Lumber Liquidators on Wednesday said that it had settled with the Department of Justice over charges it harvested more timber than its permits allowed in foreign countries such as Russia, and then imported lumber products made from the timber.
The DOJ charges were a result of its investigation of some of Lumber Liquidators’ hardwood flooring purchase orders and import declarations made concerning the origin of the timber in those orders, the Toano, Va.-based company said. The actions violated the U.S. Lacey Act, which protects plants, fish, and wildlife.
As part of the settlement, Lumber Liquidators agreed to plead guilty to violations of a customs law and the Lacey Act, and pay a combined total of $10 million in fines, community service payments, and forfeited proceeds. The 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. The company reserved for this amount in the first quarter of 2015.
“We are pleased to reach this agreement and resolve a legacy issue related to the Lacey Act,” the company’s chairman John M. Presley said in a press release. “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.”
Lumber Liquidators said it determined in the second quarter of 2015 that there were Lacey Act compliance concerns related to a limited amount of its engineered hardwood flooring. As a result, it suspended sales of the product pending further investigation, and brought the matter to the attention of the DOJ.
As part of the agreement announced Thursday, Lumber Liquidators will pay the DOJ $3.2 million in lieu of forfeiting the suspended flooring product. Lumber Liquidators will be permitted to sell the suspended engineered hardwood flooring and retain any proceeds of the sale, it said.
Both the $10 million payment and the $3.2 million payment, which remain subject to court approval, will be paid in various phases over the next two years. “The company does not believe the settlement or related payments will impact its ability to borrow under its asset-based revolving credit facilitu,” Lumber Liquidators said in its press release.
The violations are another bump in the road for the flooring company, according to CNNMoney. In May, Lumber Liquidators chief executive Robert Lynch resigned unexpectedly amid ongoing investigations, which included the DOJ inquiry and other allegations that some of its wood flooring contained toxic chemicals, including the cancer-causing chemical formaldehyde.
“The Consumer Product Safety Commission had previously disclosed its own probe into the possible health effects of the flooring,” CNNMoney wrote. “And the firm even halted sales of controversial laminate flooring from China.”