of hell through a conviction on multiple counts grounded in Foreign Corrupt Practices Act violations, only to have those convictions overturned by the judge due to prosecutorial misconduct.
Let’s hope the U.S.-based guitar manufacturer isn’t put through that same brand of retribution.
Susan Kohn Ross is an international trade attorney with Mitchell Silberberg & Knupp in Los Angeles. Contact her at firstname.lastname@example.org.