Lumber Liquidators (Toano, Va.) agreed to a $33 million settlement with federal and state governments after being charged with securities fraud for misleading investors about its Chinese-made laminate flooring’s formaldehyde levels in 2015.
The flooring retail company will pay a $19.1 million fine and a restitution of $13.9 million, with the agreement that the Department of Justice will dismiss the charge after three years provided the company meets certain obligations, “many of which the company has already implemented,” Lumber Liquidators stated. Up to $6.1 million of the penalties will be paid to the Securities and Exchange Commission.
In a statement, the DOJ said that “employees involved in the wrongdoings either were terminated or resigned from the company, and the company replaced its executive management team with experienced executives who have displayed a commitment to building an ethical corporate culture.”
The company stated that its current CEO, Dennis Knowles, has made “sweeping changes” since taking over in November 2016 after serving as the company’s COO.
"We appreciate that the government recognizes the changes in the company's leadership and the strengthened organization that we have built,” Knowles said in a statement, adding that he was pleased with the settlement.
In October 2018, Lumber Liquidators reached a $36 million settlement in a class-action lawsuit filed on behalf of customers who purchased the company’s Chinese-made laminate flooring between 2009 and 2015.
The company’s stock fell 2.5 percent following the announcement, according to Reuters, and as of publication time was trading at $11.29. The company’s stock has fallen 78 percent since a 2015 “60 Minutes” investigation reported questioned the formaldehyde levels in the company’s Chinese-made laminate flooring.