The U.S. Justice Department is seeking criminal charges against Lumber Liquidators in an ongoing investigation over the formaldehyde content of its Chinese-made laminate flooring.
What’s the Problem?
April 29, 2015 – Lumber Liquidators announced the pending charges today in a regulatory filing, while also posting a loss for the quarter and announcing the departure of chief financial officer Daniel E. Terrell.
A “60 Minutes” reported aired on CBS News March 1 revealed that Chinese flooring sold by Lumber Liquidators had tested positive for illegal levels of formaldehyde, a known human carcinogen (cancer-causing substance). The company argues that its products comply with applicable regulations for formaldehyde, including those set by the California Air Resources Board (CARB).
In the regulatory filing, Lumber Liquidators said that its March sales declined 12.8% after it spent $2.3 million on an air-quality assurance program it put into place to test formaldehyde levels in customers’ homes. The company has stopped buying laminate flooring from China, and is now using sources in Europe and North America, according to CEO Robert Lynch.
According to the filing, the DOJ is seeking charges under the Lacey Act which, among other things, makes it illegal to import or sell illegally sourced wood products. The probable loss resulting from the charges is estimated to be about $10 million, the company said. There are currently more than 100 class action lawsuits pending against Lumber Liquidators in courthouses around the country.