Company Assessed $4.47M in Largest Penalty for Illegal Trade in Coral
The Justice Department has announced that GEM Manufacturing LLC of the U.S. Virgin Islands, a manufacturer of high-end jewelry, art, and sculpture items, was sentenced to pay a criminal fine of $1.8 million for knowingly trading in falsely-labeled, protected black coral that was shipped into the U.S. in violation of the Endangered Species Act and the Lacey Act. When combined with another fine for community service work and forfeiture of items worth $2.17 million, the aggregate financial penalty of $4.47 million makes this the largest for the illegal trade in coral, the largest non-seafood wildlife trafficking financial penalty and the fourth largest for any U.S. case involving the illegal trade of wildlife.
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(The Lacey Act makes it a felony to falsely label wildlife that is intended for international commerce. The Endangered Species Act is the U.S. domestic law that implements the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Each of the species of black coral is listed in Appendix II of CITES and is subject to strict trade regulations.)
Until 2007, Supplier Could Sometimes Get CITES Export Permits from Government of Taiwan
Prior to 2010, GEM’s primary supplier of black coral was a Taiwanese company, Peng Chia Enterprise Co., Ltd. Peng Chia was, at times, able to obtain CITES export permits from the Taiwanese government, but by 2007, the Taiwanese government had increased scrutiny of the trade and insisted on a proper certificate of origin. Because much of the black coral was of, at best, undeterminable, if not legally questionable origin, it was difficult to arrange for a legitimate certificate of origin to be issued.
Later Used Sources in China w/out CITES Certificates Labeled as Plastic Craft Work
According to the plea documents, in order to be able to continue to supply GEM with raw black coral, Peng Chia sought other black coral sources in mainland China, routing them through Hong Kong on their way to GEM facilities. None of the shipments from Hong Kong had the required CITES certificates. Instead of being labeled "wildlife," each shipment was labeled "plastic of craft work" or something similarly deficient.
GEM Procured Coral Knowing There Were No CITES Certificates
A GEM company officer (terminated in early 2010) procured black coral from Peng Chia knowing that there were no CITES certificates. Under the supervision of this company officer, other GEM personnel confirmed that it was part of their jobs to receive and sort through incoming boxes of black coral and that none of those boxes arriving from Hong Kong contained CITES certificates. During the period 2007-2009, those same individuals reported seeing boxes containing black coral that were externally labeled as “plastic of craft work.” GEM never ordered plastic and does not use plastic in any of its manufacturing.
CBP Seized Shipments of Falsely Labeled Coral in 2009
In January 2009, GEM agreed to pay Peng Chia $38,965 for an order of black coral. After the funds were received in February 2009, Peng Chia used its Chinese supplier and Chinese intermediary to send six separate shipments of black coral to GEM in St. Thomas. Through a then company officer, GEM knew about the false labeling and lack of CITES certificates through emails with Peng Chia.
In August 2009, Peng Chia sent a shipment comprised of 10 boxes of black coral that were labeled “plastic of craft work” to GEM. A CBP Contraband Enforcement Team flagged the shipment as suspicious and contacted the Fish and Wildlife Service in Puerto Rico. Boxes from all six of the 2009 shipments were seized as evidence during a search of GEM’s St. Thomas facility in September 2009. None of the six shipments was accompanied by CITES certificates.
Sentenced to Pay an Aggregate Financial Penalty of $4.47M
GEM was sentenced to pay a criminal fine of $1.8 million. The criminal fine will be apportioned between the Lacey Act Reward Fund and the National Oceanic and Atmospheric Administration (NOAA) Asset Forfeiture Fund. GEM was sentenced to pay an additional $500,000 in community service payments for projects to study and protect black coral. GEM was also ordered to forfeit dozens of jewelry items, ten artistic sculptures and over 13,655 pounds of raw black coral, the total value of which, at current prices, exceeds $2.17 million. The aggregate financial penalty is $4.47 million.
Sentenced to 3.5 Yrs Probation, Compliance Program, Etc.
GEM was also sentenced to three and a half years of probation and a 10-point compliance plan that includes an auditing, tracking and inventory control program. GEM was also banned from doing business with its former coral supplier, Peng Chia Enterprise Co. Ltd. and its management team of Ivan and Gloria Chu. The Chus were indicted in 2010 for illegally providing black coral to GEM. Ivan Chu was sentenced to serve 30 months in prison and pay a $12,500 fine. Gloria Chu was sentenced to serve 20 months in prison and pay a $12,500 fine.