The Elephant in the Room - Big Brother is Watching You

A shopping trip by an off-duty federal inspector recently led to the seizure of $2 million in ivory illegally imported into the United States, one of the largest such seizures in New York history. On July 12, 2012, Manhattan District Attorney Cyrus Vance announced the guilty pleas of two jewelers and their stores for the sale of ivory without a permit. (See coverage here and here.)

Under New York law, you can sell ivory only if you have a valid permit, and the state will only give you a permit if you can show that the ivory is either antique or pre-dates the listing of elephants by the US federal government under the Endangered Species Act in the late 1970's. The case against the two jewelers convicted last week started when an off duty airport baggage inspector for the Fish and Wildlife Service noticed ivory while shopping in Manhattan. A team of federal and state investigators started an undercover investigation and determined that the jewelers lacked the necessary permits. The two jewelers pleaded guilty to the illegal commercialization of wildlife, a felony under New York law, and agreed to pay $55,000 in fines. Neither faces jail time.

So, maybe you're thinking: "This doesn't worry me because I don't sell illegal ivory." Think again. To be sure, most of us really like elephants, and as a matter of principle and ethics, we really don't want to sell or buy illegal ivory. But it's not only ivory you should be worried about. A whole slew of plant or wildlife products available in the United States may well have been extracted in violation of foreign environmental laws. And if you're in the business of selling or reselling wildlife or plant products (which can range all the way from elephant tusks to wood furniture to paperback books printed overseas), this case is a vivid reminder that federal and even state officials are enforcing even more vigorously US laws relating to imports of products harvested or exported in violation of foreign law.

As we have previously reported, US federal regulators have stepped up enforcement of the Lacey Act, which prohibits US trafficking of wildlife and plant products in violation of foreign law. The US also has continued its vigorous enforcement of the Foreign Corrupt Practices Act, which prohibits paying bribes to foreign officials, bringing over 100 enforcement actions in the last two years. As we have recently explained, environmental crimes in foreign jurisdictions and transnational bribery often are directly connected, since the guys involved in the illegal harvesting and trade frequently have to bribe foreign officials to look the other way or even collaborate in their environmental crimes.

These government efforts underscore the need for businesses to understand their supply chains, so they can make sure the products they import comply with federal, state and foreign laws. Businesses can avoid expensive legal headaches (not to mention jail time and fines) by implementing effective compliance and risk management programs designed to prevent problems before they occur. And when problems do arise, businesses can soften the blow by fully investigating the allegations, and should consider self-reporting violations and cooperating with the government.

By remaining one step ahead, businesses can rest a little easier and not have to wonder whether the next customer who walks in the door actually is an undercover government agent.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.