The Department of Justice is “seeking criminal charges under the Lacey Act” against Lumber Liquidators, according to the company’s first quarter report filed with the Securities and Exchange Commission on April 29.
The report also said the company lost $7.78 million during the first quarter. The company made $13.7 million during the same period last year.
The criminal charges can be traced back to a federal raid on Lumber Liquidators headquarters in September 2013. The federal government received a report from The Environmental Investigation Agency prior to the raid that claimed Lumber Liquidators had purchased millions of square feet of illegal wood originating from illegal logging operations in the Russian Far East.
The DOJ’s investigation is one of two federal investigations against Lumber Liquidators. The Consumer Product Safety Commission said it was investigating the company shortly after a “60 Minutes” report aired in March. The report claimed the Lumber Liquidators’ Chinese-made laminate flooring contained unsafe levels of formaldehyde and was mislabeled as being compliant with the California Air Resource Board Phase II regulations.
As of April 27, more than 100 lawsuits have been filed against the company since the report aired, according to the SEC filing.
"Costs related to legal and professional fees and a regulatory accrual were significant in the first quarter," Robert Lynch, CEO, told listeners during a conference call last week.
Lumber Liquidators set aside $10 million in the first quarter for the DOJ investigation and is holding $15.5 million in total in reserve for costs associated with the case.
The company’s stock price after disclosing its earnings for the first quarter dropped to $26.77 by the end of the day, down almost 20 percent from the previous day’s closing price of $33.39. The company’s stock was at $27.08 at the start of trading today.
