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Hammer comes down on Lumber Liquidators

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On Oct. 6, Lumber Liquidators pleaded guilty to a felony violation of the Lacey Act and must pay $10 million as part of a U.S. Justice Department settlement. In addition, Lumber Liquidators will pay the federal government $3.2 million in lieu of forfeiture of the illegally sourced flooring in inventory and is on probation for five years.

Lumber Liquidators pleaded guilty to four misdemeanor due-care violations of the Lacey Act and one felony for entry of goods by means of false statements.

“The government appears to making an example out of Lumber Liquidators and its violation of the Lacey Act,” Wedbush Securities, a privately-held financial services and investment firm, said. “The Department of Justice’s prior landmark enforcement action was against Gibson Guitars in 2012, which resulted in only a $610,000 in fines versus $13.2 million for Lumber Liquidators. Moreover, Gibson was not charged criminally, but Lumber Liquidators was. Lumber Liquidators pleaded guilty to a criminal Class E felony because it falsely declared the country of origin of timber harvested and used in the company’s wood products.”

Lumber Liquidators is still facing federal investigations from the Consumer Products Safety Commission and Federal Trade Commission and more than 100 class-action lawsuits involving the Chinese laminate flooring it sold.

The settlement payments include a $7.8 million fine and community service contributions of $880,825 to the National Fish and Wildlife Foundation and $350,000 to the Rhinoceros and Tiger Conservation Fund. Under terms of the agreement, $500,000 from the National Fish and Wildlife Foundation award must fund development of electronic wood identification devices that can identify the genus, species and country of origin of timber and wood products in a non-laboratory setting.

The company also has to implement an environmental compliance plan.

“We appreciate the opportunity to have collaborated with the DOJ to develop an Environmental Compliance Plan, which we believe when fully implemented will be one of the strongest and most comprehensive in the industry,” Jill Witter, the company’s chief compliance and legal officer, said in a statement. “The program is designed to ensure an unbroken and verified chain of custody and documentation of our products from the store all the way to the forest.”

The Lacey Act was amended in 2008 to prohibit the importation or sale of wood that was logged in violation of the law of other countries and to require an import declaration.

The International Wood Products Association issued a statement urging all wood products importers to review their compliance procedures.

“To assist our members with this important task, IWPA has developed a training course for CEOs, CFOs, buyers, compliance staff, customs specialists, sales staff, overseas producers and exports involved in the wood trade,” IWPA executive director Cindy Squires said. “The course ‘Seeing the Forest and the Trees: Wood Trade Compliance Training and Due Diligence Tools,’ will be offered in multiple locations in 2015 and 2016 and will help them meet their responsibilities under the law.”

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This article originally appeared in the November 2015 issue.

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