Lumber Liquidators has agreed to pay a total of $10 million to settle claims by the U.S. Department of Justice of importing illegally harvested timber, and another $3.2 million in a civil forfeiture to resolve similar compliance concerns with some of its engineered flooring.
The plea agreement, which still needs court approval, was announced on October 7. Under its terms, the retailer agrees to plead guilty to a felony charge of entry of goods by means of false statements and four misdemeanor violations of the Lacey Act, a conservation law designed to protect plants and wildlife that are harvested illegally.
The announcement is unrelated to investigations into allegations that the company sold laminate flooring that contained dangerously high levels of formaldehyde to thousands of homeowners. Those claims were made in a March broadcast of 60 Minutes and are still under investigation by the Consumer Products Safety Commission (CPSC) and others. They’re also the subject of a number of civil lawsuits.
Federal authorities raided the company’s headquarters two years ago looking for evidence that some of its wood imports came from forests in eastern Russia inhabited by endangered Siberian tigers, The Wall Street Journal said.
The World Resources Institute said that the Lacey Act violations included declaring that imports of Mongolian oak came from Germany when the tree is in fact found only in Northeast Asia; false declarations that Myanmar timber originated in Indonesia; and the transport of illegal timber from Russia declared as European oak.
According to Lumber Liquidators, the $3.2 million forfeiture stems from “Lacey Act compliance concerns” with some of its engineered hardwood flooring. The company subsequently suspended sales of roughly $4 million of the product pending an investigation and notified federal authorities.
There were no compliance issues with $900,000 worth of flooring, and the deal allows the company to sell the remaining flooring in return for the $3.2 million payment.
The company will adopt a compliance plan
Lumber Liquidators also has agreed to adopt an Environmental Compliance Plan to ensure that it doesn’t violate the Lacey Act in the future.
Jill Witter, the company’s chief compliance and legal officer, said in a statement posted at the company’s website, “The program is designed to ensure an unbroken and verified chain of custody and documentation of our products from the store all the way to the forest.”
The company also said that it was not admitting it had acted with a “deliberate or willful intent” to violate the law.
After authorities raided company headquarters in 2013, Lumber Liquidators said that it sourced flooring from some 110 domestic and foreign mills and that it had 60 employees assigned to monitor harvesting, manufacturing, and compliance with trade laws.
The formaldehyde probe continues
The announcement of the Lacey Act settlement helps the company in the short run, but the company still faces serious problems over claims that some laminate flooring made in China had formaldehyde levels far exceeding what’s permitted in California.
A report at MarketWatch says that the company “is not out of the woods yet” and that a settlement on the formaldehyde issue still poses “substantial risk.”
The company’s stock price jumped by 22% days after the settlement was announced, but it’s down 70% year to date.
The Consumer Products Safety Commission says its that investigation is continuing and gave no timetable for having it completed. Its most recent public statement came in March, when Chairman Elliot Kaye said, “We are actively investigating laminate flooring products from Lumber Liquidators. The company has been cooperative to date in our investigation and has pledged to fully cooperate throughout. Our work will take some time and often the science does not provide the clarity we all wish it would.”