Feds Seeking Criminal Charges Against Lumber Liquidators

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Lumber Liquidators headquarters is in Toano.
Lumber Liquidators headquarters is in Toano.

The U.S. Department of Justice is seeking criminal charges against Lumber Liquidators from its ongoing investigation of whether the company violated federal law by allegedly importing wood harvested from the habitat of an endangered tiger.

The company announced DOJ is seeking the charges in a Wednesday filing with the U.S. Securities and Exchange Commission.

Lumber Liquidators has been under investigation since at least September 2013, when federal agents searched the company’s corporate headquarters in Toano and a storefront in Henrico County for evidence that the company had violated the Lacey Act.

That act prohibits the trade of wildlife, fish or plants that have been illegally taken from a place. Allegations surfaced in 2013 that the company was buying wood illegally harvested from the habitat of the endangered Siberian Tiger, which was then taken to China for processing before being shipped to the United States.

The filing did not specify the scope of the charges, simply saying DOJ has “indicated” in “recent communications” that it will seek to charge the company with violating the Lacey Act.

The filing also said the company’s board of directors has formed a special committee to interact with DOJ and its “best estimate” of monetary losses due to federal activity is about $10,000.

By December 2013, the company was facing at least one lawsuit due to the allegations that it had violated the Lacey Act and other allegations that it sold wood products imported from China containing elevated levels of formaldehyde.

At least three other lawsuits were filed in federal court against the company in the following months. In March, the CBS News program 60 Minutes aired a report blasting the company over the formaldehyde allegations. Since then, the company has become aware of 103 pending lawsuits seeking class action status in state and federal courts over the formaldehyde allegations, according to the SEC filing.

Lumber Liquidators has repeatedly denied it has done anything wrong. It began offering free in-home air test kits to people who purchased the laminate flooring at the heart of the formaldehyde allegations.

The company issued a statement Wednesday along with the SEC filing, stating sales rose 5.6 percent in the first quarter — January through March — but that sales decreased 12.8 percent in March, which the company attributed to the formaldehyde allegations.

“Costs related to legal and professional fees and a regulatory accrual were significant in the first quarter, however, we are committed to addressing the challenges presented while maintaining our focus on our core business and value proposition,” Lumber Liquidators President and CEO Robert M. Lynch said in a statement issued Wednesday.

The company’s stock value has tumbled since the weeks following the federal searches in September 2013. Its value peaked at $119.44 per share in November 2013, but by the time the 60 Minutes report aired, it was sitting at about $35 per share. As of Wednesday afternoon, the stock was trading at $27.17 per share, a more than 17 percent decline from Tuesday.

The company also announced Tuesday it has agreed to part ways with Chief Financial Officer Daniel E. Terrell effective July 1. Terrell has been CFO since October 2006.

“For more than ten years, Dan has provided invaluable leadership and service to the Company,” Lynch said in a statement. “He played a critical role in our initial public offering and has been key to our growth over the years.  The Company is grateful for Dan’s contributions and commitment and appreciates his agreement to provide consulting services and transition assistance for a period after June 1.”

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