Gibson Agrees to Pay $350,000 in Penalties, Loses Seized Imported Ebony

Gibson Guitar will pay $350,000 in penalties to settle federal charges that it illegally imported ebony from Madagascar to use for guitar fret boards.

So ends a criminal investigation that, for the past year, has drawn fire from conservatives as an example of government over-reaching.

Gibson, the legendary guitar manufacturer behind the Les Paul, the SG and the Flying V, agreed to pay a $300,000 fine and donate $50,000 to the National Fish and Wildlife Foundation.

The government deferred prosecution of the company for criminal violations of the Lacey Act, which makes it illegal to import wood that was harvested and exported illegally under another country’s laws.

"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," said Gibson CEO Henry Juszkiewicz in a statement posted on Gibson.com this morning. "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."

The settlement, which was announced yesterday, frees Gibson from the charges as long as it doesn’t violate the agreement over the next year and a half. Gibson also agreed to withdraw a suit seeking to recover $260,000 worth of ebony and rosewood that was seized during by the government.

Agents of the U.S. Fish and Wildlife Service and the U.S. Customs and Border Protection agencies raided Gibson's offices and factories on August 24, 2011. Gibson also was raided in 2009.

Here are some "Possible Questions and Answers" that were posted on Gibson.com this morning:

In light of your previous outspoken condemnation of the Government's conduct in this case, why are you taking such a moderate, mild-mannered approach in your official statement?

The company is gratified that the Government ultimately saw the wisdom and fairness in declining to bring criminal charges in this case. The "Criminal Enforcement Agreement" we have entered into straightforwardly recognizes that it was inappropriate to criminalize this matter.

In light of the Government's lenient treatment here, does Gibson still believe that amendments to the Lacey Act are necessary to make the law more fair and reasonable?

Yes. The outcome here deals only with the particular controversy about the particular fact pattern. A true legislative reform is necessary to avoid systemic criminalization of capitalism, as I explained in my recent Wall Street Journal article.

Wasn't the Government's conduct here, with its armed raid on your headquarters and manufacturing facilities, so outrageous and overreaching as to deserve further Congressional investigation, just calling a spade a spade?

I don't retreat from any of my prior commentary, but I am gratified that this resolution puts the matter behind us. We are a forward-looking company hoping to move our business ahead in an environmentally forward-thinking way.

For more questions and answers, plus official filings from the U.S. Department of Justice (including grainy B/W photos and pretty much everything you need to know about this case), visit Gibson.com.