Lumber Liquidators Problems Continue as DOJ Preps Criminal Charges

It’s been a difficult year for Lumber Liquidators Inc. As investigations continue into formaldehyde levels in their laminate wooden flooring, news came out that the U.S. Department of Justice will be seeking criminal charges against the company for allegedly importing illegally harvested wood. The company seems to have been expecting this, noting in its quarterly report that $10 million has already been set aside as a “best estimate” for losses following the charges. They’ve certainly had enough warning: federal investigators first questioned the pedigree of imported wood used in Lumber Liquidator products back in September 2013. At the time, several media sites reported that authorities were concerned about imported wood being sourced from protected habitat in Russia. An Environmental Investigation Agency report, Liquidating the Forest, alleges that:

“Lumber Liquidators has imported millions of square feet of solid oak flooring from a manufacturer that freely describes its own illegal logging practices and that buys wood from suppliers that are under scrutiny by Russian authorities for illegal logging in the most threatened temperate forest in the world.”

The Department of Justice charges will be brought under the Lacey Act, a conservation law regulating the importing of products made from illegally logged wood. Lumber Liquidators’ headquarters were raided in 2013 in connection with the charges, while the EIA claims that Chinese-made flooring products use wood that was cut from the habitat of the endangered Siberian tiger.

Last week, a group of investors who have filed a lawsuit against the company amended their complaint to include claims that Lumber Liquidators used illegally sourced wood to increase profit margins. According to the suit, Lumber Liquidators told investors that reported gross margins were due to Chinese partnerships that allowed the company to cut out unnecessary middlemen – when in fact costs were kept down by buying laminate flooring made in Chinese factories that used wood from the Russian Far East, home of the Siberian tiger and the endangered far East leopard. The wood is also suspected of containing dangerously high levels of formaldehyde, sparking dozens of private lawsuits and false advertising complaints.

All in all, a lot of problems for the company – but it’s good to see the Lacey Act being enforced. The World Wildlife Fund currently lists the Far East (or Amur) leopard as “critically endangered” and the Siberian tiger as “endangered,” with fewer than 40 individuals remaining in the wild in the 1940s. Recent conservation efforts have raised that figure to its current levels of around 450.