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The D&D Daily's Ongoing Coverage of
Lumber Liquidator Controversy
Published Sept. 27, 2013
Federal investigators raided the offices of Lumber Liquidators - Stock Tumbles
Stocks of the hardwood flooring retailer fell sharply on Friday as the news
emerged, dropping just over 10% at midday. No arrests were made and the search
warrants remain sealed, said Brandon Montgomery, a spokesman for the Department
of Homeland Security. He said the search involved special agents from the
Immigrations and Customs Enforcement, U.S. Fish and Wildlife Service and the
Department of Justice. Lumber Liquidators (LL) suggested the investigation
involved its importation of wood products, which come from "approximately 110
domestic and international mills around the world." Lumber Liquidators said it
"takes its sourcing and compliance very seriously, and is cooperating with
authorities."
cnn.com
Published Sept. 30, 2013
Feds come calling on Lumber Liquidators with search warrants
in hand
Lumber Liquidators, the nation’s largest specialty retailer
of hardwood flooring in North America with more than 300
locations, disclosed that the actions by federal
authorities, including the Department of Homeland Security's
Immigration and Customs Enforcement and the U.S. Fish and
Wildlife Service, were related to the importation of certain
wood flooring products. The Company takes its sourcing and
compliance very seriously, and is cooperating with
authorities to provide them with requested information,”
Lumber Liquidators said in a statement.
retailingtoday.com
Published Nov.
7, 2014
Lumber
Liquidators responds to investigation, criticism
 More than a year
after federal investigators raided the company's headquarters, the chief
compliance officer for flooring giant Lumber Liquidators is addressing steps the
company is taking to ensure it is buying legally-sourced timber. Agents with
Homeland Security Investigations began investigating the company in September
2013 after allegations surfaced that the company was knowingly buying
illegally-sourced timber. The federal investigation was followed by multiple
lawsuits and criticism from two environmental non-profits, the Environmental
Investigation Agency and Greenpeace. Now the embattled company is responding by
creating a new sustainability policy.
Ray Cotton, the company's chief
compliance officer, spoke exclusively with 13News Now about the policy, in
his first interview since the federal investigation began. Cotton was hired
in February, months after the federal investigation began. In the time with the
company, he has been promoted to senior vice president and given additional
staff to oversee the company's compliance with federal sourcing laws. But
Cotton says his hiring, additions to his staff and the creation of the formal
sustainability policy is not a response to the investigation or months of
scrutiny the company has gotten.
"In terms of the way we source, we've always
been world class," Cotton said. "We've always been transparent about those
things. I think the difference is we've made it more obvious on the optics."
Daniel Brindis, a Greenpeace activist who has led the campaign against Lumber
Liquidators' sourcing in Brazil, said he is encouraged by the company's recent
action but hopes to see more progress in the future.
"This is definitely a
significant step. It represents a high level of investment on the part of the
company that wasn't there before," Brindis said. "We feel like its commitments
to environmental and social responsibility could be a bit more specific and
stronger."
Brindis was quick to add that the new steps Cotton and his team are
taking now does not mean that they should be cleared from past allegations of
wrongdoing. But Cotton said the company has never knowingly broken the law.
"We
are transparent and we are open and ethical in the way we do things," Cotton
said. "I have known the CEO a long time. He wants to provide best value to
customers, shareholder value, all stakeholders but he's not going to cheat to do
that."
The company's sustainability webpage outlines a number of steps and
initiatives planned to ensure continued compliance with federal laws. Among
those are plans to increase DNA testing of wood and aggressive scrutiny of
customs paperwork that comes with imported wood by third-party auditors. Cotton
said he is also traveling to the company's suppliers around the world to educate
them about the company's policies. He said his team will only continue to
improve on the company's commitment to sustainability.
"I have asked those
questions and I have pushed hard and I've gotten good answers. I'm still here.
The company is doing all the right stuff and only getting better," he said.
13newsnow.com
Published March
3, 2015
60 Minutes Blasts Lumber Liquidators - Laminate flooring deliberately mislabeled
 Just after 11:00 a.m. ET,
the company released a statement regarding the "60 Minutes" report, saying
the newsmagazine used an improper testing method. Near 1:30 pm ET on Monday,
shares of the company were down more than 21%. The "60 Minutes" report showed a
factory in China making laminate flooring for Lumber Liquidators that was
deliberately mislabeled to show that it complied with California regulations
when it did not. The report centered on elevated levels of formaldehyde, a known
carcinogen, in Lumber Liquidators laminate flooring products sold in California.
"60 Minutes" spoke to plaintiffs in a lawsuit that accuses Lumber Liquidators of
selling laminate products in California with formaldehyde levels that exceed
that state's standards by six or seven times, and the news program noted the
state's standards were set to be adopted nationwide later this year.
yahoo.com
cbsnews.com
Lumber Liquidators Says Floors 'Completely Safe'
Lumber Liquidators Holdings Inc. fought back against accusations raised on "60
Minutes" Sunday night that the company sold laminate flooring that didn't meet
safety standards, saying the attacks were driven by short sellers who stood to
benefit by driving its stock price down. Lumber Liquidators defended its
business in a statement Monday, saying its products comply with California
standards and its laminate floors are "completely safe." The company questioned
the method of testing the laminate in the "60 Minutes" segment and said its
suppliers couldn't verify the identity of the employees who appeared in it.
wsj.com
Published March 5, 2015
Senator calls for Lumber Liquidators investigation following '60 Minutes' report
The Senate is turning up the heat on Lumber Liquidators, and shares of the
company are getting whacked.
In a letter sent to regulators on Wednesday, Senator Bill Nelson (D-Florida) has
asked the heads of the Consumer Product Safety Commission (CPSC), the Centers
for Disease Control and Prevention (CDC), and the Federal Trade Commission (FTC)
to test the company's flooring highlighted during a report on "60 Minutes" on
Sunday night. "I ask that your agencies independently investigate and test these
specific Chinese wood laminate products to determine if they present a risk to
the public under the Consumer Product Safety Commission's (CPSC) authority under
the Federal Hazardous Substances Act or the limits prescribed by Congress in the
Formaldehyde Standards for Composite Wood Products Act."
Read the senator's full letter here.
businessinsider.com
Published March 12, 2015
Lumber
Liquidators Says Sales Fall 12.7% After '60 Minutes' Report - Flooring company
plans to offer free air-quality testing
Lumber Liquidators
Holdings Inc. said Thursday that its sales have slid 7.5% since a "60 Minutes"
segment earlier this month alleged the company's Chinese-made laminate flooring
doesn't meet California's emissions standards for levels of formaldehyde, a
known carcinogen. In the nine days after the "60 Minutes" segment ran, Lumber
Liquidators said its same-store sales fell 12.7% compared with a year ago. Since
the segment ran, Lumber Liquidators said negative sentiment toward the company
has doubled, with about 8% of consumers now saying they wouldn't buy from the
company. The report has attracted government interest. Last week, Sen. Bill
Nelson (D., Fla.) sent a letter to the heads of the Consumer Product Safety
Commission, the Centers for Disease Control and Prevention and the Federal Trade
Commission, calling for an investigation into Lumber Laminates' laminate
flooring.
wsj.com
Published April 20, 2015
Lawsuit Alleges Lumber Liquidators Hired a Mold Lab to Conduct Formaldehyde
Testing - Alleges violations of RICO Act
The suit alleges that Lumber
Liquidators "has hired a mold lab to conduct formaldehyde gas emissions testing
and is trying to lull its customers into a false sense of security with the
accreditation and proficiency of its chosen lab." The lawsuit seeks an
injunction against the defendants from continuing to misrepresent the
accreditation of the lab and that the Bio-Badge home test kit is the same as
used by "professionals" to test for formaldehyde in indoor. This lawsuit is the
first case filed against Lumber Liquidators alleging violations of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"). The suit alleges that Lumber
Liquidators and the testing companies it has hired engaged in a pattern of
racketeering, through mail and wire fraud, to conceal the true concentrations of
formaldehyde gas emissions from Lumber Liquidators' laminate flooring by using a
laboratory which is only accredited to analyze microorganisms (such as mold) and
is not accredited to conduct analysis on chemicals, such as formaldehyde.
Plaintiffs hired outside testing firms which showed excessive levels of
formaldehyde gas several times above the minimum risk levels published by the
EPA. businesswire.com
Published April 29,
2015
U.S. Seeks Criminal Charges Against Lumber Liquidators - Over 103 class-action
lawsuits filed - Stock down 50% - CFO leaving
The Justice
Department is seeking criminal charges against Lumber Liquidators in an ongoing
investigation over imported products. In March a report on CBS' "60 Minutes"
said that Lumber Liquidators' laminate flooring made in China contains high
levels of formaldehyde. Lumber Liquidators Holdings Inc. has said that it
complies with applicable regulations for its products. In a regulatory filing
Wednesday, Lumber Liquidators said that the Justice Department was seeking
criminal charges against it under the Lacey Act. The company, based in Toano,
Virginia, also disclosed that it is aware of more than 100 pending
class-action lawsuits against it related to its Chinese-made laminate flooring.
On a conference call with investors, CEO Robert Lynch said the company had spent
more than $15 million on the issue during the quarter, including $10 million it
has set aside to deal with the Justice Department investigation, millions more
in professional and legal fees and nearly $2 million for an indoor air testing
program it is offering to concerned customers.
Lynch also announced that the company would be sourcing more of its laminate
flooring from Europe and North America and less from China "in response to
customer demand." But the change-which he acknowledged will hurt already
declining profit margins-is unlikely to head off regulators, who appear to be
closing in on the company.
The company is also dealing with pressure at the state level. In the SEC
filing, the company said it is "fully cooperating" with information requests
from various state attorneys general about its Chinese laminate flooring.
nytimes.com
yahoo.com
cnbc.com
Published May 6,
2015
Lowe's halts sale of laminate flooring after report alleging similar issue to
Lumber Liquidators
Lowe's has responded to a report that some of its
laminate flooring may be contaminated by toxins by suspending sales of it, in
what the retailer calls an "abundance of caution." The report comes from one of
the concerned hedge fund analysts, Chinese investor Xuhua Zhou, who had also
been in touch with the CBS News program "60 Minutes" regarding potentially
harmful substances in flooring sold by Lumber Liquidators. One of the
independent labs employed by that program also tested some samples of flooring
sold by Lowe's and found levels of formaldehyde ten times above the safety
standard, according to reports.
retaildive.com
Published May 8,
2015
Lumber Liquidators Suspends Sales of All Laminate Flooring From China - Hires
Former FBI Director to Review Compliance Policies
Lumber Liquidators
has suspended sales of Chinese laminate flooring after facing accusations that
the products contained dangerous levels of formaldehyde. Concerns have grown
that Lumber Liquidators' Chinese suppliers falsely marked some laminate flooring
products as compliant with California's safety standards. The company also said
on Thursday that it had hired Louis J. Freeh, the former director of the
Federal Bureau of Investigation, to help review its compliance policies. The
retailer has said that its products are safe as used in homes, but its stock
has sunk roughly 50 percent this year. Lumber Liquidators has been supplying
worried consumers with indoor air quality test kits. On Thursday, the company
said that 11,000 kits had been returned, and 3,400 had been analyzed. More
than 97 percent of those results were within the guidelines set by the World
Health Organization. While the air quality kits can measure overall
formaldehyde levels in the air, they cannot pinpoint its source. No federal
standard exists for formaldehyde in wood products, although the Environmental
Protection Agency is close to issuing a final rule. "Despite the initial
positive air quality testing results we have received, we believe it is the
right decision to suspend the sale of these products," said Robert M. Lynch,
Lumber Liquidators' president and chief executive.
nytimes.com
Published May 21, 2015
Lumber Liquidators Chief Robert Lynch Resigns "Unexpectedly" - CFO resigned as
well
Lumber Liquidators, under scrutiny for months as it faces
accusations that it sold products with dangerous levels of formaldehyde, said
Thursday that its chief executive had left the company. The chief executive
and president, Robert M. Lynch, resigned "unexpectedly," the company said.
Thomas D. Sullivan, the company's founder, will serve as acting chief.
executive. Mr. Lynch's resignation came weeks after the retailer announced that
its chief financial officer, Daniel Terrell, would resign in June. Shares
of Lumber Liquidators fell about 14 percent in morning trading on Thursday.
"There could be other shoes to drop rather than thinking that we're getting to
the bottom here." Lumber Liquidators faced more than 100 lawsuits related to its
Chinese-made laminate as of April.
nytimes.com
Published June 12, 2015
Lumber Liquidators Case Highlights Lacey Act Risk - DOJ To Pursue Criminal
Charges - Brand Reputation Impacting Stock
On April 29, 2015, Lumber
Liquidators Inc. announced in its most recent 10-Q that the U.S. Department of
Justice plans to pursue criminal charges surrounding allegations the company
illegally imported wood in violation of the Lacey Act, 16 USC § 3371 et seq. On
the heels of this announcement, some leadership reorganization and disappointing
earnings, Lumber Liquidator shares were trading as much as 20 percent lower.
The Lacey Act prohibitions applicable to foreign wood sourcing are quite
broad, and require a company to exercise due care in its supply chain, even if
it is not the importer of record. The cost of being subject to a Lacey Act
investigation or enforcement action greatly outstrips the cost of compliance.
Companies that are the subject of Lacey Act investigations and enforcement
proceedings may face substantial civil or criminal penalties, seizure of goods,
disruption of supply chains, negative PR, significant legal fees, and a decline
in stock prices. Knowing of violations of the Lacey Act can lead to felony
charges, punishable by five years in prison and a $250,000 ($500,000 for
companies). See 16 USC § 3373.
law360.com
Published October 23, 2015
Lumber Liquidators pleads guilty in second case, pays $13.2M fine -
Unrelated to "60 Minutes" formaldehyde report
A federal investigation related to Lumber Liquidator's illegal timber
trafficking has ended with a guilty plea and some damning statements by
prosecutors.
Multiple published reports indicate the flooring retailer plead guilty to one
felony and four misdemeanors and agreed to pay a $13.2 million fine. The
guilty plea stems from an investigation into charges that the company
imported flooring manufactured in China from timber illegally harvested from an
area in eastern Russia.
According to an Associated Press report, a statement of facts filed with the
plea agreement indicated that Lumber Liquidators should have known the flooring
manufactured in China was made from illegally sourced Mongolian oak. However,
the company failed to heed "red flags" as required by the company's own
internal procedures.
The please agreement is said to be unrelated to the controversy that erupted
after a CBS "60 Minutes" report exposed that some of Lumber Liquidators'
laminate flooring sourced from China contained high levels of the carcinogen
formaldehyde.
chainstoreage.com
Published February 22, 2016
CDC: Elevated cancer risk in Lumber Liquidators laminate flooring
Certain types of laminate flooring made by Lumber Liquidators (LL) have a
greater risk of causing cancer or other health problems than previously
believed, U.S. health regulators said Monday.
The Centers for Disease Control and Prevention said Monday that exposure to
formaldehyde in the flooring was greater than it had calculated earlier this
month, meaning people who purchased the flooring are about three times more
likely to get cancer than previously estimated.
The determination shook up investors, who sent Lumber Liquidators stock down 20%
to $11.31 in morning trading. They had been mildly encouraged by the CDC's Feb.
10 report suggesting that formaldehyde levels in select versions of the
company's laminate flooring could cause two to nine cancer cases per 100,000
people.
The actual figure is six to 30 cases per 100,000 people, the CDC said Monday.
The discrepancy stems from regulators using the wrong figure for ceiling height
to determine exposure risk.
In addition to cancer, people are also susceptible to increased risks of
exacerbated respiratory issues such as asthma and eye, nose and throat
irritation, the CDC said.
usatoday.com
Published June 17, 2016
Lumber Liquidators
Dodges Mandatory Recall In Flooring Row
The
U.S. Consumer Product Safety Commission on Thursday said Lumber Liquidators
Inc. wouldn't resume sales of allegedly hazardous laminate wood flooring and
that there wouldn't be a mandatory recall, after the company recently paid
$26 million to settle related shareholder and derivative suits.
The
CPSC issued a statement saying it hadn't found unsafe levels of formaldehyde
in the products, which allegedly used illegally harvested wood from China.
The agency also said any future sale, disposal or transfer of the products
would require its approval.
Lumber Liquidators launched a free
testing program for customers last year, CEO John Presley said in a Thursday
statement. To date, the company has allegedly completed 17,000 home air
tests and 1,300 flooring tests, and every piece of laminate tested had
fallen within the government's formaldehyde rules.
law360.com
Published June 21,
2017
Lumber Liquidators Gets Claims Trimmed From Flooring MDL
A Virginia federal judge overseeing multidistrict litigation over Lumber
Liquidators Inc.'s allegedly hazardous laminate wood flooring axed California
state law false advertising claims and Illinois state consumer fraud claims
Tuesday, but preserved other state law claims that the flooring was deceptively
marketed.
law360.com
Published June 19,
2018
Lumber Liquidators MDLs Get Initial OK For $36M Settlement
A Virginia federal judge overseeing multidistrict litigation involving Lumber
Liquidators' alleged false statements that its laminate wood flooring complied
with California Air Resource Board's formaldehyde emissions limits preliminarily
approved a $36 million agreement to end the litigation Friday.
law360.com
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