Lumber Liquidators To Pay $33 Million For Formaldehyde Lie

RICHMOND, VA – Lumber Liquidators, one of largest flooring retailers in the country, has agreed to pay a $33 million penalty for misleading investors about formaldehyde-laced laminate flooring from China.

“This resolution holds Lumber Liquidators accountable for misleading the investing public,” said G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia.

Terwilliger added that the company “had cooperated with the investigation, completely replaced its senior executive team, and displayed a commitment to building an ethical corporate culture.”

Headquartered in Virginia, Lumber Liquidators are one of the largest retailers of flooring products in the United States. The case focused on the fact that the company had knowingly filed a false and misleading statement to investors denying allegations concerning its products that had aired in a 2015 episode of the investigative television show, 60 Minutes.

According to court documents in 2013 the California Air Resources Board (CARB) informed Lumber Liquidators that flooring samples collected from its California stores had failed tests for formaldehyde emissions.

Although flooring suppliers in both the US and China echoed CARB’s concerns, and despite the company’s own tests mirroring CARB’s results the company’s public announcements were that the tests themselves were faulty and they continued to order more of the failed product.

In 2015, the television show 60 Minutes aired a segment detailing how the laminate flooring had failed CARB’s emission standards. The episode included undercover videos from China in which the suppliers admitted not only that the laminates were not CARB compliant but that the company was indeed aware of the test failures.

The day after the show aired the New York Stock Exchange halted trading of the company’s stock. In response though Lumber Liquidators issued a statement assuring investors and the public that its products complied with all CARB regulations.

As a result of its agreement with the Department of Justice, Lumber Liquidators agreed to pay a total criminal penalty of $33 million to the United States, including a $19 million criminal fine and $14 million in forfeiture.

“Lumber Liquidators lied to investors and to the public - all to protect its stock price,” said Brian A. Benczkowski, Assistant Attorney General of the Justice Department’s Criminal Division.

Kelly R. Jackson, Special Agent in Charge of IRS-Criminal Investigation (IRS-CI) Washington, D.C. Field Office added, “Lumber Liquidators knowingly deceived the shareholders they were entrusted to serve.”

Lumber Liquidators operates five locations in Missouri, including Springfield. Earlier this morning employees at the store declined comment.