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Lumber Liquidators fined $33m for formaldehyde misinformation

Products - Flooring © amenic181 - Fotolia.com

Major US flooring firm Lumber Liquidators has agreed to pay $33m for misleading investors that its products were in compliance with formaldehyde emissions regulations.

A 2015 investigation by US news programme 60 minutes, found that its laminate flooring sourced from China exceeded the formaldehyde emissions limits set in the California Air Resources Board (CARB) Regulations.

The company entered into a deferred prosecution agreement (DPA) relating to charges of securities fraud. The case was "primarily focused on the fact that Lumber Liquidators knowingly filed a false and misleading statement to investors broadly denying the allegations of the 60 minutes investigation".

Following a Department of Justice (DOJ) ruling this week, Lumber Liquidators has agreed to pay a fine of $19.1m, and restitution of $13.9m, of which up to $6.1m will be paid to the Securities and Exchange Commission (SEC).

The DOJ noted that "employees involved in wrongdoing either were terminated or resigned from the company, and the company replaced its executive management team with experienced executives who have displayed a commitment to building an ethical corporate culture."

In a statement posted on the company’s website, Lumber Liquidators' chief executive officer Dennis Knowles said it has made "sweeping changes" during his time as CEO and will continue to take steps with the new executive team to "better Lumber Liquidators".

The statement says that the company has incorporated "extensive remedial measures" that include the implementation and enforcement of a "comprehensive compliance, ethics, and reporting programme, as well as training and guidance on relevant policies and procedures".

"This penalty should serve as a warning to other corporations who seek to mislead investors," said David W Archey, special agent in charge of the FBI’s Richmond Field Office.

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