Lumber Liquidators Sentenced To Record $13 Million Penalty

Flooring Company to Pay $13 Million, Largest Lacey Act Penalty Ever
Virginia-based hardwood flooring retailer Lumber Liquidators Inc. was sentenced today in federal court in Norfolk, Virginia, and will pay more than $13 million in criminal fines, community service and forfeited assets related to its illegal importation of hardwood flooring, much of which was manufactured in China from timber that had been illegally logged in far eastern Russia, in the habitat of the last remaining Siberian tigers and Amur leopards in the world, announced the Department of Justice.

In total, the company will pay $13.15 million, including $7.8 million in criminal fines, $969,175 in criminal forfeiture and more than $1.23 million in community service payments. Lumber Liquidators has also agreed to a five-year term of organizational probation and mandatory implementation of a government-approved environmental compliance plan and independent audits. In addition, the company will pay more than $3.15 million in cash through a related civil forfeiture. The more than $13.15 million dollar penalty is the largest financial penalty for timber trafficking under the Lacey Act and one of the largest Lacey Act penalties ever.

Lumber Liquidators pleaded guilty and was charged in October 2015 in the Eastern District of Virginia with one felony count of importing goods through false statements and four misdemeanor violations of the Lacey Act, which makes it a crime to import timber that was taken in violation of the laws of a foreign country and to transport falsely-labeled timber across international borders into the United States. The charges describe Lumber Liquidators’ use of timber that was illegally logged in Far East Russia, as well as false statements on Lacey Act declarations which obfuscated the true species and source of the timber. This is the first felony conviction related to the import or use of illegal timber and the largest criminal fine ever under the Lacey Act.

According to a joint statement of facts filed with the court, from 2010 to 2013, Lumber Liquidators repeatedly failed to follow its own internal procedures and failed to take action on self-identified “red flags.” Those red flags included imports from high risk countries, imports of high risk species, imports from suppliers who were unable to provide documentation of legal harvest and imports from suppliers who provided false information about their products. Despite internal warnings of risk and non-compliance, very little changed at Lumber Liquidators.

For example, Lumber Liquidators employees were aware that timber from the Russian Far East was considered, within the flooring industry and within Lumber Liquidators, to carry a high risk of being illegally sourced due to corruption and illegal harvesting in that remote region. Despite the risk of illegality, Lumber Liquidators increased its purchases from Chinese manufacturers using timber sourced in the Russian Far East. In 2013, the defendant imported Russian timber logged under a concession permit that had been utilized so many times that the defendants’ imports alone exceeded the legal harvest allowance of Mongolian oak, Quercus mongolica, by more than 800 percent. The investigation revealed a prevalent practice in timber smuggling enterprises, where a company uses a seemingly legitimate government permit to log trees. Corruption and criminal activity along the supply chain results in the same permit being used multiple times and in areas outside of the designated logging area, sometimes vastly exceeding its legal limits.

On other occasions, Lumber Liquidators falsely reported the species or harvest country of timber when it was imported into the United States. In 2013, Lumber Liquidators imported Mongolian oak from Far East Russia which it declared to be Welsh oak and imported merpauh from Myanmar which it declared to be mahogany from Indonesia.

The illegal cutting of Mongolian oak in far eastern Russia is of particular concern because those forests are home to the last 450 wild Siberian tigers, Panthera tigris altaica. Illegal logging is considered the primary risk to the tigers’ survival, because they are dependent on intact forests for hunting and because Mongolian oak acorns are a chief food source for the tigers’ prey species. Mongolian oak forests are also home to the highly endangered Amur leopard, Panthera pardus orientalis, of which fewer than 50 remain in the wild. In June 2014, in response to illegal logging and the decline in tiger populations, Mongolian oak was added to the Convention on the International Trade in Endangered Species (CITES) Appendix III.

The $1,230,825 in community service payments is being provided to two Congressionally-chartered recipients, the National Fish and Wildlife Foundation (NWFW) and the USFWS Rhinoceros and Tiger Conservation Fund. One project that will be funded is the development of a wood identification device that if successful, could fill a critical gap in enforcement when it comes to identifying the species of timber at a border or in an enforcement scenario. The device would be able to identify timber species that are listed on the CITES Appendices, including the species that were at issue in this case. If U.S. border officials would have had access to such a device in 2011, then perhaps Lumber Liquidators could have been flagged for violation years ago, thus averting the flow of money back to China and Far East Russia in support of illegal logging. Other projects would involve protecting, researching and preserving the Siberian tiger, Amur leopard and their habitat.