U.S. federal authorities recently executed search warrants at two Virginia facilities belonging to Lumber Liquidators Holdings, Inc., the largest specialty retailer of hardwood flooring in the United States. Lumber Liquidators said in a press release last month that the raids were related “to the importation of certain of the Company’s wood flooring products,” but did not explain further. Media were quick to pick up on the raids, and Lumber Liquidators’ stock price fell 9.3 percent, the largest intra-day decline in 19 months. While the stock has since largely recovered, a number of law firms have announced their intention to file suit on behalf of shareholders.
This incident highlights how alleged ties to illegally harvested woods can negatively impact business. But moreover, it shows that the U.S. Lacey Act—which bans trafficking of illegally sourced wood and paper products—is continuing to crack down on suspected illicit activity. It’s important that companies take note—and take action to make certain they are in compliance.
Illegal Harvesting in the Russian Far East
A Wall Street Journal blog post suggests that a recent report from the Environmental Investigation Agency (EIA), released October 8, offers some indications about the wood flooring products that may be in question. The report, Liquidating the Forests: Hardwood Flooring, Organized Crime, and the World’s Last Siberian Tigers, details the rampant organized illegal activity in the vast hardwood forests of the Russian Far East, which support the last populations of Siberian tigers. It traces the resulting illegal wood through northeast China’s manufacturing facilities, alleging that Lumber Liquidators has been buying illegally sourced Russian hardwoods from a Chinese supplier despite what EIA describes as “immediately apparent” evidence that the supplier’s oak supplies were “riddled with illegal sources.”
The EIA report follows a widely publicized April 2013 report from the World Wildlife Fund, Illegal Logging in the Russian Far East: Global Demand and Taiga Destruction, which analyzed Russian customs data to show that in 2010, at least half of the oak exported from Russia to China was stolen from Russia’s forests.
This post also appears on WRI Insights.