A US judge has accepted a plea deal in which Lumber Liquidators agrees to pay more than $13 million in fines and penalties for violating the Lacey Act, which prohibits the trade of illegal timber.
In addition to the fines and penalties, Lumber Liquidators must implement a Lacey Act compliance plan that will “radically alter the way the company sources wood products.”
Imports of illegal wood into the US are way down since the Lacey Act was amended in 2008, but still worth $3 billion every year.
A judge in Norfolk, Virginia accepted a plea deal today in which Lumber Liquidators agreed to pay more than $13 million in fines and penalties for violating the Lacey Act, which prohibits the trade of illegal timber.
The company insists there was no intent to willfully deceive anyone about the provenance of its wood products, though it has pleaded 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 plea deal represents the first time a major US corporation was found guilty of smuggling wood under the Lacey Act, signed into law in 1900 to halt the illegal wildlife trade and amended in 2008 to ban the trade of illegally harvested wood and other plants.
According to the Environmental Investigation Agency, which first uncovered Lumber Liquidators’ complicity in the illegal timber trade in a 2013 report, the facts of the case reveal that the company committed systematic fraud and imported large quantities of illegal timber from the Russian Far East and other high-risk countries.
Investigators with EIA posed as timber buyers in the Russian Far East and followed the illegally harvested wood to Suifenhe, a border town in China, where they spoke with officials at a company called Xingjia Economic and Trade Corp. who admitted their company was involved in illegal logging and that they were paying bribes to government officials to look the other way.
Xingjia’s single biggest trading partner, the investigators learned, was Lumber Liquidators. EIA’s Kate Horner says the team actually observed wood products being wrapped up in Lumber Liquidators packaging at Xingjia’s factory.
The EIA investigators were able to track those products once they reached the US because each individual package has a unique manufacturing code. Sure enough, the codes on products containing illegal timber that the EIA investigators had tracked from Russia to China showed up in US import records.
Horner told Mongabay that Lumber Liquidator’s actions went way beyond simply failing to perform due diligence to ensure that illegal timber wasn’t making its way into the hardwood products it was selling to unsuspecting consumers in the US.
“One would surmise that Lumber Liquidators had to have known, given how egregious the illegal logging was, and how readily [Xingjia] admitted to their illegal practices,” she said.
The $13 million in fines and penalties levied against Lumber Liquidators is relatively small compared to the impact the company has had on the forests of the Russian Far East and elsewhere, Horner said. But she expects the new Lacey Act compliance plan the company has agreed to as part of the plea deal to dramatically change how Lumber Liquidators does business.
Lumber Liquidators will be placed on a five-year probationary period while it implements the compliance plan. If the company fails to implement the plan within 3 months, it will be required to cease importing all hardwood products until the US Department of Justice determines the company has come into compliance.
“In addition to the fines and penalties imposed as part of this deal, this compliance plan will radically alter the way the company sources wood products,” Horner said. “The real cost to the company will come from having to forego cheap, stolen wood in its supply chain while the Department of Justice looks over its shoulder.”
Lumber Liquidators may not be the only company that ends up changing its business practices in response to this Lacey Act enforcement action. Horner says that the US government has now, in effect, set a clear example of what Lacey Act compliance should look like and what sort of due diligence companies should perform.
There are likely a number of US companies that have been watching the Lumber Liquidators case closely, given the precedent it sets. A recent analysis by the Union of Concerned Scientists found that while illegal wood imports into the US have declined between 32 and 44 percent since the Lacey Act amendments went into effect, companies are still bringing $3 billion worth of illegal wood into the US every year.
Chinese companies would also be wise to pay attention to how the US government’s case against Lumber Liquidators has played out, as it has major implications for their export market. “One of things we’ve been saying to Chinese industry since passing Lacey is they need to take new measures to make sure they’re only sourcing legal wood if they want to have access to export markets,” Horner said.
There was an initial flurry of interest in rooting out illegal logging when the Lacey Act amendments passed seven years ago, but that was followed by a lull in activity, according to Horner.
“Enforcement sends a strong message that cheap illegal wood from Chinese manufacturers will no longer be tolerated in the US. As Lumber Liquidators and others review their supply chains, Chinese companies will lose out unless they’re in compliance.”