[Coral-List] Highest Financial Penalty for Illegal Coral Trade

Susan_White at fws.gov Susan_White at fws.gov
Mon Oct 31 18:49:12 EDT 2011

Congratulations to all who made case this a success!  Our law enforcement 
and legal teams are a vital part of any successful reef conservation, for 
without prosecution there would not likely be effective deterrence.

Three cheers!!  hip, hip, hip - hooray!

"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."

Department of Justice
Office of Public Affairs

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 
the rise.
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

Susan White,   Project Leader
Pacific Reefs National Wildlife Refuge Complex
email:  susan_white at fws.gov             ph:  808/792-9560 
><>   ><>   ><>   ><>   ><>   ><>   ><>   ><>   ><>   ><> 
Pacific Remote Islands Marine National Monument
     Baker, Howland, Jarvis, Palmyra Atoll, Kingman Reef, 
       Johnston Atoll, Wake Atoll NWRs
Rose Atoll Marine National Monument
     Rose Atoll NWR
Marianas Trench Marine National Monument
     Marianas Arc of Fire, Mariana Trench NWRs
><>   ><>   ><>   ><>   ><>   ><>   ><>   ><>   ><>   ><> 
U.S. Fish & Wildlife Service
300 Ala Moana Blvd.  Rm 5-231
Honolulu, HI  96850
fax:  808/792-9585

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