With Gibson Settlement, 'Due Care' Slightly More Clear

While not establishing a formal legal precedence, the criminal enforcement agreement that Gibson Guitar signed in late July in order to put an end to the investigation of its alleged Lacey Act violations does shed a little more light on "due care" requirements for importing wood products, according to Marcus Asner, a partner at Arnold & Porter LLP.

One of the reasons the U.S. Department of Justice (DOJ) entered into the "criminal enforcement agreement" was Gibson's "remedial efforts" at Lacey Act compliance. In the second-to-last section of the settlement, Appendix B, Gibson spells out its new "Lacey Act Compliance Program," which is "precedent-setting," according to Asner, who has prosecuted violators of the Lacey Act in the past and also works as a defense lawyer.

"It doesn't technically bind the DOJ," Asner said during a recent interview, "but, in a practical matter, if somebody had a compliance program that looked like Gibson's, and they were exercising it in good faith, they'd have a very strong argument within the hierarchy of DOJ to say, 'Look, you really shouldn't be enforcing against us in light of these facts. We've done what you  warned us to do here.'"

Certain requirements of the compliance program include: annual training of purchasing staff; asking suppliers questions to garner "as much information as possible regarding the supplier and where wood based products are originating"; independently researching suppliers through Internet searches, discussions with U.S.- or foreign-based authorities, on-site visits, and other measures; requesting sample documentation before making a purchase; and retaining all records for five years. (The full text of Gibson's "Lacey Act Compliance Program" can be read at the bottom of this article.)

"Companies engaged in international commerce in seafood, wildlife, paper, and wood should view the Gibson Lacey Act Compliance Program as a useful guide as they look to the future and seek to protect themselves from liability," Asner wrote in a recent blog post. The reason it is useful is because, just like courts, the DOJ likes to maintain consistency, Asner said.

"When you're dealing with corporate enforcement action, negotiating with the government is where the game is," he said. "When you're representing corporations before the government, like I do, 99 percent of what you do is try and avoid the court by working with the government and appealing up within the Department of Justice. And the Department of Justice, just like the court, is very focused on maintaining consistency. So that's why this really does have precedential value-in a practical way, not a legal way."

Why does the settlement not establish a technical legal precedence? "It's not a court decision," Asner said. "A court decision would ordinarily set legal precedence, but when you're dealing with corporate criminality or corporate enforcement action, a lot of the real litigation happens before you ever get to court."

In the settlement, Gibson effectively admitted that ebony imported from Madagascar-which prompted the government's first raid on the company in November 2009-was illegal. Still, the matter of ebony and rosewood imported from India-which prompted the government's second raid on the company in August 2011-appears to have been dropped by the DOJ. In fact, in his official response to the settlement, Gibson's CEO Henry Juszkiewicz said his company's goods from India were being returned by the government, and that, moving forward, Gibson can resume importing wood from there.

"They enforced, at the end of the day, where Gibson was wrong," Asner said, "and DOJ decided not to enforce where Gibson had credible argument. It got very politicized, but the Department of Justice came out of it enforcing the law, as they should be doing, and trying to level the playing field for American businesses."

Certain members of the wood products industry-including the NWFA, Anderson Hardwood Floors and Columbia Forest Products-have formed the Lacey National Consensus Due Care Defense Standard, a national consensus standard that could be defensible in court if a company "certifies to the standard."

Below is Gibson's "Lacey Act Compliance Program" as established in the criminal enforcement agreement it signed with the DOJ in July: