Lumber Liquidators will pay $13.2 million to settle a Department of Justice (DOJ) investigation primarily related to hardwood flooring the company imported from foreign suppliers, including Eastern Russia, that harvested more timber than permitted. As part of the settlement, which still requires court approval, Virginia-based Lumber Liquidators agreed to plead guilty to violations of federal customs law and the Lacey Act, a U.S. conservation law regarding the protection of plants, fish and wildlife. This settlement is unrelated to current California Air Resources Board-related claims related to the sale of Chinese-made flooring that exceeds the state agency’s standards for safe formaldehyde emissions.
This agreement is with the Environment and Natural Resources Division of the federal law enforcement agency. Lumber Liquidators pled guilty to four misdemeanor due care violations of the Lacey Act and a single felony charge for entry of goods by means of false statements. In addition to the $10 million settlement, which includes “community service contributions” totaling more than $1.2 million to the National Fish and Wildlife Foundation and the Rhinoceros and Tiger Conservation fund, there also is a $3.2 million payment in lieu of civil forfeiture of the non-compliant flooring. In exchange for the payment, the company will be permitted to sell the product and retain the proceeds.
According to the operative complaint, Lumber Liquidators reported gross margins that were significantly higher than those of its major competitors, Home Depot and Lowe’s Companies Inc., which it attributed to partnerships in China that allowed it to cut out middlemen and work directly with suppliers. In reality, the company was buying engineered and laminate flooring manufactured in China that contained and emitted dangerously high and illegal levels of formaldehyde, as well as wood that had been illegally harvested from protected forests in the Russian Far East, home to the critically endangered Siberian tiger and Far East leopard, which are both among the rarest animal species on the planet, according to the complaint.
The scheme was only discovered when independent analysts began investigating the company, followed by federal regulators and most recently, journalists at “60 Minutes,” the complaint said. Unhappy customers have also filed proposed class actions accusing the retailer of duping consumers by falsely touting that its inventory from China complies with emissions standards for formaldehyde, a toxic chemical. Two false advertising complaints – filed in March in California and South Carolina federal courts, respectively – alleged that Lumber Liquidators routinely sells Chinese-made flooring that greatly exceeds California Air Resource Board standards for safe formaldehyde emissions.
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