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April 14, 2015 — Lumber Liquidators has been hit with a shareholder lawsuit accusing them of using illegally-sourced wood and knowingly selling laminate floors with dangerous levels of formaldehyde.

The lawsuit was filed on March 27 in Virginia. Shareholders say directors at Lumber Liquidators engaged in a “sourcing initiative” to inflate profit margins, but that tactic backfired when laboratory analysis revealed problems with formaldehyde levels.

Another shareholders lawsuit accuses executives of insider trading. Lumber Liquidators’ founder and CEO allegedly sold a combined $19 million worth of stock at inflated prices before the company’s problems with certain Chinese-made wood products became public.

Lumber Liquidators is based in Virginia. In 2013, a federal search warrant was executed at the company’s headquarters in Toano and another location.

The nature of the investigation was unclear, but came shortly after an environmental report accused the company of using illegally-sourced wood from Russia’s far east, home of the endangered Siberian tiger. At the time, the company’s stock was trading at an all-time high of $120.

The company’s stock now trades at about $30 a share. The price dropped by over 50% in February and March, after a report by 60 Minutes accused them of selling Chinese-made laminate flooring with levels of formaldehyde that exceed California’s emissions limits.

 

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