Lumber Liquidators pleads guilty to federal charges

Virginia Gazette

Toano-based Lumber Liquidators agreed to plead guilty Wednesday to five federal charges, including one felony, and to pay a $10 million penalty for using illegally harvested and imported lumber in its floor covering products.

The plea agreement ends a more than two-year  investigation into the company for importing illegally sourced wood products.

In the course of that investigation a federal search warrant was served on Lumber Liquidator's Toano headquarters in September 2013, by several federal agencies, including Homeland Security.

According to the Justice Department the wood in some Lumber Liquidators products came from Russia and Myanmar. Logging in Eastern Russia is illegal because it threatens the habitat of Siberian tigers.

Lumber Liquidators was also charged with covering up the origins of the wood, according to court documents.

Lumber Liquidators said the settlement is not related to the controversy over the issue of whether some of its laminate flooring violates California clean air standards due to excessive formaldehyde emissions -- the subject of a March report on CBS' "60 Minutes."

The "60 Minutes" piece sent Lumber Liquidators stock into a tailspin and led to class action lawsuits against the company by consumers who had purchased its products.

Former CEO Robert Lynch resigned in May.

The $10 million payment announced Wednesday by the Department of Justice includes a fine, a forfeiture of profits, and contributions to two conservation charities.

According to a new filing with the Securities and Exchange Commission Wednesday, the agreement means Lumber Liquidators will pay $7.8 million in fines and an additional $1.2 million in community service payments.

According to an SEC filing for Lumber Liquidators, $4 million is due at sentencing, $2 million is due within a year, and the remainder is due two years after sentencing. 

“The community service payments include an $881,000 payment to the National Fish and Wildlife Foundation, $500,000 of which is designed to fund projects that develop electronic timber identification devices for use in non-laboratory settings and $381,000 of which fund Amur leopard conservation projects, and a $350,000 payment to the Rhinoceros and Tiger Conservation Fund,” documents filed with the SEC state.

 The company also agreed to forfeit $3.2 million in cash to avoid forfeiture of the flooring, the filing says. The cash forfeiture is due upon sentencing. Under the agreement, the company is free to sell the flooring from the illegally harvested wood and retain any of the proceeds.

The charges against Lumber Liquidators were violations of the Lacey Act of 1900.

 The Lacey Act prohibits trade in wildlife, fish, and plants  taken, possessed, transported or sold illegally.

 Environmental groups have charged that the company was using illegally sourced timber from China, Brazil and Siberia.

The company was started in 1993 by Tom Sullivan, a building contractor, in Stoughton, Massachusetts, and developed a niche market in hardwood flooring.

The company moved headquarters from Boston to Colonial Heights in 1999 and to Toano in 2004, building a 306,000-square-foot production center.

Lumber Liquidators has stores in 46 states and Canada and employs over 1,000 workers.

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