Lumber Liquidators Holdings Inc. must pay $10 million in fines and penalties for telling U.S. officials the timber for its wood flooring came from Germany rather than the actual source -- the habitats of endangered Siberian tigers in southeast Asia.
Lumber Liquidators shares jumped as much as 17 percent with trading volatility briefly triggering market circuit breakers. New York Stock Exchange trading resumed about six minutes later.
U.S. District Judge Raymond Jackson in Norfolk, Virginia, on Monday accepted a plea agreement the company reached last year with federal prosecutors. The deal also calls for five years’ probation and the appointment of an outside auditor.
Jackson said the company should derive no public relations benefit from the plea agreement. He also warned of the consequences that would flow from a failure to abide by its terms.
“Lumber Liquidators will cease the importation of hardwood if they do not follow the plan,” the judge said.
After the hearing, company representatives left the court without speaking to reporters.
“Lumber Liquidators is pleased to put this legacy issue behind us,” the company said in a statement e-mailed to Bloomberg News. “This matter was concluded consistent with our prior disclosures.”
The Toano, Virginia-based business pleaded guilty in October to five charges, conceding that some of its timber came from the east Asian habitat of endangered Siberian tigers and not from Germany as indicated on import paperwork. It agreed at the time to pay a total of $13.2 million in sanctions, including forfeitures, the biggest fine ever imposed under the Lacey Act, which criminalizes importing to the U.S. timber taken in violation of another country’s laws.
While that admission of wrongdoing ended a two-year federal probe, it left untouched dozens of federal lawsuits pending in Alexandria, Virginia, contending the company’s Chinese-made laminate flooring contained excessive levels of formaldehyde. Those allegations were sparked by a “60 Minutes” investigative news report aired in March.
The timber-sourcing problem also originated in China, where many of the company’s suppliers are located. Lumber used to make wood products purchased by the retailer was actually harvested in far eastern Russia and Myanmar, according to court papers filed by federal prosecutors on Oct. 7.
Lumber Liquidators was charged with making false statements -- a felony -- and four lesser offenses. The company has said it fully cooperated in the investigation and has since enhanced its sourcing and compliance practices. It also said that it wasn’t required to have acted with willful or deliberate intent to violate the law and that it didn’t stipulate to having done so.
“Lumber Liquidators profited from the destruction of old growth forests and the disappearance of the few remaining Siberian tigers and Amur leopards,” federal prosecutor Patrick Duggan told reporters after Monday’s hearing. “This sentencing shows that the U.S. will hold accountable those who profit, those companies and individuals who gain financially from the illegal exploitation of protected resources and endangered species.”
450 Cats Left
The tigers hunt deer and wild boar that feed on Mongolian oak acorns. Only about 450 of the great cats are believed to exist, according to National Geographic. Amur leopards, which also hunt the east Asian forests, are similarly endangered, according to the World Wildlife Fund’s website.
As part of its pact with prosecutors, Lumber Liquidators agreed to pay the federally chartered National Fish and Wildlife Foundation $880,825, with the bulk of that money to be allocated to development of timber identification technology and the remainder, $380,825, to be dedicated to conservation of Amur leopards and their habitat.
An additional $350,000 will be paid to the U.S. Fish and Wildlife Service’s Rhinoceros and Tiger Conservation Fund for the protection of wild tigers and their habitats.