Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Wednesday, October 26, 2011
U.S. Virgin Islands Company Sentenced for Illegal Trade of Protected Coral
Gem Manufacturing Sentenced to Highest Financial Penalty for Illegal Coral
WASHINGTON ? A U.S. Virgin Islands company was sentenced Wednesday in
federal court in St. Thomas, U.S.V.I., for knowingly trading in
falsely-labeled, protected black coral that was shipped into the United
States in violation of the Endangered Species Act and the Lacey Act, the
Department of Justice announced.
On July 15, 2011, GEM Manufacturing LLC, headquartered in St. Thomas,
pleaded guilty to seven counts of v iolations of both the Endangered
Species Act and the Lacey Act. 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.
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, accounts established by Congress to assist U.S. Fish and Wildlife
Service (FWS) and NOAA in the enforcement of federal conservation laws.
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 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
?We face a growing challenge to preserve the world?s coral, which serves
as essential habitat for marine biodiversity,? said Ignacia S. Moreno,
Assistant Attorney General for the Environment and Natural Resources
Division at the Department of Justice. ?We will continue to work with our
federal partners to aggressively investigate and prosecute those who
violate U.S. law by illegally trading in protected species.?
?I have stated before and reiterate that the U.S. Attorney’s Office will
vigorously protect the environment,? said U.S. Attorney Ronald W. Sharpe
for the District of the U.S. Virgin Islands. ?It is critical that we do
everything we can to prevent the decline and depletion of coral and other
protected flora and fauna so that the environment, in this case the marine
environment, may be preserved for our enjoyment and that of future
?Illegal trade further threatens already fragile coral reef ecosystems.
The penalties here should make it clear that the United States will not
tolerate trafficking in these protected resources,? said William C. Woody,
Chief, U.S. Fish and Wildlife Service (FWS) Office of Law Enforcement.
?Black corals are valuable resources that serve as habitat for a myriad of
species in the deep sea,? said Eric Schwaab, assistant NOAA administrator
for NOAA’s Fisheries Service. ?They are slow-growing, and some species can
live for hundreds to thousands of years. Effective enforcement and
regulation of their trade in support of CITES are among our most important
tools in ensuring that collection of these species is sustainable and that
their survival in the wild is assured.?
?CBP Officers and Agriculture Specialists in the Caribbean work hand in
hand with the U.S. Fish and Wildlife Service to detect and intercept
falsely labeled and concealed wildlife from illegally entering into U.S.
commerce,? said Marcelino Borges, U.S. Customs & Border Protection (CBP)
Director of Field Operations for the Caribbean. ?Cooperation and
collaboration between U.S. Customs & Border Protection and U.S. Fish &
Wildlife Service were critical in the success of this investigation.?
?This sentence sends a clear message to black coral traffickers that we
and our federal law enforcement partners are in the business of preventing
illegal wildlife trade,? said Roberto Escobar Vargas, special agent in
charge of U.S. Immigration and Customs Enforcement?s Homeland Security
Investigations (ICE-HSI) in Puerto Rico. ?We will continue to identify and
apprehend those who exploit protected species for commercial gain.?
GEM was 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. GEM was the entity known as ?Company X? in the related
case of U.S. v. Gloria and Ivan Chu, Case No. 2010-003 (D. Virgin
Islands). In January 2010, federal agents arrested the Chus as part of
a sting operation in Las Vegas. The Chus were subsequently indicted in
2010 for illegally providing black coral to GEM. On June 23, 2010, 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
Black coral is a precious coral that can be polished to a high sheen,
worked into artistic sculptures, and used in inlaid jewelry. Black coral
is typically found in deep waters, and many species have long life spans
and are slow-growing. Using deep sea submersibles, scientists have
observed that fish and invertebrates tend to accumulate around the black
coral colonies. Thus, black coral communities serve important habitat
functions in the mesophotic and deepwater zones. In the last few
decades, pressures from overharvesting, due in part to the wider
availability of scuba gear, and the introduction of invasive species have
threatened this group of coral. Recent seizures of illegal black coral
around the world have led many to believe that black coral poaching is on
GEM is a manufacturer of high-end jewelry, art, and sculpture items that
contain black coral. The vast majority of GEM?s sales are through retail
stores called ?galleries.? In order to facilitate its operations, GEM
Manufacturing LLC operated through several subsidiaries that did business
in Florida, Nevada, California, Hawaii, U.S. Virgin Islands, Alaska and
the Cayman Islands.
Prior to 2010, GEM?s primary supplier of black coral was a Taiwanese
company, Peng Chia Enterprise Co., Ltd., located in Taipei, Taiwan. 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 basically impossible to arrange for a
legitimate certificate of origin to be issued.
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. The
scheme had been running for at least two years by the time the year 2009
black coral shipments were sent to St. Thomas. The 2009 shipments form
the basis of the charges contained in the bill of information.
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.
In January 2009, GEM agreed to pay Peng Chia $38,965.00 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. On Aug. 19, 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 FWS based in San Juan, Puerto Rico.
As part of “Operation Black Gold,” 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 these six shipments was accompanied
by CITES certificates. Boxes from the Aug. 19, 2009, May 10, 2009, and
other shipments were falsely labeled as ?plastic of craft work.?
The case was investigated by agents of the FWS and NOAA with support from
ICE-HSI and CBP. Analysis of coral samples by the FWS?s National
Forensics Laboratory in Ashland, Ore., was critical to the investigation.
The case is being prosecuted by Christopher Hale of the Justice
Department?s Environmental Crimes Section, Environment and Natural
Resources Division, and Nelson Jones of the U.S. Attorney?s Office in St.
Environment and Natural Resources Division