in the district court of the virgin...

Case: 3:11-cr-00019-CVG -RM Document #: 8 Filed: 05/26/11 of 25

IN THE DISTRICT COURT OF THE VIRGIN ISLANDS DIVISION OF ST. THOMAS AND ST. JOHN

UNITED STATES OF AMERICA, ) ) ) ) ) ) )

Criminal Case No. ,46 I /-19 v.

GEM MANUFACTURING LLC,

Defendant.

FED. R. CRIM. P. ll(c)(l)(C) PLEA AGREEMENT

I. PARTIES TO THE AGREEMENT

Pursuant to Federal Rule of Criminal Procedure I I (c)(l )(C), this Plea Agreement is

entered into by and between defendant Gem Manufacturing LLC, including its subsidiaries,

(collectively ''GEM") and the U.S. Attorney's Office for the District of the Virgin Islands and

the Environmental Crimes Section of the U.S. Department of Justice (together, the

''Government"). This Agreement specifically excludes and does not bind any other territorial,

state, federal, tribal, or foreign agencies or prosecution authorities, including the other United

States Attorneys and the Internal Revenue Service, from asserting any civil, criminal, or

administrative claim against the defendant.

2. TERMS

The Government and GEM stipulate and agree to the following terms:

a. Defendant GEM shall obtain a corporate resolution, consistent with business

association law and company by-laws, indicating its understanding of the Plea Agreement and its

intent for GEM (including subsidiaries) to be bound by the tenns of this Plea Agreement. Such a

resolution shaH identify·one or more persons as having authority to sign the Plea Agreement and


Plea Agreement United States v. GEM Manufacturing LLC

associated forms and paperwork as well as to appear in Court as GEM's designated corporate

representative. The corporate representative shall not be outside counsel.

b. Defendant GEM shall waive presentment of a Grand Jury Indictment and plead guilty

to the seven-count Bill of Information filed by the Government.

c. Counts One and Two charge the felony of Lacey Act False Labeling, a violation of 16

U.S.C. §§ 3372(d), 3373(d)(3)(A). For an organization, Lacey False Labeling carries a

maximum fine of $500,000 per count, or if greater, a maximum fine of twice the gross gain or

loss pursuant to 18 U.S.C. § 357l(d), and a mandatory special assessment of $400.00 per count

of conviction. Counts Three through Seven charge a Class A misdemeanor violation of the

Endangered Species Act, a violation of 16 U.S.C. §§ l538(c), l540(b) and 50 C.F.R. §§

23.13(a)� 23.20. For an organjzation, this violation of the Endangered Species Act carries a

maximum fine of$2 00,000 per count, or if greater, a maximum fme of twice the gross gain or

loss pursuant to 18 U.S.C. § 3571(d), and a mandatory special assessment of $1 25.00 per count

of conviction. The Bill of Information contains a Forfeiture Allegation brought pursuant to 16

U.S.C. §§ l5 40(e)(4) , 33 74(a)(l ) which seeks the forfeiture of illegally traded raw black coral

and finished products that have incorporated illegal black coral.

d. Defendant acknowledges that the Government can prove the following essential

elements of Counts One through Seven and the Forfeiture Allegation:

The elements of Counts One and Two, Lacey Act False Labeling are:

(i) The coral that was imported is "wildlife" under the Lacey Act definition;

(ii) The defendant knowingly made or submitted a false record, false label, or

false identification for wildlife;

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Plea Agreement ''"'"

United States v. GEM Mantifacturing LLC

(iii) That had been imported, exported, transported, sold, purchased, or received

from any·foreign country OR transported in interstate or foreign commerce; and

(iv) The offense involved the importation or exportation of wildlife OR the sale

or purchase of wildlife, offer of sale or purchase, or commission of an act with

intent to sell or purchase wildlife that involved wildlife with a market value

greater than $350.

The elements of Counts Three through Seven, Endangered Species Act Violation

through Trade Contrary to CITES are:

(i) The defendant is subject to the jurisdiction of the United States;

(ii) The defendant knowingly violated a regulation issued in order to implement

16 U.S.C. § 1538(c);

(iii) In that, the defendant engaged in the import� export, re-export, or

international trade of a species listed on Appendix II of CITES;

(iv) Without complying with Part 23 of Title 50 of the Code of Federal

Regulations in violation of 50 C.F.R. § 23.13(a); and

( v) In that, Defendant engaged in international trade of a CITES specimen

without a valid CITES document, in contravention of 50 C.F.R. § 23.20(c).

The elements of the Forfeiture Allegation are:

(i) For Counts One and Two, Lacey Act Forfeiture, the tangible property sought

to be forfeited is "wildlife" under the definition contained in the Lacey Act;

(ii) The wildlife was imported, exported, sold, received, acquired, or purchased

contrary to the provisions of 16 U.S.C. § 3372(d);

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Plea Agreement '"�''

United States v. GEM Manufacturing LLC

(iii) For Counts Three through Seven, Endangered Species Act Forfeiture, the

tangible property sought tQ be forfeited is "wildlife" under the definition

contained in the Endangered Species Act; and

(iv) The wildlife was taken, possessed, sold, purchased, offered for sale or

purchase, transported, carried, shipped, exported, or imported contrary to CITES

and the U.S. regulations implementing the Convention.

e. Defendant is pleading guilty because the defendant is in fact guilty of the charges

contained in Counts One through Seven of the Information. In pleading guilty to these offenses,

the defendant acknowledges that should the case go to trial, the Government would present

evidence to support these charges beyond a reasonable doubt. What follows are just some of the

facts the Government would have available to make its case:

At all times relevant to the Infonnation, the Defendant-was a manufacturer of high-end

jewelry, art, and sculpture items that contain black coral. Defendant sold some of its items

through the Internet, but the vast majority of its sales were 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.

The charge_s in this case originate from the acts and omissions of GEM's officers and

employees. The defendant agrees that, as a business organization, it is liable for the criminal acts

of its officers and employees acting within the scope of their employment and for the benefit of

the company.

4



Defendant's primary supplier of black coral was a Taiwanese company, Peng Chia

Enterprise Co., Ltd. ("Peng Chia"), located in Taipei, Taiwan. Peng Chia w� in the business of

supplying materials for jewelry manufacture, jewelry items, and raw black coral to customers

outside of Taiwan. Peng Chia's owner and manager were, respectively, Ivan Chu and Gloria

Chu. The Chu's were convicted for their role in the illegal trafficking of black coral to GEM in

the case of U.S. v. Gloria Chu and Ivan Chu, Criminal Case No. 2010-003 (D. Virgin Islands).

The Indictment and Plea Agreements associated with that case refer to "'Company X." The

instant defendant is Company X, and those pleadings from Criminal Case No. 20 I 0-003 are

incorporated by reference.

At various times prior to 2007, and up through August 2009, Peng Chia supplied GEM

with raw black coral. The black coral was sent to GEM facilities in Miami, St. Thomas, Las

Vegas, New Orleans, and the Cayman Islands.

There are several species of black coral, and each species is internationally protected

through listing on Appendix II of the Convention on the International Trade in Endangered

Species of Wild Flora and Fauna ("CITES"). Species listed on Appendix II are subject to strict

regulation; trade is only authorized in particularized circumstances. One such requirement is that

the exporting country must issue an "export permit." Prior to 2007, Peng Chi a was, at times,

able to obtain CITES export permits from the Taiwanese government, but by 2007, the

Taiwanese government had reportedly become more strict with regard to issuing the permits.

The increased scrutiny was an insistence 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. In this new enforcement

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Plea Agreement ''·"''


climate, the Taiwan-based suppliers of black coral, that Peng Chia had previously used to obtain

black coral for GEM, could not provide certificates of origin that were satisfactory to Taiwanes��

authorities. Peng Chi a's own suppliers either went out of business or located to other areas, such

as mainland China.

In order to be able to continue to supply GEM with raw black coral, Peng Chia sought

other black coral sources in mainland China. These Chinese-sOurced shipments were routed

through Hong Kong on their way to GEM facilities. None of the shipments from Hong Kong

had the required CITES certificates. Further, instead of being labeled as .. wildlife" with an

adequate description of the contents, 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 Information.

Emails from Peng Chia to a company officer at GEM revealed that CITES certification

was not going to be available starting in 2007, (This company officer was terminated in early

201 0.) This GEM company officer continued to procure black coral from Peng Chia even

though there were no CITES certificates. Further, under the superVision of this then company

officer, other GEM personnel in locations such as St. Thomas, Las Vegas, and Miami confinned

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.

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Plea Agreement """'


In January 2009, through the actions of GEM's then company president, GEM agreed to

pay Peng Chia $38,965.00 for an order of black coral. After the funds were received in Februa1y

2009, Peng Chia used its Chinese supplier and Chinese intermediary to send six separate

shipments of black coral to GEM in St. Thomas. Boxes of all six 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. The aggregate weight of the six shipments

was 760 kilograms (I ,675.5 pounds). Further, the boxes referenced in Counts One and Two

were externally labeled as "plastic of craft work." Moreover, at the direction of GEM's then

company president, other GEM personnel submitted paperwork containing the false labeling

when they cleared those boxes from Customs in St. Thomas. The U.S. Fish and Wildlife

Service's National Forensic.s Laboratory in Ashland, Oregon analyzed coral samples from all six

shipments and determined that they were in fact black coral.

By way of example, Peng Chia sent a shipment of ten boxes of black coral to GEM on or

about August 18, 2009. The tracking number for that shipment was 2618560792. The boxes

were labeled as "plastic of craft work" despite containing black coral. The invoiced weight was

156 kilograms {343.9 pounds). The external labeling and tracking numbers were transmitted to

GEM prior to receipt in St. Thomas.

See beginning on the next page, the following photographs of the August 2009 shipment,

its contents, the label, and accompanying commercial invoice.

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Plea Agreement United States v. GEM Manufacturing UC

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Plea Agreement '""'''

United States v. GEM Manufacturing UC

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Plea Agreement '""''


The defendant knew that the boxes would be falsely labeled as "plastic of craft work"

because, prior to or contemporaneous with the shipments leaving Hong Kong, Ivan Chu and

Gloria Chu transmitted shipping information to the GEM company officer. The infonnation on

the shipping label was communicated to the then company officer during this email

correspondence.

The Defendant concedes that the quantity of illegal black coral shipments that Peng_ Chia

sent to GEM and its related business entities during the period 2007 to 2009 was worth at least

$165,000. The aggregate weight of black coral shipments received by GEM in the period 2007

to 2009, without CITES certificates, is estimated to be at least 8,499 pounds.

l l



While the defendant received illegal coral from Peng Chia from_2007 through August

2009, it had a significant stock of coral that had been imported with facially valid and legal

CITES certificates. As part of its manufacturing operations, GEM comingled the illegal coral

with legitimate stock. As such, some of the illegal coral entered into the production stream and

was incorporated into finished retail products, thus rendering those particular products illegal.

f. In exchange for the defendant's guilty plea, the U.S. Attorney's Office for the Distric-t

of the Virgin Islands and the Environmental Crimes Section of the U.S. Department of Justice

agree that they will not bring any other criminal charges or seek any additional forfeiture against

the defendant arising from or related to any and all conduct, as described in the factual basis

section (2.e.) above, such conduct known to the Government as of the time the last person signed

this Plea Agreement, that concerned the supply; sale, import, export, declaration, labeling, or

transshipment of black coral. Nothing in this Agreement shall protect the defendant in any way

from prosecution for any offense committed after the complete execution of this Agreement.

Further, nothing in this Agreement shall prevent the Government from bringing charges for

obstruction, false statements, witness tampering, or perjury should it be learned that the

defendant committed those crimes during the investigation of this case.

g. The defendant agrees to be sentenced according to the terms and conditions set forth

in Section 3 (The Sentenc_e and Related Terms) and Section 4 (Forfeiture) of this Plea

Agreement. The parties have entered into this Plea Agreement pursuant to Federal Rule of

Criminal Procedure I I (c)( 1 )(C) with the understanding that the Court will accept or reject the

Agreement in whole, but may not modifY its tenns. If the District Court modifies any portion of

the Plea Agreement, either party will have the right to withdraw from the Plea Agreement.

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Plea Agreement United States v. GEM Mamifacturing LLC

3. THE SENTENCE AND RELATED TERMS

a. The defendant shall pay a criminal fine of two million dollars ($2,000,0UO). One

million dollars ($1,000,000) of the fme must be paid within fourteen (14) days of sentencing.

The defendant can avail itself of phased payments after the initial $1,000,00.0 has been paid.

GEM must make an additional fine payment of five hundred thousand dollars ($500,000) no later

than twelve (12) months of sentencing. In any event, the entire two million dollar ($2,000,000)

fine must be paid in full no later than twenty-four (24) months after sentencing.

b. Pursuant to 16 U.S.C. §§ 186l(e), 3375(d), and Notice re NOAA Policy on

Prohibited and Approved Uses of the Asset Forfeiture Fund, 76 Fed. Reg. 16386-16387 (March

17, 2011 ), the fine generated from the charged counts is payable to two funds that were

established by Congress in order to further enforcement of conservation laws. Of the $2,000,060

fine, $1,545,000 shall be paid into the Lacey Act Reward Fund, and $455,000 shall be paid into

the NOAA Magnuson-Stevens Asset Forfeiture Fund. As such, the parties request that, upon

receipt of a fine payment, the Clerk of Courts remits the fine in the following amounts, as set

forth in the table below:

Payment Due Payment Payee Payment Address Date Amount Within 14 $5 45,000 ·"Lacey Act Reward USFWS Office of Law Enforcement days of Fund" 1875 Century Blvd., Suite 380 sentencing Atlanta, GA 30345

A lTN: Ms. Connie Saunders, USFWS Case No. 2009404582

Within 14 $455,000 "DOC/NOAA" NOAAIGCEL days of 8484 Georgia A venue, Suite 400 sentencing Silver Spring, MD 20910

ATIN: Ms. Susan Beresford, NOAA OLE Case No. SE0903681, Account Code 2XLAFF2 PG3 -

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' '/ ' ',.,


Plea Agreement '"''"

United Stales v. GEM Manufacturing LLC

Within 12 $500,000 "Lacey Act Reward USFWS Office of Law Enforcement months of Fund" 1875 Century Blvd,, Suite 380 sentencing Atlanta, GA 30345

AlTN: Ms. Connie Saunders, USFWS Case No. 2009404582

Within 24 $500,000 "Lacey Act Reward USFWS Office of Law Enforcement months of Fund" 1875 Century Blvd., Suite 380 sentencing Atlanta, GA 30345

AlTN: Ms. Connie Saunders, USFWS Case No. 2009404582

c. Separate and apart from the two million dollar ($2,000,000) criminal fine, the

defendant shall make three community service payments totaling five hundred thousand

($500,000) dollars. Defendant agrees that it shall not seek a tax benefit or tax deduction for thf:

payments in any jurisdiction. Defendant further agrees that it is prohibited from using the fact of

the payments in any public relations, marketing, or advertising activity. Within fourteen (14)

days of sentencing, GEM shall deliver each payment, in the form of a cashier's or certified check

from a U.S. bank, as set forth below:

SMITHSONIAN INSTITUTION. The defendant shall make a payment of $140,000

to the National Museum of Natural History ("NMNH"), a subunit of the Smithsonian

Institution, which is authorized by 20 U.S.C. §55 to "receive money or other

property by gift, request, or dev-ise, and to hold and dispose Of the same in promotion

of the purposes thereof." The delivery address for the payment is Dr. Stephen D.

Cairns, Department oflnvertebrate Zoology, Smithsonian Institution, P.O. Box

37012, NMNH W-326 MR-163, Washington, DC 20013-7012. The $140,000 shall

be for the exclusive use of the labs of and associated with the NMNH's Department.

of Invertebrate Zoology exclusively for research� surveys, and experimentation

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designed to increase knowledge and understanding regarding the identification,

natural history, distribution, genetics, genomics� molecular biology, protein analysis,

marine community interactions and associations, population restoration and/or

systematics of corals known as "black corals" or corals of the Order Antipatharia.

NATIONAL FISH AND WILDLIFE FOUNDATION. The defendant shall make a

payment of $180,000 to the National Fish and Wildlife Foundation, a congressionally

chartered nonprofit corporation established by 16 U.S.C. § 3701 to further domesti.;

and international conservation efforts. The delivery address for the payment is

National Fish and Wildlife Foundation, c/o Timothy DiCintio, 1133 15th Street NW,

Suite 1100, Washington, DC 20005. The $180,000 shall be for the exclusive purpose

of generating a comprehensive investigative study that, to the extent possible,

identifies, quantifies, characterizes, and analyzes the commerce, trade, illegal

trafficking, harvesting, sourcing, marketing, processing, storage, financing, pricing,

and transshipment of black coral from, between, and through Southeast Asia, the

Indo-Pacific, East Asia, Taiwan, and the United States and its territories. The study

shall utilize on-the-ground research personnel in multiple countries. It shall be

insufficient for the study to primarily be a policy p!iper, legislative/regulatory gap

analysis, or literature review. If sufficient resources remain, the secondary objecthe

for use of the funds would go for the development of a DNA identification method

for black coral that would be implemented to identify sources of black coral and

support enforcement efforts.

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Plea Agreement """'


UNIVERSITY OF THE VIRGIN ISLANDS. The defendant shall make a payment

of $180,000 to the UV1 Center for Marine and Environmental StuQies ("CMES"), a

component of the University of the Virgin Islands, which is a 50 I (c )(3) educational

institution. The delivery address for the payment is University of the Virgin Islands,

c/o Mitchell A. Neaves, #2 John Brewers Bay, St. Thomas, VI 00802. The $180,000

shall be for the exclusive use of the CMES� and its formal1y affiliated components at

the University of the Virgin Islands, exclusively for research, surveys, and

experimentati<m designed to increase knowledge and understanding of the natural

history, distribution, pathogens, genetics, marine community interactions and

associations, selective pressures, habitat value, threats from invasive species,

utilization as habitat by fish and lobsters, threats and impacts from human activities,

conservation strategies, and/or population restoration of"black corals," corals of the

Order Antipatharia, and those species of coral that form reefs or colonies in the

mesophotic or deepwater zones. The payment shall not be used for research

activities outside the United States and its territories.

For each of the above recipients, the entire payment must be utilized within 48 months of

sentencing. Other than the parameters set forth in this section, the U.S. Department of Justice

exercises no control over how the payments are to be utilized. However, acceptance of the

payment constitutes the recipient's understanding and acceptance of the tenns of this Plea

Agreement concerning community service payments. Each recipient must provide the U.S.

Attorney's Office in St. Thomas, U.S.V.I., the U.S. Probation Office in St. Thomas, U.S.V.I.,

and the Department of Justice Environmental Crimes Section with four sets of written reports

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United States v. GEM Mamifacturing LLC

describing. in detail how the funds have been utilized and the results achieved. The first three

reports are annual reports that shall be delivered, respectively, within 14 months, 26 months, and

38 months of sentencing. The fourth report shall be a final report that shall be delivered within

50 months of sentencing. The reporting requirement is separate from and.additional to the

Government's explicit encouragement that the results achieved should be published in peer-

reviewed scholarly journals. If the community service payments result in any publication, the

particular payment recipient shall immediately transmit two copies of such publication to the

three recipients of the annual reports.

d. Upon sentencing, GEM is to be placed on organizational probation for a tetm of thn:e

and a half (3.5) years. In addition to the usual conditions, the defendant shall be subject to ten

(I 0) special c_onditions during the term of probation:

Special Condition l . GEM shall not do any business whatsoever with Peng Chia, Ivan

Chu, Gloria Chu, and any company that employs or is owned or managed by Ivan Chu or Glor:.a

Chu.

Special Condition 2. GEM shall comply with-all requirements and regulations of the

U.S. Fish and Wildlife Service and the U.S. states and territories regarding the trade, shipment,

and sale of coral and items containing coral. GEM shall not accept, import, order, or use coral

that lacks a required CITES certificate or that was harvested or shipped in contravention of a

state, territorial, or foreign permit.

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Plea Agreement "'""'


Special Condition 3. GEM shall refrain from marketing and advertising its products as

being made with coral that has somehow become harvestable, died, or "broken off' due to

natural causes or events.

Special Condition 4. No GEM entity located in the United States and its territories shaH

ship, export. transfer, or transship raw coral to the Cayman Islands, directly or indirectly. No

GEM entity located in the United States and its territories shall receive, order, purchase, handle,

use, or transship raw coral from the Cayman Islands, directly or indirectly, whether or not the

coral originally came from the Cayman Islands, All finished or intermediate stage coral pmdw;ts

that are shipped between the United States (including its territories) and the Cayman Islands shall

be accompanied by proper CITES certificates.

Special Condition 5. ln addition to the_ forfeiture requirement, each GEM entity located

in the United States and its territories shall completely cleanse and divest itself of all raw black

coral (including bleached and colored black coral). There are two exceptions. Shipments of

coral that were received after November I 9, 2009, and that were properly labeled and

accompanied by valid CITES certificates or state permits are exempt from this condition. In

addition, raw black coral that was cut or polished by GEM employees before September l, 2009,

and is not longer than one inch on its longest side or through its longest axis is exempt. GEM

shall produce a company-wide inventory of such coral and a certification of the required

cleansing and divesting to the Government and the Probation Office within 72 hours of

sentencing.

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Plea Agreement United Slates v. GEM Manufacturing LLC

Special Condition 6. In addition to any other notification requirements, GEM shall notify

the U.S. Fish and Wildlife Service in San Juan, Puerto Rico in writing at least 48 hours prior to·

receiving a shipment of coral, not including finished products for retail sale or individual items

being shipped for warranty repair or upgrade. At a minimum, the notice shall include the

tracking number, content description, weight, number of boxes, external labeling, shipper,

consignee, CITES Certificate or state/territorial permit number,

Special Condition 7. Within seventy-two (72) hours of sentencing, GEM shall implemc:nt

a comprehensive tracking, use, and inventory control system for its raw coral stock, finished

products, and coral in the manufacturing production chain. Under the system, for each finished

product manufactured after January 1, 2010, and for each product in production, GEM shall be

able to identify the source of black coral, shipment tracking number, and CITES certificate or

permit number, and if applicable, other state, territorial, or foreign permit number. In addition,

for each finished product manufactured after June I, 2011, and for each product in production,

GEM shall be able to specify the weight of black coral contained within the product. GEM shaH

keep track of its coral inventory and depletion rates.

Special Conditi-on 8. Every 180 days during the probation period, GEM shall provide the

Government and the Probation Office with a written report detailing for each GEM location,

including the Cayman Islands, the amount of raw coral inventory, the amount of coral in

production, the finished product inventory, finished products sold during the past 180 days, and

any shipments of coral or coral products into, out of, or between GEM facilities.

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Special Condition 9. At GEM's own expense, and to no expense to the Government,

GEM shall commission two annual audits of its comprehensive tracking, use, and inventory

control system. The audits shaU encompass each GEM entity and facility and shall be performt�d

by competent and qualified outside auditors. At least one member of the auditing team must be a

Certified Public Accountant. GEM shall cooperate fully with the auditors. Neither Active

Capital, nor any of the Dart entities qualifies as an outside auditor. The auditors shall provide

written reports of their findings to the Goverilment and the Probation Office within 14 and 26

months of sentencing. In the sole and exclusive discretion of the Government, upon written

notice to GEM within 29 months of sentencing, GEM shall undertake a third annual audit, the

findings of which shall be transmitted to the Government and the Probation Office no later than

40 months of sentencing.

Special Condition I 0. In addition to any other inspection right granted by any other law,

during nonnal business hours, both the Probation Office and the U.S. Fish and Wildlife Service

shall be permitted to conduct warrantless spot inspections of GEM facilities in the United State5

and its territories, if such facilities are involved in the manufacturing, processing, receipt,

shipment, or storage of raw black coral. Without prejudice to any other inspection right. the

Probation Office and the U.S. Fish and Wildlife Service shall be permitted to conduct

warrantless inspections of GEM's retail and other facilities with twenty-four (24) hours notice.

e. The defendant shall pay a mandatory special assessment of$1 ,425.00. The special

assessment must be paid in full at sentencing and shall not be part of any phased payment plan.

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f. The sentence set forth in paragraphs 3.a. through 3.e. above and the .. Forfeiture"

section that follows is the agreed-upon sentence. There are no applicable departures or variances

that would serve to reduce the sentence, nor shall the defendant argue for any departure or

variance.

g. The parties agree that as of the date of the last person signing this Plea Agreement, no

substantial assistance or cooperation has been offered or provided that would trigger a sentence-

reduction or modification under Federal Rule of Criminal Procedure 35 or Section SKI.l of the

U.S. Sentencing Guidelines. The parties agree that whatever cooperation that has been offered,

performed, or contemplated has been incorporated into the terms and proposed sentence of the

current plea deal. As a matter of context, the Government recognizes the substantial a�sistance

and cooperation that GEM has provided during the investigation into this matter, especially with

regard to the practical assistance, including the use of company facilities, funds, and email

accounts that facilitated the arrest and conviction of Ivan Chu and Gloria Chu. Defendant agre�s

that regarding any offer or undertaking of future, not yet contemplated, cooperation or

substantial assistance, (i) whether or not to accept, (ii) the evaluation of same, (iii) whether or r.ot

the action merits notification to the Court, and (iv) what, if anything, would be filed with the

Court shall be in the sole and exclusive discretion of the Government.

h. Except as otherwise provide_d in this paragraph, the defendant hereby·expressly wai�es

its rights to appeal from l?oth its conviction and its sentence, including but not limited to any

appeal rights conferred by 28 U.S.C. § 1291 and by 18 U.S.C. § 3742. The defendant further

waives its right to contest its conviction and/or its sentence in any collateral proceeding,

including proceedings brought under 28 U.S.C. §§ 2241,2255, on any ground, except that the

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Plea Agreement Uhited States v. GEM Manzifacturing LLC

defendant may bring a post conviction claim if the defendant establishes that ineffective

assistance of counsel directly affected the validity of this waiver of appeal and collateral

challenge rights or the validity of the guilty plea itself. Subject to the foregoing, the defendant

reserves the right to bring a direct appeal of any sentence imposed in excess of the statutory

maximum. The defendant haS read and understood the sentence, including forfeiture,

contemplated by this Plea Agreement and has no basis to assert that it exceeds the statutory

maximum.

i. The defendant further waives any right to seek attorney's fees or other litigation

expenses under the ''Hyde Amendment," 18 U.S.C. § 3006A, and the defendant acknowledges

that the Government's position in the instant prosecution was not vexatious, frivolous, or in bad

faith.

j. The Government reserves the right to allocute, or otherwise make an oral presentation,

regarding the investigation and facts of the case.

k. This Plea Agreement shall bind the defendant and its subsidiaries and affiliates,

including GEM Manufacturing LLC, Passman of Alaska LLC, Passman of California LLC,

Passman (Cayman) Ltd., Passman of Hawaii LLC, Passman Holdings USA LLC, Passman of

Nevada LLC, Passman of St. Thomas LLC, and all .subsidiaries and affiliates that import, ship,

transport, store, handle, process, manufacture, repair, sell, or market coral or products that are

made from or contain coral. During the three and a half year probation period, the defendant

shall provide immediate, written notice to the Government and the U.S. Probation Office of any

of the following: (i) any company name change, (ii) any purchase, lease, or sale of facilities or

real property, (iii) any use of brand or trade name apart from "Passman" or "Bernard K.

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Plea Agreement '""'

United States v. GEM Man1ffacturing LLC

Passman," (iv) any purchase, sale, reorganization, transfer of a plurality or controlling interest, or

divestiture of GEM, (v) any change in coral supplier, and (vi) any other change impacting upon

or affecting this Plea Agreement. No change in name, change in corporate or individual control,

business reorganization, bankruptcy, change in ownership, merger, change in legal status, sale or

purchase of assets, or similar action shall alter or diminish the defendant's obligations under th::s

Plea Agreement. Defendant further agrees that it will not engage in any business reorganizatio r1,

transfer of ownership, corporate dissolution, or other business practice in order to avoid the

obligations set forth in this Plea Agreement.

I. The defendant agrees that the criminal fine, special assessment, and community service

payments are not dischargeable in bankruptcy or an insolvency proceeding and that the

defendant will not seek or cause to be sought a discharge or finding or dischargeability as to th(:

criminal fine, special assessment, and community service payments.

4. FORFEITURE

The parties agree to a forfeiture of specific property. For purposes of this Plea

Agreement only, the identification of specifically forfeitable property was a compromise based

on the-recognition that GEM's previous comingling of legal and illegal inventories of raw coral

would have led to a protracted and costly fact-finding endeavor should the matter have been

contested. As such, GEM and the Government agree that the forfeited property constitutes

wildlife that was traded in contravention of the Lacey Act, ClTES, and the lJ.S. laws and

regulations implementing the Convention.

23


Plea Agreement United States v. GEM Manufacturing UC

The forfeited property is specified in the proposed Consent Order of Forfeiture. The

forfeited property includes all raw coral located in the United States and its territories, not

polished and cut for immediate production as of September 1, 2009, which was acquired by

GEM prior to November 20, 2009. The known weight of this forfeited coral is at least 11,601

poWlds. The forfeited raw coral additionally includes all coral delivered on December 28, 2009,

as part of a law enforcement operation in Las Vegas (weighing 620 potmds) as well as coral held

in law enforcement custody in SanJuan and St. Thomas (weighing at least 1,444 pounds). Thus,

the total forfeited raw coral weighs at least 13,665 pounds.

The finished retail products subject to forfeiture are 90 jewelry items and 10 artistic

sculptures. These retail products are valued at $1,404,520. GEM shaH ensure that the forfeited

finished retail products shall be undamaged and of at least the same weight, quality, and

condition as the items offered for retail sale in its galleries. The Government shall have the right

to substitute, at its election, finished retail products of equal value if the tendered finished retail

items are dsmaged or faulty. Defendant GEM hereby forever waives, abandons, and forfeits any

ownership, possessory. or controlling interest, if any, it might have or have had in the raw black

coral and finished retail products identified in this se.ction and tha proposed Consent Order of

Forfeiture.

5. VICTIM RESTITUTION

Restitution is not applicable in this case.

24


Plea Agreement "'�'


6. CONCLUSION

There are no other agreements or side deals between the Government and the defendant.

The defendant enters this Plea Agreement knowingly, voluntarily, and upon advice of counsel.

The defendant warrants that the person signing on the company's behalf is authorized to do so

under the applicable business association law and company by-laws. Furthermore, Defendant's-

attorneys aver that they have explained this Plea Agreement to the defendant.

Dated:¥),

Dated:_), '2 7': UJ(f

Dated: 2-;(')-I/

Dated: ':J/.J..t i /1 I

By:

RONALD W. SHARPE UNITED STA S ORNEY

Greg Position: President and CEO o Authorized corporate representative of GEM

Manufacturing LLC

25

Case: 3:11-cr-00019-CVG -RM Document #: 8-1 Filed: 05/26/11 Page 1 of 7

IN TilE DISlRICT COURT OF TilE VIRGIN ISLANDS DIVISION OF ST. TIIOMAS AND ST. JOHN

UNITED STA'IBS OF AMERICA, )

v.

GEM MANUFACTURING LLC.,

Defendant.

\ CRIMINAL No.AAJ/- f 'J ) ) ) ) )

CONSENT ORDER OF FORFEITURE

BASED UPON the Plea Agreement entered into between the United States of America

and the defendant C'GEM") and the stipulations set forth below, and finding that there is a

requisite nexus between the property listed below and the offenses to which the defendant has

pleaded guilty, and that the defendant has an interest in said property, IT IS HEREBY

ORDERED:

l . That pursuant to 16 U.S.C.§§ l540(e)(4), 3374(a) and 28 U.S.C. § 2461(c), the

following property is forfeited to the United States:

a. At least 11,601 ponnds of raw black coral, that was not cut or polished by GEM

employees for innnediate production as of September l, 2009, and that was acquired by GEM

before November 20, 2009. This raw black coral is located at GEM-affiiliated facilities in St.

Thomas, U.S.V.I. and Las Vegas, Nevada. It includes raw black coral in other GEM and GEM

subsidiaries' facilities, located in the United States, if such coral is determined to be

located there.

b. At least 620 ponnds of raw black coral delivered on or about December 28,

2009, to GEM's subsidiary's facility in Las Vegas, Nevada.

c. At least 1,444 pounds of raw black col1l.l that is currently being held as evidence at

H/.:/IJ/1


govenunent facilities in St. Thomas and San Juan, Puerto Rico.

d. Any other raw black coral, not cut or polished by GEM employees for immediate

production as of September l, 2009, located in the United States and its territories, that was

purchased from or was brokered by Peng Chia Entetprise Co., Ltd., I van Chu, or Gloria Chu.

e. en IS lC SC Upt es con o.g 1 ac cor , as spect 1e m e e e ow: T arf f ul tur tainin bl k a! 'fi d. th tab! b I

QUANTITY SKU DESCRIPTION

2 S(J1880YCN Elephants at Play

I S01920YCN Great White Shark Sculptnre

I SOI950YCN Turtle Totem Sculpture

I S03010YCN Together for Peace

I S40120YCN 3 Giraffe on Natural Base

I S41290YCN Crystal Candelabra

I S41414YCN New Orleans Street Car

I S00670YCN Samurai

I S00490YCN Vase

f Ninety jewelry items. as specified in the table below:


2 A21460YCN ANKLET: 4 Bead Dainty

2 A21470YCN ANKLET: 4 Bead Dainty Square

2 A21480YCN ANKLET: All Around Dainty

2 A21490YCN ANKLET: AD Around Dainty Square

1 A21500YCN ANKLET: FootbaD

1 A21510YCN ANKLET: Long Bead Dainty

1 B21380YCN070 BRACELET: 4 Bead Dainty

I B21410YCN070 BRACELET: All Around Dainty

1 B21450YCN070 BRACELET: All Around Square Dainty

I B21570WCN070 BRACELET: Circle and Square Bracelet

I B21520YCN070 BRACELET: FootbaU

2 W/.JJJI/



I B00550YCN070 BRACELET: Half Moon

I B21560YCN070 BRACELET: Love Bead

I B00910YCD070 BRACELET: Princess All Coral

I B02501 YCD070 BRACELET: Princess Diamond SmaU

I B02700WCN070 BRACELET: SmaU Horizon WG

I B21570WCN070 BRACELET: Circle & Squares

1 pair CI0500YCN CUFFLINKS: Inlaid

2 pairs CI0510YCN CUFFLINKS: Round

2 pairs C01830YCN CUFFLINKS: Round Gold Border

2 pairs CID530YCN CUFFLINKS: Slice Grain

1 pair COI040WCN CUFFLINKS: Square Gold Border

1 pair COI540YCD CUFFLINKS: Sunrise Diamond

1 pair COI540WCN CUFFLINKS:Sunrise WG

I pair E20040YCN EARRINGS: 2 Bead Dainty

1 pair E2200YCD EARRINGS: Around the World

I pair E01870YCN EARRINGS: Dome

1 pair E20580YCN EARRINGS: Eternity AU Coral

1 pair E02930YCN EARRINGS: Geo Triangle

1 pair E20600YCN EARRINGS: Geometric

1 pair E20610YCN EARRINGS: Love Bead

I pair E02400YCN EARRINGS: Midnight

1 pair EOI051YCN EARRINGS: Round Gold Border SM

1 pair E20431YCN EARRINGS: Sculpted Teardrop

I N20730YCN300 NECKLACE: 30" Dainty

I N20750YCN400 NECKLACE: 40" AU Around Square Dainty

I N20600YCN180 NECKLACE: 6 Bead Dainty

I N21210YCN320 NECKLACE: Geometric Bead

3 U!.1Utl


QUANTITY SKU DESCRIP110N

l N20770YCN160 NECKLACE: Football

l N21200YCN320 NECKLACE: Graduated

l N00640YCN16D NECKLACE: HaHMoon

l N01490YCN160 NECKLACE: Sunrise Large

l N21230YCN180 NECKLACE: Love Bead

l P02230YCD PENDANT: Around tbe World

l P30370YCD PENDANT: Eternity O.OSCT

1 P04230YCD PENDANT: Gold Triangle Pendant

1 P21031YCN PENDANT: Heart

1 P02940YCN PENDANT: Midnight

1 P01830YCN PENDANT: Round Gold Border

I P21251YCN PENDANT: Sculpted Teardrop

1 P21791YCN PENDANT: Sting Ray

1 P2l330WCN PENDANT: TurOe

1 P21890YCN PENDANT: Wbale Tail

1 R02820YCD RING: Anna BeUe

1 R02160YC RING: Around tbe World LG

l R00010YCD RING: Baby Grand

1 ROl357YCD RING: Double Diamond Zig Zag

1 R02510WCN060 RING: Geo Square

1 R006DOYCN RING: Large Dainty

1 R01060YCD RING: Large Mardi Gras

l R01340YCN RING: Raised Border

1 R00310YCD RING: SmaD Drummer

l R028SOYCN RING: Winsor

1 TOllSOYCN TIE TAC: Inlaid Design Tie Tac YG

2 T01180YCN TIE TAC: Round Gold Border Tie Tac YG

4 I.S/.1fJ! I


QUANTttY SKU DESCRIPTION

I T01190YCN TIE TAC: Round Tie Tac YG

I T01233YCN TIE TAC: Slice Grain Tie Tac LG

I TOI231YCN TIE TAC: Slice Grain Tie Tac SM

I TOI210YCD TIE TAC: Square Diamond Tie Tac

I TOI220YCN TIE TAC: Square G<Jid Border Tie Tac YG

I TOI250YCD TIE TAC: Sunrise Diamond Tie Tac YG

I TOI250YCN TIE TAC: Sunrise Tie Tac YG

I Quartet U01090YCN TUX STUDS: Inlaid

2 Quartets UOI060YCN TUX STUDS: Round

2 Qnartets UOIOSOYCN TUX STUDS: Round Gold Border

I Quartet UOliOOYCN TUX STUDS: Slice Grain

I Quartet UOI070YCD TUX STUDS: Square Diamond

2 Quartets U01080YCN TUX STUDS: Square G<Jld Border

1 Quartet U01130YCN TUX STUDS: Sunrise

2. The United States, or its agent,. may take possession and maintain custody of the

above-described tangible property. GEM sball ensure that the forfeited finished retail products

(psragraphs e. and f. above) shall be uodamaged and of at least the same weight, quality, anc.

condition as items offered for retail sale. The United States shall have the right to substitute, at

its election, finished retail products of equal value if the tendered finished retail items are

damaged or faulty. If such substitution occurs, the parties shall submit a modified Consent Order

of Forfeiture.

3. The United States shall, to the exteot practicable, provide direct written notice to any

persons known to have alleged an interest in the seized property. and shall publish notice of this

order in accordance with Fedeml Rule of Crhnioal Procedure 32.2(b )(6).

4 . Any person, other than the defendant, asserting any legal interest in the property may,


within thirty days of the publication of notice or the receipt of notice, whichever is earlier,

petition the court for a hearing to adjudicate the validity of their alleged interest in the property.

5. Following the Court's dispositiOn of all timely petitiohs filed, a final order of

forfeiture shall be entered. If no third party files a timely petition, this Order shall become the

final order of forfeiture, as provided by Fed. R. Crim. P. 32.2(c)(2), and the United States shall

have clear title to the property, and shall dispose of the property in accordance with law.

Date United States District Judge

The parties stipulate and agree that the aforementioned property constitutes "wildlife taken, possessed, sold, purchased, offered for sale or purchase, transported, delivered, receiveC., carried, shipped, exported, or imported contrary to the provisions of this (Endangered Species] Act, any regulation made pursuant thereto, or any permit or certificate issued hereunder,·" and constitutes "wildlife'' that was "imported, exported, transported, sold, received, acquired, or purchased" contrary to the Lacey Act, 16 U.S.C. § 3372(d), and is subject to forfeiture to the United States, pursuant to 1 6 U.S.C. § § 1540(e)(4), 3374(a) and 28 U.S.C. § 246l(c).

The defendant hereby waives the requirements of Federal Rules of Criminal Procedure 32.2 and 43(a) regarding notice of the forfeiture in the charging instrument, announcement of the forfeiture at sentencing, and incorporation of the forfeiture in the judgment.

The defendant stipulates and warrants that it has the control and authority to legally bir::d its subsidiaries and affiliated companies to the terms of this Consent Order of Forfeiture. GEM's subsidiaries and affiliated companies have no, and shall make no, claim to the forfeited propeny.

RONALD W. SHARPE

UNITED STATES A ITORNEY

6

Print name: Greg Ebenholtz

Position: President and CEO of GEM


IGNACIA S. MORENO

ASSISTANT ATTORNEY GENERAL

By: !/�� { Christopher L. Hale DOJ Trial Attorney Environmental Crimes Section

7

\iLAJ £,t),Jt William E. Lawler, III Attorney for Defendant

Michael . umn Attorney for Defendant

in the district court of the virgin...

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