Lumber Liquidators (Toano, Va.) paid $2.5 million to the California Air Resource Board to settle the agency’s claim that the retailer’s Chinese-made laminate flooring exceeded state limits on formaldehyde.
Lumber Liquidators admitted no guilt in the settlement filed with the SEC, and said in a statement that “CARB has concluded its review with no formal finding of violation or admission of wrongdoing.”
The $2.5 million fine was calculated based on an amount equal to $10,000 per day for the 250 days (Sept. 4, 2013–May 7, 2015) that CARB alleges Lumber Liquidators sold the Chinese-made laminate in California.
“The California Air Resources Board adopted the [Airborne Toxic Control Measure] to protect the public from toxic exposures to formaldehyde from composite wood products, and we are enforcing this regulation,” CARB Enforcement Division Chief Todd Sax said in a statement. “Companies need to understand we expect compliance with our rules, and we will hold those accountable who do not comply.”
In addition to the fine, CARB is requiring Lumber Liquidators to implement auditing programs to ensure its laminate suppliers’ products comply with CARB Phase II regulations related to formaldehyde emissions. The company would be responsible for providing sample composite cores and finished goods for testing.
Lumber Liquidators stopped selling Chinese-made laminate in May 2015. It still sells laminate supplied by North American and European manufacturers.
“We look forward to continuing to work with CARB to establish new industry standards for flooring product testing,” said CEO John Presley in a statement. “We believe today's settlement will go a long way in helping us to execute our strategy, which includes rebuilding our brand and communicating—with clarity and candor—the value of our products to our customers and stakeholders."
The CARB settlement is the latest event in a year-long saga for the company that began with a “60 Minutes” investigation on March 1, 2015, into the formaldehyde content of the company’s Chinese-made laminate flooring.
News of the settlement caused a small spike in the company’s stock price. It went from $12.02 Tuesday morning to $13.94 at bell close. The stock is still down from $69.22 since February 2015.
Last month, the Centers for Disease Control and Prevention released its analysis of a federal investigation into the laminate flooring. It concluded the flooring posed a cancer risk from six to 30 cases per 100,000 people, but said that the calculated risk is likely lower than the modeled estimate. The CDC also said “exposure to the lowest modeled levels of formaldehyde could result in eye, nose and throat irritation for anyone.”
