Stock in the hardwood flooring retailer jumped up 16.6 percent after the company announced it had settled a Department of Justice investigation related to foreign timber imports.
Hardwood flooring retailer Lumber Liquidators has settled a suit brought by the U.S. Department of Justice regarding illegal foreign timber imports for $10 million, the company said in a statement.
DOJ initially began investigating Lumber Liquidators back in 2013 for buying illegally harvested timber from Russia in violation of the Lacey Act, a U.S. conservation law regarding the protection of plants, fish and wildlife. Congress amended the law in 2008 to cover plants and trees for the first time to reduce global demand for illegally obtained timber products.
As part of the settlement, Lumber Liquidators agreed to plead guilty to criminal violations, including four misdemeanor due care violations of the Lacey Act and a single felony charge for entry of goods by means of false statements. The $10 million payments include a $7.8 million fine, community service contributions of $880,825 and $350,000 to the National Fish and Wildlife Foundation and the Rhinoceros and Tiger Conservation fund, respectively, and a $969,175 forfeiture payment.
“These violations, including the Class E felony, do not require the Company to have acted with a deliberate or willful intent to violate the law, and the Company did not stipulate that it acted with such a deliberate or willful intent,” the company said. “Lumber Liquidators also has agreed to implement an Environmental Compliance Plan to ensure future compliance with the Lacey Act.”
In addition, the company agreed to pay a $3.2 million payment in lieu of a civil forfeiture of hardwood flooring products that had been suspended as a result of the case. Lumber Liquidators will be permitted to sell the previously-suspended engineered hardwood flooring and retain any proceeds of the sale.
The company noted, however, this settlement does not cover a separate claim by the California Air Resources Board (CARB) related to potentially unsafe levels of formaldehyde in certain Lumber Liquidators products.
“The company is continuing to cooperate with other agencies, including the Consumer Product Safety Commission, CARB, Securities and Exchange Commission and U.S. Attorney’s Office for the Eastern District of Virginia, with respect to additional ongoing inquiries and legal proceedings unrelated to today’s announced settlement,” said Lumber Liquidators.
Stock in the Toano, Va.-based company jumped 3.1 percent to $14.59 per share Wednesday after the announcement was made, from $14.07 per share at closing time on Tuesday. Shares opened at $15.86 on Thursday and closed at $16.41, up another 12.5 percent from Wednesday and 16.6 percent from Tuesday. Early morning trading Friday saw Lumber Liquidators stock trading as high as $18.90 per share.
Prior to the DOJ and CARB lawsuits, Lumber Liquidators’ stock price had grown from around $13 per share in 2011 to $119 per share in 2013 thanks to skyrocketing revenues and earnings. The fast-growing flooring retailer has more than 355 stores in 46 states and more than $1 billion in annual revenues. Early in 2015, however, shares began falling dramatically, causing several investment firms to “short” the stock, selling it with the belief that the price will decline, enabling the seller to buy it back at a lower price to make a profit.
“We are pleased to reach this agreement and resolve a legacy issue related to the Lacey Act. We will continue to focus on strengthening Lumber Liquidators across every area of the organization and executing on our value proposition to improve operational efficiencies and deliver value to our stakeholders,” John M. Presley, chairman of the Board of Directors, said in a statement.
“We appreciate the opportunity to have collaborated with the DOJ to develop an Environmental Compliance Plan, which we believe when fully implemented will be one of the strongest and most comprehensive in the industry,” added Chief Compliance and Legal Officer Jill Witter. “The program is designed to ensure an unbroken and verified chain of custody and documentation of our products from the store all the way to the forest.
“We have invested significant time and resources to strengthen our quality assurance procedures, from enhanced protocols designed to verify licensing, certification and regulatory compliance as well as product sample testing. We are also committed to strengthening our tools and training programs to encourage secure and anonymous reporting of any potential concerns. We will continue to improve our procedures on an on-going basis and look forward to working with our suppliers to set the highest standards for sourcing of wood products in our industry.”
Lumber Liquidators settles DOJ illegal import suit
