Lumber Liquidators (Toano, Va.) agreed to plead guilty in an agreement Oct. 7 to violations of a Customs law and the Lacey Act, and will pay $10 million in fines, community service payments and forfeited proceeds in a settlement with the Department of Justice, the company announced today.
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Lumber Liquidators (Toano, Va.) agreed to plead guilty in an agreement Oct. 7 to violations of a Customs law and the Lacey Act, and will pay $10 million in fines, community service payments and forfeited proceeds in a settlement with the Department of Justice, the company announced today.
The guilty plea included a felony charge for entry of goods by means of false statements and four misdemeanor due-care violations of the Lacey Act. For the company to be guilty of these violations does not require that it had acted deliberately or with willful intent to violate the law, and Lumber Liquidators denies that it acted deliberately or with willful intent.
As part of the settlement, the company will also implement an Environmental Compliance Plan to ensure future business is in compliance with the Lacey Act.
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The payments include a $7.8 million fine, contributions of community service worth $880,825 and $350,000 to the National Fish and Wildlife Foundation and the Rhinoceros and Tiger Conversation fund, and a $969,175 forfeiture payment.
The settlement is related to a Department of Justice investigation launched in 2013. Federal agencies raided Lumber Liquidators headquarters in September 2013 to look for evidence that the company had imported wood product sourced illegally from protected forests in Russia’s Far East.
"We are pleased to reach this agreement and resolve a legacy issue related to the Lacey Act,” said John Presley, Lumber Liquidators chairman, in a statement. “We will continue to focus on strengthening Lumber Liquidators across every area of the organization and executing on our value proposition to improve operational efficiencies and deliver value to our stakeholders."
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In addition, Lumber Liquidators settled a companion civil forfeiture case with the Department of Justice for $3.2 million. In the second quarter of 2015, the company identified compliance concerns related to $4.1 million worth of its engineered hardwood floors. Lumber Liquidators raised the issue with the Department of Justice, and during the investigation discovered that $3.2 million of the engineered product did have compliance concerns.
Both of these incidents are unrelated to the class action lawsuits against the company regarding the formaldehyde content of its Chinese-made laminate flooring product, as reported by 60 Minutes in March.
The $10 million and $3.2 million payments, which remain subject to court approval, will be paid in phases over the next two years. The company reserved for each payment in the first and second quarters of 2015, respectively.
The company made the settlement public after the market closed on Oct. 7. Its stock price, which ended the day at $14.59, immediately started to climb and was at $15.86 when the market opened the next day. It peaked at $21.14 on Oct. 9. As of 10:30 a.m. on Oct. 12, the stock was valued at $17.29.
The company's stock has fallen by 73 percent since it announced the "60 Minutes" investigation during a Feb. 26 conference call with investors.
Editor's note: The article was updated Oct. 12 to include stock price information and on Nov. 2 to clarify that, at time of publication, the company had not pled guilty in a court of law but was announcing their intentions to plead guilty.
