Gibson Guitar Corp. Strikes Deal with Justice Dept. to Avoid Prosecution

Gibson Guitar Corp. agreed to settle charges that it illegally purchased and imported ebony wood from Madagascar and rosewood and ebony from India, the Justice Department said today.

The company will pay a $300,000 fine under a criminal enforcement agreement that defers prosecution for criminal violations of the Lacey Act. Another $50,000 fine will go to the National Fish and Wildlife Foundation “to be used to promote the conservation, identification and propagation of protected tree species used in the musical instrument industry and the forests where those species are found.”

Since May 2008, it has been illegal under the Lacey Act to import into the United States plants and plant products that have been harvested and exported in violation of the laws of another country. Raids of Gibson factories by federal authorities led to concerns from some guitar owners that they could also be found in violation and pursued for having instruments made of illegal wood.

Last August, Gibson officials accused the government of “bullying” the company. “Gibson has complied with foreign laws and believes it is innocent of any wrong doing. We will fight aggressively to prove our innocence.”

Under the agreement with the Justice and Interior departments, Gibson will also withdraw its civil claim to retrieve $261,844 worth of Madagascar ebony seized in a raid.

“As a result of this investigation and criminal enforcement agreement, Gibson has acknowledged that it failed to act on information that the Madagascar ebony it was purchasing may have violated laws intended to limit overharvesting and conserve valuable wood species from Madagascar, a country which has been severely impacted by deforestation,” said Assistant Attorney General Moreno. “Gibson has ceased acquisitions of wood species from Madagascar and recognizes its duty under the U.S. Lacey Act to guard against the acquisition of wood of illegal origin by verifying the circumstances of its harvest and export, which is good for American business and American consumers.”

The criminal enforcement agreement includes a detailed statement of facts describing the conduct for which Gibson accepts and acknowledges responsibility. Gibson received four shipments of Madagascar ebony fingerboard blanks from its supplier between October 2008 and September 2009.

Sorry folks...Henry is marketing the business....Companies from both Japan and Germany have been through both the Nashville and Memphis production plants within the past month.

Breaks my heart but Henry can't survive this gov onslaught...

Gibson was already in financial trouble before any of these raids.

From a March 2010 Debtwire article:

[Gibson CEO Henry] Juszkiewicz earned widespread praise for rescuing the brand in the mid eighties with a hands-on approach, only to draw equally widespread criticism in recent years for his autocratic management style. The owner dissolved Gibson’s board of directors in 2008 and spent free cash flow on dividends and subsidiaries, even as he failed to report earnings and flirted with covenant breaches, four sources familiar with Gibson’s financial travails told Debtwire.
While angry employees and retailers lack the leverage to change the CEO’s policies – including robot guitars, abandonment of small retailers and a revolving door of middle managers – Gibson’s lenders may force Juszkiewicz to play a different tune.
“This is a classic example of a company controlled by one individual,” said one of the sources familiar with the matter. “And with no independent board of directors and no public shareholders, the only mechanism that lenders have is the hammer of acceleration.”
Guitar dealers are equally critical. “In the guitar world, a lot of people are frustrated because they feel that [Juszkiewicz] has ruined the company because it’s all about his ego, not the guitars,” said a proprietor of an independent guitar store, who wished to remain anonymous. “Gibson and Fender [Music] are two American icons … and he is ruining one of those.”
The famed guitar maker violated terms on its USD 150m syndicated loan when it failed to deliver 2008 audited financials and is expected to show a breach of financial performance covenants for 2009 as covenant levels tightened, all of the sources said. The most recent forbearance of default expired in January and the company did not bother to extend it.
The only thing keeping lenders from accelerating on the debt is the IP value in Gibson’s brand, which is associated with high quality products and commands respect in the industry, all of the sources said.

So, while Gibson had been in financial trouble for two years, in April 2010 the Nashville floods hit Gibson big. Gibson was planning to relocate its facility from Opryland mills and had irreplaceable shaping molds for mandolins and banjos on pallets on the floor, not to mention wood. All of that - lost in the flood.

Gibson didn't manufacture another mandolin until, I believe, January 2011. I know, because I purchased one of the Ten - the first ten mandolins made after the flood were custom-numbered F-5g models.

It's August 2012, and Gibson is stil not making Gibson banjos.

Gibson was in severe financial trouble for reasons unrelated to the government.

I’d love to get a Gibsom Hummingbird or Songwriter.

Both are sweet guitars. However, if you've never played one, I might suggest that you also try a J-45 and a Southern Jumbo.

Both the Hummingbird and Songwriter are square-shouldered dreadnaughts; the J-45 and the Southern Jumbo are round-shouldered.

Gibson built its acoustic guitar reputation on round-shouldered guitars (and the J-200). They simply have the distinct "Gibson Sound." The J-45 was introduced in 1942 and is Gibson's most famous and widely used acoustic guitar. It's nickname in the guitar world is "The Workhorse." The Southern Jumbo is essentially the same guitar, except with some Grand Ole Opry bling.

Early Bob Dylan is played on a J-45 or Southern Jumbo. All of the photos of John Lennon playing an acoustic guitar in India? He's playing Donovan Leitch's J-45.

The J-160s the Beatles player were essentially J-45s with electronics built in.

You'll enjoy a Hummingbird or a Songwriter, but they'll sound more like a generic dreadnaught. Any of the round-shouldered dreadnaughts, like the J-45, will have the distinctive "Gibson Sound."

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