Lumber Liquidators reaches settlement with DOJ over criminal violations

TOANO, VA (WBTV) - Federal prosecutors in Virginia have filed felony and misdemeanor charges against flooring giant Lumber Liquidators late Wednesday afternoon.

The company, which is headquartered in Toano, Va—in between Richmond and Newport News—has been under investigation by federal agents with Homeland Security Investigations for more than two years.

A bill of criminal information filed by federal prosecutors charged the company with one count of entry of goods by means of false statements and four counts of violations of the Lacey Act related to the transportation and importation of illegally harvested lumber.

According to the federal criminal complaint, Lumber Liquidators was knowingly purchasing flooring from Chinese suppliers made from timber illegally harvested from Far East Russia. The complaint says the forests from which the timber was being harvested are home to some of the remaining population of Siberian tigers.

Federal prosecutors allege that Lumber Liquidators falsified paperwork required to be submitted with wood being imported from other countries declaring that the wood was harvested in accordance with federal environmental protection laws, including the Lacey Act.

Allegations contained in today's criminal complaint were first made by the Environmental Investigation Agency after an undercover investigation made public in 2013.

WEB EXTRA: Click here to see the federal documents

After news of the settlement broke, the organization's executive director, Alexander von Bismarck, cheered the action as a major step forward for protecting the environment.

"This is the first time that a major U.S. corporation is found guilty of a criminal felony for smuggling wood, related to violations of the U.S. Lacey Act," von Bismarck said in an interview with WBTV News. "It's a long time coming, and urgently needed to protect the U.S. consumer from unknowingly financing organized crime and the destruction of the last virgin forests on earth."

Lumber Liquidators issued a press release late Wednesday afternoon saying it had reached a settlement with federal prosecutors related to the charges.

Under the terms of the agreement, the company will pay a combined total of $10 million in fines and a $3.2 million payment in lieu of civil forfeiture.

John M. Presley, Chairman of the Board of Directors, commented, "We are pleased to reach this agreement and resolve a legacy issue related to the Lacey Act.  We will continue to focus on strengthening Lumber Liquidators across every area of the organization and executing on our value proposition to improve operational efficiencies and deliver value to our stakeholders."

As part of its settlement with federal prosecutors, the company also agreed to implement an Environmental Compliance Plan to ensure compliance with environmental laws in the future.

During a rare interview in May 2014, the company's founder Tom Sullivan told reporters that the company was cooperating with the federal investigation and had nothing to hide.

A CBS News 60 Minutes investigation in March 2015 found the company's flooring contained increased levels of formaldehyde that violated California air quality standards.

Wednesday's settlement is unrelated to ongoing disputes over claims that Lumber Liquidators' flooring contains high levels of formaldehyde and violates some air quality standards. In its release, the company said it continues to cooperate with a number of regulatory agencies on that and other issues.

Customers across the country have filed class action lawsuits against the company claiming its flooring was defective or caused them to get sick.

In May, the company's CEO, Robert Lynch, abruptly resigned his position. Sullivan, Lumber Liquidators' founder, took over while a search for a permanent chief executive took place.

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