Gibson Guitar agrees to pay $300,000 penalty to settle Lacey Act violations

By Pete Kasperowicz - 08/06/12 12:23 PM ET

The Justice Department announced Monday that it has come to an agreement with Gibson Guitar Corp. that will resolve an investigation into whether the company used illegally harvested wood and ebony in its production process, a violation of the Lacey Act.

Under the agreement, Gibson will pay a $300,000 penalty, plus a $50,000 "community service payment" to the National Fish and Wildlife Foundation to help promote conservation of protected trees. Additionally, Gibson agreed to set up a compliance program to ensure it does not use illegally harvested products, and to forfeit its right to about $260,000 worth of wood and ebony seized in the investigation.

In return, the Obama administration will not charge Gibson criminally for violating the Lacey Act. That act amended the Endangered Species Act in 2008 to also provide for criminal penalties against the importation or use of illegally harvested plant materials. Gibson is a premier guitar makers, whose instruments have been used by musicians such as Eric Clapton and Keith Richards.

The settlement ends a dispute between Gibson and the Justice Department that has lasted more than a year, and includes two federal raids on the company to seize illegal material. The Justice Department said Monday that the settlement shows the administration is serious about implementing the Lacey Act changes.

"This criminal enforcement agreement goes a long way in demonstrating the government's commitment to protecting the world's natural resources," U.S. Attorney Jerry Martin said. "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."

Justice said Gibson has admitted to buying Madagascar Ebony, an endangered tree, for making "fingerboard blanks" to use in the manufacturing of guitars. The department also said it illegally imported rosewood and ebony from India.

But enforcement could only prompt House Republicans to press for legislation to scale back the requirements of the Lacey Act. In June, the House Natural Resources Committee approved the RELIEF Act, which would amend the law so that it does not apply to goods made in or imported to the United States before it took effect in 2008.

The bill, H.R. 3210, was sponsored by Rep. Jim Cooper (D-Tenn.), who hails from the same state where Gibson's headquarters are located. It's also sponsored by three other Tennesseans, and 17 other House members.

In July, House GOP leaders indicated they were prepared to move the bill, even setting an amendment deadline for it in anticipation of possible floor action.

National Retail Federation Vice President Erik Autor said that while the settlement solves the specific issue with Gibson, it does not address the ongoing problems with the Lacey Act.

"Retailers — by and large — support the environmental objectives of Lacey, however this settlement vindicates retailers' arguments that the Lacey Act is being misapplied to foreign laws and regulations that have no relation to its noble environmental objectives," he said. "Today's action underscores the need to address the underlying problems of the Lacey Act, and demonstrates the need for a legislative remedy."

— This story was updated at 5:20 p.m.