March 11, 2015

Illegal levels of formaldehyde discovered in Chinese-made laminate flooring

lumber-liquidators-lawsuitLumber Liquidators is under fire after a “60 Minutes’’ expose revealed retailer hardware flooring company sells laminate hardwood flooring containing amounts of formaldehyde that are illegal under California law.  “60 Minutes” journalists discovered Lumber Liquidators’ facilities in China were illegally labeling laminate hardwood flooring as legally compliant after they traveled to the sites manufacturing the laminate hardwood flooring.

Formaldehyde is a known cancer-causing agent.  Symptoms of formaldehyde exposure range from nose and throat irritation in mild cases to developing asthma or leukemia in instances of prolonged exposure.  Formaldehyde is present in the glue used to bind wood particles together in cheap laminated hardwood floorboards.  The laminate tops of the floorboards helps keep most, but not all, of the formaldehyde from escaping into the air.

“60 Minutes” investigators sent floorboard samples collected from the Chinese factories and retail stores in the United States to third party laboratories for testing.  Independent analysis of the floorboards revealed the product’s non-compliance with California’s environmental regulations.  While it is legal for for laminate flooring sold in California to contain formaldehyde, it must meet state formaldehyde emissions standards set forth by the California Air Resources Board (CARB).

Lumber Liquidators facing federal investigations and class action lawsuits

Members of Congress have asked the Consumer Product Safety Commission to investigate how much executives at Lumber Liquidators knew about the formaldehyde-tainted floorboards.  Sen. Bill Nelson of Florida asked the Federal Trade Commission and Centers for Disease Control and Prevention to conduct their own testing of laminate hardwood floorboards manufactured for Lumber Liquidators.

The outcry for investigations into Lumber Liquidators’ formaldehyde-laced floorboards is just the latest in a series of troubles for the company.  In September 2013, Lumber Liquidators’ warehouses were raided by federal investigators under suspicion the company was buying illegally-harvested Russian timber from Chinese distributors.  The U.S. Department of Justice may seek criminal charges against the company for purchasing the illegal Russian lumber.

Lumber Liquidators is facing civil suits related to the Department of Justice’s impeding criminal charges against the company under the Lacey Act for buying illegal Russian timber.  Class action lawsuits across the country are cropping up as investors claim Lumber Liquidators’ board chairman and CEO dumped almost $19 million worth of stock before news of the federal investigation broke.

Stock prices for Lumber Liquidators have reached a two-year low, depreciating almost 60% since late February 2015.  Lumber Liquidators’ stock was trading at just under $120 in November 2013 but in the wake of the investigation into purchases of illegal timber, selling formaldehyde-laced floorboards, and allegations of insider trading, the Toano, Virginia-based company’s public valuation has plunged.