What is the problem?
Lumber Liquidators’ stock price went from $13 a share in 2011 to $119 in 2013. It is almost unprecedented for a commodity business to double its profit margins in two years, which raised red flags.
On March 1, 2015, “60 Minutes” ran a story after independent tests found that Chinese-made laminate failed to meet California’s emissions standards for formaldehyde but were falsely labeled as compliant. Within one week, the stock price plummeted 40% from nearly $70 a share to under $40.
What Can I Do?
If you are an investor who purchased Lumber Liquidators common stock on or after January 1, 2011 and continue to hold any of the stock today, suffered economic losses, or would like more information about joining a shareholder class action, contact our law firm at 1-866-879-3040.
Securities Class Action Lawsuit Claims
Securities class actions against Lumber Liquidators claim the company:
- Failed to disclose that certain Chinese-made laminate wood products did not comply with laws pertaining to formaldehyde emissions and were falsely labeled as CARB-2 compliant.
- Violated the Lacey Act, which bans import and trade of illegally sourced wood products.
- Is facing criminal felony or misdemeanor charges from the Justice Department for violating import laws against illegally logged wood from Russia.
Formaldehyde in Flooring
The first shareholder class action lawsuits against Lumber Liquidators were filed in 2013, shortly after a scathing article was published by Seeking Alpha.
The author of the article reported that that Lumber Liquidators was selling Chinese-made laminate hardwood that contained toxic levels of formaldehyde, according to testing by two independent labs:
“The tested product, Mayflower 5/16” x 5” Bund Birch Engineered, emits a staggering three and half times over the government mandated maximum emission level. The product is clearly not CARB [California Air Resources Board] compliant yet Lumber Liquidators tagged CARB compliance on the box.”
The article sent Lumber Liquidators’ stock prices plummeting, and a federal securities class action was filed in the U.S. District Court in Virginia on November 26, 2013 (Kiken v. Lumber Liquidators Holdings, Inc., et al.). By mid-December, the stock price plunged 25% to just under $90.
Illegally Sourced Wood from Russia
The shareholder class action also accuses Lumber Liquidators of artificially inflating their stock prices and revenues by importing illegally harvested timber from Russia’s far east, in direct violations of a federal U.S. environmental law known as the Lacey Act.
The accusations of using illegal wood were reported in 2013 by the Environmental Investigation Agency (EIA). After a three-year undercover investigation, the group found that a Chinese-owned wood flooring company called Xingjia was operating sawmills and factories that used illegally logged wood from Russia.
The group also found that Xingjia was concealing their activities with falsified documents and bribes. Import records showed that Xingjia’s biggest customer was Lumber Liquidators and they had done business since at least 2007.
In September 2013, the Wall Street Journal reported that federal authorities raided Lumber Liquidators headquarters. In February 2015, Lumber Liquidators announced that the Department of Justice may file criminal charges against them.