Lumber Liquidators to pay $33 million for misleading investors
Lumber Liquidators has agreed to pay $33 million in fines for misleading investors about dangerous levels of formaldehyde in its Chinese-made laminate flooring, federal officials said Tuesday.
The probe and settlement with the company -- one of the largest biggest flooring retailers in the nation -- derives from a 2015 "60 Minutes" probe that found risky levels of the chemical linked to an increased risk for cancer.
The CBS news program showed undercover video of the discount retailer's suppliers stating products did not comply with regulatory requirements on formaldehyde emissions standards. The chemical in the laminate flooring was found to be at levels high enough to increase the risk of cancer and cause respiratory issues for those with asthma, an analysis by the Centers for Disease and Control and Prevention found in 2016.
The morning after the CBS news program aired on March 1, 2015, the New York Stock Exchange halted trading of the Virginia-based company's stock on the expectation that the company would issue a statement to response to the allegations, according to the U.S. attorney for the Eastern District of Virginia. Later that morning, Lumber Liquidators had employees file regulatory forms broadly denying the allegations about the company's Chinese-made laminate products and omitting facts about the company's internal tests, prosecutors said in a statement.
"Despite having evidence confirming that the individuals in the "60 Minutes" undercover video were factory employees of its suppliers, Lumber Liquidators falsely stated that its suppliers were not depicted in the video," according to the U.S. Securities and Exchange Commission, which announced a separate $6 million settlement with Lumber Liquidators, part of the the $33 million in criminal and regulatory penalties.
The company has cooperated with the government's probe and has since replaced its top executives with those "who have displayed a commitment to building an ethical corporate culture," stated U.S. Attorney G. Zachary Terwilliger.
Shares of the company -- priced as high of $114.19 per share in October 2013 -- were selling for $11.11 on Tuesday afternoon.