Lumber Liquidators, the largest hardwood flooring retailer in the United States, plead guilty to violations of the Lacey Act among other charges, will pay more than $10 million in penalties and will be placed on a five year probationary period while it implements an environmental compliance plan.

Lumber Liquidators was represented by Patrick R. Hanes, Charles E. James, Jr., and Andrew O. Mathews, Williams Mullen in Washington, D.C. and by Bruce A. Baird of Covington & Burling in Washington, D.C.

“This is the first time that a major U.S. corporation is found guilty of a criminal felony for smuggling wood, related to violations of the U.S. Lacey Act,” said Alexander von Bismarck, executive director of the Environmental Investigation Agency, the non profit group which broke the story of the company’s illegal imports of hardwood into the United States. “It’s a long time coming, and urgently needed to protect the U.S. consumer from unknowingly financing organized crime and the destruction of the last virgin forests on earth.”

“A $10 million fine is small compared to the destruction caused in the forests, but the real cost to the company will come from having to forego cheap, stolen wood in their supply chain while the Department of Justice looks over their shoulder. This will be a major adjustment.”

According to the plea agreement, Lumber Liquidators “will plead guilty because the defendant is in fact guilty of the charged offenses.”

Lumber Liquidators is pleading guilty to one criminal felony count of entry of goods by means of false statements and four misdemeanor counts of violating the Lacey Act.

The company will pay $7.8 million in fines to the Lacey fund, $1.2 million Community Service payments and $969 thousand in forfeited proceeds.

The Department of Justice found that Lumber Liquidators committed systemic fraud and sourced illegal timber from the Russian Far East and high risk countries.

The Environmental Investigation Agency was the first organization to expose Lumber Liquidators of importing illegally harvested timber in its 2013 report, Liquidating the Forests.

Posing as timber buyers, EIA investigators went undercover to expose the illegal wood trade in the Russian Far East and traced the supply chains through China to a company that admitted to illegal logging, paying bribes, and that its single biggest trading partner was Lumber Liquidators.

EIA’s report also relied on publicly available trade data, copies of court cases from Russian authorities, scientific analyses, and shipment records.

In a statement, the company said that the plea includes four misdemeanor due care violations of the Lacey Act and a single felony charge for entry of goods by means of false statements.

“These violations, including the Class E felony, do not require the company to have acted with a deliberate or willful intent to violate the law, and the Company did not stipulate that it acted with such a deliberate or willful intent,” the company said in the statement. “Lumber Liquidators also has agreed to implement an Environmental Compliance Plan to ensure future compliance with the Lacey Act.”

“We appreciate the opportunity to have collaborated with the Department of Justice to develop an Environmental Compliance Plan, which we believe when fully implemented will be one of the strongest and most comprehensive in the industry,” said Jill Witter, the company’s chief compliance and legal officer.  “The program is designed to ensure an unbroken and verified chain of custody and documentation of our products from the store all the way to the forest.  We have invested significant time and resources to strengthen our quality assurance procedures, from enhanced protocols designed to verify licensing, certification and regulatory compliance as well as product sample testing.  We are also committed to strengthening our tools and training programs to encourage secure and anonymous reporting of any potential concerns.  We will continue to improve our procedures on an on-going basis and look forward to working with our suppliers to set the highest standards for sourcing of wood products in our industry.”