We would note that Lumber Liquidators’ pleading guilty to Lacey Act violations may already weaken the company’s position in securities fraud lawsuits. Recall that in its 2Q15 10Q, Lumber Liquidators disclosed that in May 2015, the California Air Resources Board (CARB) notified Lumber Liquidators that additional samples of finished products were obtained in 2014, a few of which, based on deconstructive testing, exceeded the CARB formaldehyde emissions limits for raw composite wood.
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Lumber Liquidators issued a press release late Wednesday afternoon saying it had reached a settlement with federal prosecutors related to the charges.
Lumber Liquidators also faces allegations a few of its flooring contained toxic chemicals, including cancer-causing formaldehyde.
The company said it reserved money for the payments in the first quarter of 2015.
The resolution of the case sent shares of parent company Lumber Liquidators Holdings up as much as 9.7 percent to $16 on Thursday in New York.
The company will pay a total of $13.2 million dollars in fines, forfeitures, donations and community service.
The guilty plea included a felony charge for entry of goods by means of false statements and four misdemeanor due-care violations of the Lacey Act.
The company will also implement an Environment Compliance Plan that will ensure its compliance with the Lacey Act in the future. As a result, it suspended sales of the product pending further investigation, and brought the matter to the attention of the DOJ. Lumber Liquidators will be permitted to sell the suspended engineered hardwood flooring and retain any proceeds of the sale, it said.
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As part of the agreement announced Thursday, Lumber Liquidators will pay the DOJ $3.2 million in lieu of forfeiting the suspended flooring product. “We will continue to improve our procedures on an ongoing basis and look forward to working with our suppliers to set the highest standards for sourcing of wood products in our industry”.
