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Gibson Guitars settles

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The guitar-maker, a living example of overcriminalization after a raid and threatened felony convictions for executives over technical violations of the Lacey Act, got an offer too good to refuse: a criminal enforcement agreement of a $300,000 fine, forfeiture of about that much worth of ebony wood, and a $50,000 contribution to the U.S. National Fish and Wildlife Foundation. [Reuters]

This is obviously a good deal for Gibson: they would have spent at least that much money on lawyers defending themselves, their executives are no longer being hassled, and there is no longer a worry of prison time.

Less obvious is that it is a good deal for abusive government prosecutors and the Obama administration: Gibson was planning on setting up camp at the RNC to promote the problem of overcriminalization, and now their arguments have less force. Though the settlement is plainly a nuisance settlement (the government surely spent more than $600,000 bringing this case), Gibson makes admissions that it "failed to act on information that the Madagascar ebony it was purchasing may have violated laws intended to limit over-harvesting and conserve valuable wood species from Madagascar," and the government can pretend that it actually did something to protect the environment rather than just enforcing an arbitrary law promoted by local industry to eliminate competition from imports. It is worrisome that the very vocal Gibson Chief Executive Officer Henry Juszkiewicz has had no comment, suggesting that one set of lawyers or the other have silenced him. But the problem of overcriminalization remains, and the government's awesome prosecutorial power means that it can coerce criminal enforcement agreements that smear the victims just enough to preclude them from being effective voices against prosecutorial abuse.

Take, for example, the recent $3 billion fine paid by GlaxoSmithKline. Gosh, with so much money paid, GSK must have done something wrong. Except the government's remedy for the most technical of violations is debarment, a death penalty for pharmaceutical manufacturers. The government holds all the cards here; even if the company is entirely innocent and there's only a 5% chance of losing, a defendant drug company is going settle for whatever the government asks for, because the consequences of fighting and losing are essentially bankruptcy--and I'm not aware of anyone who thinks courts get it right 95% of the time. Meanwhile the government attorneys have every incentive to take advantage of this dynamic to promote their careers. The charges against GSK include complaints that low-level sales reps provided truthful information to doctors, just outside the scope of FDA approval. Unfortunately, no defendant is willing to bet the company on a First Amendment challenge. Manufacturers are afraid to speak out for fear of attracting adverse government attention. So we're all worse off because of the government's ban on truthful speech by certain commercial actors, and there's no political constituency to raise it because of the mud thrown on the victims because the parties agree to characterize the conduct as "fraud."

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.