Oct. 20 (Bloomberg) -- A raid on Gibson Guitar Corp. by U.S. agents seeking illegally imported wood has given anti-regulation activists from the Tea Party to fiddler Charlie Daniels one more reason to dislike the Obama administration.
“Thirty agents with guns” showed up unannounced at Gibson’s Nashville, Tennessee, factory on the morning of Aug. 24, Chief Executive Officer Henry Juszkiewicz, 58, said in an interview. “They wouldn’t let me come in my office. I had to come in the conference room and conduct business as best as I could while they did whatever.”
Wearing bulletproof vests, agents from the Justice and Homeland Security Departments sent workers home and seized almost 100 guitars and boxes of raw materials, Juszkiewicz said. The raid has incensed Tea Party groups and Republican lawmakers such as House Speaker John Boehner, who say it’s yet another example of an overreaching big government.
“The company’s costs as a result of the raid?” Boehner said in a Washington speech on Sept. 15. “An estimated $2-to-3 million. Why? Because Gibson bought wood overseas to make guitars in America. Seriously.”
The agents were investigating possible violations of the Lacey Act, enacted in 1900 to curb illicit trafficking in fish and wildlife. It was expanded in 2008 to make it a crime to import plants and plant products taken illegally.
“The Lacey Act prohibits companies from undercutting law-abiding U.S. wood products companies, including numerous small businesses, by trading in artificially inexpensive raw materials that have been illegally harvested from foreign forests,” Assistant Attorney General Ronald Weich and Christopher Mansour, the Justice Department’s legislative affairs chief, said in a Sept. 19 letter to Republican lawmakers. Agents carry arms as standard practice, according to the letter.
The raiders seized 6,000 fingerboards made of rosewood from India, the company says. The wood for the thin strip that runs along the guitar’s neck was exported unfinished, a violation of Indian law that made it subject to the Lacey Act, according to an affidavit from U.S. Fish and Wildlife Service agent John Rayfield that led to a warrant for the raid.
Gibson is “innocent and will protect its rights.” Juszkiewicz said in a statement after the raid.
Wyn Hornbuckle, a Justice Department spokesman, declined to comment, citing the continuing investigation. Representatives from the India embassy in Washington didn’t return a call seeking comment.
‘Fat, Sweet, Snarling’
Closely held Gibson, founded in 1894, says it produces more than 160,000 guitars annually in Nashville and has almost $500 million in revenue. It’s the country’s second-largest guitar maker after Scottsdale, Arizona-based Fender Musical Instruments Corp., according to The Music Trades, a publication that covers the industry.
Juszkiewicz, a Harvard MBA who says he worked his way through the General Motors Institute in Flint, Michigan, by playing a Gibson guitar in various bands, acquired the company with business partners in 1986.
The guitar maker boasts on its website of the “fat, sweet, snarling” sound of its Les Paul traditional model. It also has developed guitars with musicians B.B. King and Chet Atkins.
Daniels, 74, who plays a Gibson guitar as well as his trademark fiddle, calls the raid a form of harassment that may hurt the company and its workers. Gibson has about 1,200 U.S. employees, including more than 500 at the Nashville factory that was raided.
“These people are about to destroy some jobs in Tennessee,” Daniels, whose hits include “The Devil Went Down to Georgia,” said in an interview. “The federal government is spending too much time for stupid things like raiding a little guitar company.”
The agents who appeared at Gibson’s factory “bum-rushed the building,” floor manager Johnny Alexander, a 23-year Gibson employee, said in an interview. Employees were herded out so quickly that many left belongings such as purses behind, he said.
“They treated us like we were going to run back into the building and destroy guitars,” Alexander, 48, said.
Gibson is familiar with the little-known Lacey Act, having been raided two and a half years ago as well, with the same factory as the target, according to Juszkiewicz. The company was never charged in that dispute, over wood from Madagascar, he said.
U.S. Representatives Jim Cooper, a Democrat, and Republican Marsha Blackburn, both from Tennessee, and Republican Mary Bono Mack of California today introduced legislation that would protect guitar makers and musicians if they unknowingly possess wood that violates the Lacey Act. Wood owned before the 2008 Lacey Act amendment would also be exempt.
“In theory, anybody who travels outside the country or even across the state line with an old guitar right now would be in legal jeopardy,” Cooper said in a statement. The measure is supported by musicians Vince Gill, Rosanne Cash and Nanci Griffith, Cooper said.
About 1,000 people rallied in Nashville on Oct. 8 to protest the August raid. The gathering in a parking lot across from Opryland, the country music mecca, featured live entertainment, booths for Tea Party-affiliated groups and denunciations of federal bureaucrats.
‘Show of Power’
“It was strictly a show of power of the federal government,” Sid Gilchrist, 70, a Nashville retiree wearing a Ron Paul hat, said of the raid. “I stand with Gibson all the way.”
Larry Aull, a retired advertising executive who drove from Indianapolis for the event, said Gibson is the victim of selective enforcement. He held a sign saying, “When I play, I have my Gibson. When I vote I have my pick.”
Blackburn, whose district neighbors the Gibson plant, spoke at the rally. She said in an interview that she has heard from furniture, piano and guitar makers who are afraid they’ll also be targeted by federal agents.
“I can see a musical retailer may not sell certain instruments because you’re not sure,” Erik Autor, vice president and international trade counsel for the National Retail Federation, said in an interview. “It may take a bite out of your business.”
Charlie Redden, supply-chain manager for Taylor Guitars in El Cajon, California, says such concerns can be avoided. He said the closely held company, which produces 90,000 guitars annually, works with environmental groups to ensure its imported wood meets legal requirements. Its fingerboards are made of ebony from Cameroon, he said.
“We support the Lacey Act and think it is good for the environment,” Redden said in an interview. “I can understand the anxiety in the market. They should go through the supply chain to make sure the wood is coming from a reputable source.”
Cheap illegal wood undercuts the value of quality products from U.S. companies, said Richard Donovan, vice president for forestry with the Rainforest Alliance, an environmental group based in New York.
Yet sending armed agents into a U.S. factory may have gone too far, he said in an interview.
“We have not seen needs for any of that action,” Donovan said.
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