If and when criminal charges are brought, targets are likely to include a large German importer/exporter of rare woods, Theodor Nagel Gmhb & Co KG and its U.S. affiliates, including Luthier Mercantile, Inc. (LMI). It’s not widely reported, but LMI was the importer of the East Indian ebony involved in the August 2001 raids (not Gibson). LMI changed the harmonized schedule classification of the wood after export and before import, as well as the description. LMI failed to complete the Lacy Act declaration. LMI listed its affiliate, Nagel as the ultimate consignee at the address of the Red Arrow Delivery Service warehouse in Nashville. LMI attempted to file pre-dated Lacey Act paperwork showing Gibson as the ultimate consignee.
At Red Arrow, the federal government discovered a shipment of wood imported from India through Canada, addressed to LMI as ultimate consignee, but with an email to Red Arrow saying to disregard the customs paperwork and to treat Gibson as the ultimate consignee.
When wood was seized from Gibson in August 2009, it was because it was contraband based on LMI’s actions. Gibson had, and has, a cause of actions for monetary damages against LMI. Plant products that are imported without a Lacey Act declaration, or under false or fraudulent paperwork are contraband. Although whether that is a reasonable position, it’s entirely different from what has played out in the press based on Gibson’s press releases and a thousand Tea Party bloggers.
The government was no stranger to Theodor Nagel, the falsely listed ultimate consignee, either. Nagel was the target of the investigation that led U.S. Customs and the U.S. Fish and Wildlife Service to Gibson in 2009. And the combination of Nagel and Gibson raised eyebrows.
I’ve discussed on may other threads the Madagascar government’s 2006 ban on the export of ebony and rosewood.
On September 29, 2009, the USFWS received information from an investigative audit of timber exports collected by a cooperating organization in Madagascar, which revealed that the large German wood import-export company Theodor Nagel Gmbh & Co. KG purchased at least one illegal shipment of sawn Madagascar ebony, exported by Thunam on March 27.
On September 30, 2009, the USFWC received a transcript from a recorded interview with Thunam in which Thunam stated that he had an exclusive arrangement to supply Madagascar wood to Theodor Nagel. The cooperative individual noted that Thunam’s wood was not inventoried or stamped as required under Malagasy law. Thunam stated the wood he supplies to Nagel cannot be legally exported from Madagascar and the Nagel is aware of the status of the wood and the illegality of exporting the wood. Thunam stated that he had traveled to German on many occasions to discuss the legal status, which had delayed timely exports.
If this seems unlikely, note that the October 2010 edition of National Geographic interviewed Roger Thunam as a lumber trafficker in Madagascar and he is quoted as saying he puchases and deals in illegally harvested lumber. Thunam is one of only two invididuals ever to be convicted for lumber trafficking in Madagascar; he had paid a settlement to be released from prison shortly before selling the wood that led to the first, 2009, raids on Gibson Guitars.
On October 5, 2009, a U.S. Immigration and Customs Enforcement Senior Special Agent found one of the Thunam imports to the U.S. entering the Port of Newark, New Jersey. The purchaser was Gibson Guitar of Nashville. The government checked import records and discovered that Gibson had made other purchases of Madagascar wood from Nagel since the illegal export of wood from Thunam to Nagel.
On October 13, 2009, a USFWS Special Agent conducted a phone interview with Phil Guillery, the Director for the Forest Trust, an organization consulted by companies, including Gibson, to located sustainable sources of rare woods for the manufacture of musical instruments. Guillery had put together a trip, from June 9 through 20, 2008, for representatives from Gibson, C.F., Martin, Taylor, and sustainable wood groups, to tour Madagascar and gather facts to plan the establishment of a low-yield, high-value, managed forest in Madagascar. Guillery stated that all guiltar industry representatives, including Gibson representative Gene Nix, were informed that the harvest of Madagascar ebony and rosewood was illegal and that the export of these woods was also illegal under Malagasy law. Guillery stated that he had provided Nix and the others with a copy of the 2006 Interministerial Order making the harvest and export illegal (the government later found this copy from Guillery at Gibson during the 2009 raid).
Two banks are known to finance all timber exports from Madagascar: the Antalaha Brana of BFV-Société Générale and the Bank of Africa. Government reviews found all exports to Nagel from Madagascar came from Thuman as the exporter.
On October 10, 2009, a USFWS conducted an interview with Andrew Keck of International Resources Group, which hosted part of the June 2008 visit to Madagascar by Gibson Guitar wood specialist Gene Nix and representatives from Martin and Taylor. According to Keck, Nix and the others were informed specifically about Roger Thunam, a convicted Malagasy timber trafficker, and were told that he supplied illegal wood to Theodor Nagel Gmbh & Co. KB. Keck said Nix and others toured Thunam’s site and discussed the violations of law in his wood supply operations. Keck confirmed that all representatives, including Gibson’s Nix, knew that Thunam could not legally export wood to Nagel for sale to any of the companies present on the tour to Magasacar. They toured other sites.
The government has a transcript and digital recording of an interview with Gerald Rambeloario, Former Director General of Forests of the Republic of Madagascar from 2007-2009 (equivalent to the Secretary of the Interior for the United States), which was recorded in Madagascar on May 23, 2011. Rambeloario states that fingerboard ‘blanks,’ sawn to specific sizes are not finished products and are not lawful for export under Malagasy law. Rambeloariso also explains that he was involved in the Music Wood fact-finding trip to Madagascar that was attended by Gibson Guitar (which would be Gene Nix); that Gibson was well-informed about illegal logging; and that the purpose of the trip was to associate with a new partnership for the purpose of high-priced wood from communities that would manage the forests. What was discussed was an emerging program that required a relationship with Gibson Guitar. USFWS determined that some of the Madagascar ebony was in Gibson’s factories and some was stored at a Red Arrow Delivery Service Warehouse in Nashville.
On November 17, 2009, the government executed search warrants on three Gibson factories in Nasville and Memphis and on the Red Arrow Delivery Service Warehouse and confiscated Madagacar ebony, six guitars, and some computers sand files.
From the computers and files it was clear that Gibson knew of the illegality of exporting Madagascar ebony, and of purchasing it from Thunam. Gibson was seeking long-term goal but chose to buy from Thunam despite what Nix had learned in Madagascar.
Rememer that the trip took place in June 2008.
In a September 20, 2007 Trip Justification, Gene Nix wrote: “[t]here are no certified sources of ebony at present . . .” This was significant, because Gibson had a copy of the 2006 Inter-Ministerial Order which only permitted export of wood from certified sources. Gibson sought this wood. As Nix wrote in the Justification: “One of the challenges facing Gibson Musical Instruments in the company’s quest for increasing FSC7 certified wood input is the use of Ebony and Indian Rosewood in production.” According to Gibson’s SmartSource Action Plan, p.7, Gibson was looking for legal sustainable management and conservation measure which could be introduced as a supply chain with progression toward FSC Certification over a long-term time frame.
In a written review of the Madagscar trip, Nix noted that on June 15, 2008, he flew by private plane to Antalaha and visited with private companies in logging and processing, notably Roger Thunam’s business:
Key things we saw [at Roger Thunam’s Madagascar business]- large yard, wood in yard not properly stored; it is under temporary seizure and cannot be moved: substantial stored quantities of cut items for export including blanks for various instruments. Mostly ebony . . .
On August 26, 2008, Gene Nix sent an email to various Gibson executives stating:
I spent two and a half weeks in Madagascar this June [2008],I represented our company along with two other guitar manufacturers. . . . All legal timber and wood exports are prohibited because of wide spread corruption and theft of valuable woods like rosewood and ebony.”JaraAla is a USAID-funded project that supports reforms in Madagascar to improve sustainable forest management. On February 25, 2009, JaraAla director Andrew Keck emailed Nix and others. An attachment to the email was a filed showing that only Thierry Body has been given the right by the Malagasy government to export ebony under special circumstances. The email noted that Thunam had no legal stock acknowledged by the Malagasy government under official inventory as required by law.
The same day, Gene Nix sent an email to Gibson President David Berryman, saying “[Maderas Barber] has been in the business a long time and may be able to help begin some legitimate harvests. Mr. [Roger] Thunam on the other hand should now be ableto supply Nagel with all the rosewood and ebony for the grey market.” Nix brought back a video of Thuman’s manufacturing facility, which consisted of a couple of individuals with a table saw and a pile of logs. This facility does not appear to be able to rip the logs and produce the raw fretboard blanks Gibson which Gibson CEO Henry Juszkiewicz showed to reporters and referred to as a ‘finished good.’ Gibson knew about the Inter-Ministerial Order of 2006 before the Madagascar Trip. An English translation was part of the trip materials. Problems with Madagascar harvests were discussed in a February 25, 2009 email from Gene Nix, a Review of Trip Program, a Concept and Background Note, the 2007-2012 Gibson “SmartSource” Action Plan, an August 26, 2008 email from Nix re: Trip to Madagascar, a June 23, 2008 emal from Nix to Clay Maxie, a Februay 25, 2009 email from Andrew Keck to Nix, the February 25, 2009 email from Nix to Berryman, and the Program for information-gathering trip to Magascar.
Gibson had long-term plans for a partnership to develop a sustainable yield of Madagascar ebony in partnership with Magadascar. But Gibson also wanted some right away. So Gibson chose to buy several shipments from a convicted trafficker, whom Nix, according to several witnesses, had not only been informed could not legally sell his wood, but had specifically discussed could not sell his wood to U.S. sources through Theodor Nagel. Nix noted that Thunam’s sources were under government seizure.
Gibson bought its wood from Thunam through Nagel anyway.
The importer used by Gibson, Hunter Trading Corporation, an affiliate of Theodor Nagel, Gmgn, had received a tariff ruling in 2005 that sawn ebony thicker than 6mm was to be imported as a Harmonized Schedule 4407 item. As a result, the ebony imported for Gibson was not imported as finished fretboards, but was declared and imported as rough sawn wood, contrary to Gibson CEO Henry Juszkiewicz’s claims.
Gibson CEO Henry Juszkiewicz states that Thunam had paperwork to export the Madagascar ebony (illegal traffickers tend to have forged papers, but Thunam wasn’t even that clever). First, after the confiscation of the Madacscar ebony, Theodor Nagel placed a notice on its website that it would no longer trade in wood from Madagacar unless the documentation was reviewed by a third party and determined to be genuine, suggesting its concerns about any paperwork it may have had from Thunam. Second, Thunam had no wood on the inventories of government records in Madagascar and his purported paperwork does not come from the required central ministry; it is a regional declaration (Madagascar was undergoing a coup around this period). Third, Thunam’s purported paperwork is not for the exportation of parts for musical instruments, or fretboards, or rough sawn blanks, but for finished roof joists and wall panes, and similar objects.
After the trip to Madagascar, Martin and Taylor ceased to import Madagascar ebony and rosewood. Martin ceased almost all, if not, the manufacture all standard models in Madascar rosewood. They rely on existing stores (note: Martin dwarfs Gibson in the manufacture of acoustic guitars and maintains huge stocks of wood; Martin makes many more square shoulder D-body-model guitars than Gibson makes acoustic models total) and the prices of their products using the same have rapidly increased. Note that Gibson’s major competitor is neither Martin nor Taylor; it’s Fender. The Gibson factory in Bozeman, Montana, which produces acoustic products and competes with Martin and Taylor, was not raided. Gibson makes few rosewood acoustic guitars. Most of its famous models (J-200, Hummingbird, Dove, Country Western) have either maple or mahogany back and sides.
The civil forfeiture action in the Madagascar ebony case (U.S. v. Ebony Wood in Various forms, No. 3:10cv00747 (Mid. Dist. Tenn.) has been stayed based on an affidavit and other information presented by an attorney in the Environmental Crimes Section, Environment and Natural Resources Division of the United States Department of Justice Criminal Division, on the grounds that to continue the civil action and permit Gibson to conduct discover would jeopardize an ongoing criminal investigation (it’s more complicated; Gibson was likely on the cusp of being sanctioned or being dismissed for failure to act in good faith in discovery.).
A motion to stay the civil forfeiture action in the Indian ebony case (U.S. v. 25 Bundles of Indian Ebony Wood, No. 3:11-cv-00913 (Mid. Dist. Tenn.) is pending on the same grounds.
I’ve consulted with three members of the NAMM/industry panel on the Cooper Amendment to the Lacy Act; Gibson Guitars declined to place a representative on that 20+ member panel. I was offered an opportunity to meet with Congressman Cooper’s staff regarding my concerns on the “your first offense is free” (well, that’s a simplification) language to of the amendment.
For those who post that Gibson CEO Henry Juszkiewicz is a major Republican donor, he made only his second reported political contribution to a candidate or party, ever, to Rep. Cooper (D) of Tennessee, who co-sponsored the amendment. I don’t think Gibson can take advantage of the “slap on the wrist for your first offense” language, because I think it’s clear that in 2009, Gibson knew its purchase of Madagascar ebony was illegal.
I hope this fills in some of the blanks for those of you are seriously interested in the facts and not press releases. The 2011 raids are more complicated, but the party in error is a Nagel affiliate, LMI. Nothing’s quite as simple as a Gibson press release. And if the government ever told Gibson in a pleading that all you have to do is have your product made overseas and the problem will go away, don’t you think Henry J. would have produced that pleading? They’re of public record. I have them all.
I’m perturbed at Henry J’s lies in press releases (it hasn’t kept me from buying a L-200 and a F-5g mandolin, among other Gibson products, since the 2009 raids).
If you have any questions, then please let me know. I’m an attorney (sadly) and I’ve collected guitars for forty years this year. I’ve met Henry J., and Berryman, and Chris Martin, and I remember opening the door for Bob Taylor back when he was delivering guitars out of his car (he and I arrived at a guitar store at the same time). I’m interested in this stuff.
Luthier Mercantile, Inc. (LMI) has great white glue for instruments.