A few months ago, I used this blog to open my big mouth about the “persecution” of Gibson Guitar by FBI agents and armored SWAT teams. Upon entering three factories and the company's Nashville corporate headquarters, the authorities issued a warrant under a conservation law called the Lacey Act and stripped Gibson of its imported Indian rosewood and other materials they said were imported illegally.
Gibson insisted it got permits and followed foreign laws on exports of finished products. The U.S. government said they weren't finished enough. Using this bully pulpit, I asked the musical question, “Does that mean our own government would rather the guitars be â€˜finished' overseas rather than made in America by Gibson?”
This week the news came out that Gibson elected to pay a $350,000 fine to avoid U.S. prosecution over allegations it illegally imported endangered wood from India and Madagascar. To some readers this appeared to be an admission of guilt by the company. One was pretty blunt with me:
“If it were me, I would have a quiet but firm discussion with whoever fed you the information that Gibson was being persecuted without justification,” he wrote. “Seems that 'little birdie' was passing on bad info at best.”
In my defense, as the news report we posted to our website stated, Gibson still does not admit wrongdoing. Its CEO stated the company agreed to the settlement to avoid the legal costs associated with going to trial.
"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," CEO Henry Juszkiewicz said in a statement.
As part of the settlement, Gibson is getting back the materials seized in the second factory raid and was cleared to continue sourcing rosewood and ebony fingerboards from India. The value of that decision to Gibson probably exceeds the value of anything they could gain by putting up a fight.
But, just for fun, I asked myself if Gibson would have had much of a chance of winning the case. I don't know, I concluded.
So I asked someone who might know. His name is Michael Burke, chair of the American Bar Association's International Section and partner with the Atlanta law firm of Arnall Golden Gregory LLP. He gave me a firm answer:
“Among other things, they would have had to prove that the export was legal under Madagascar law,” he told me. “That's not an easy burden—to prove the legality of an export under foreign law. Again, I suspect the economics played a role. The settlement was less expensive than continued litigation.”
If anything positive came out of this case, it was a lesson for logistics managers: “Know thy supply chain.” Burke says that means not only understanding every detail of your contracts with suppliers, but if you know what you're importing is protected under legislation like the Lacey Act, talk to your lawyer or make sure you have certification of export legality from the local government. If things smell fishy, get yourself off the hook fast. There's a song that would sound great on a Gibson.