Manufacture This

The blog of the Alliance for American Manufacturing

Chain mislead investors about its formaldehyde-laced laminate products.

You might remember that back in 2015, the television news program 60 Minutes aired an investigative report finding that national chain Lumber Liquidators was selling Made in China laminate flooring containing dangerously high levels of formaldehyde, a substance known to cause cancer.

The segment – if you feel like getting angry today, just watch it below –  prompted the government to investigate, and a class action lawsuit was filed on behalf of the 760,000 customers who had purchased the poisonous flooring.

In 2018, Lumber Liquidators was ordered to pay a $36 million settlement as a result of the class action lawsuit. And on Tuesday, the company agreed to pay a $33 million penalty to settle federal charges that it misled its investors about the flooring. Reuters reports:

The Justice Department settlement includes a deferred prosecution agreement, under which the government agreed not to prosecute Lumber Liquidators for securities fraud so long as the company upgrades oversight and cooperates with its ongoing probe for three years. … The amount the company will pay represents Lumber Liquidator’s net profits from the sale of 100 percent of its Chinese laminate from January through May 2015, U.S Attorney’s office said.

The company also has completely replaced its senior executive team, and “installed experienced executives who have displayed a commitment to building an ethical corporate culture,” according to U.S. Attorney G. Zachary Terwilliger.

As 60 Minutes reported, the Chinese-made laminate flooring sold by Lumber Liquidators contained astonishingly high levels of formaldehyde. When a team of investigators featured in the report tested 150 boxes of the flooring, they found every single piece of it exceeded California emissions standards, some 20 times above acceptable levels. A 2016 federal investigation confirmed much of those findings.

(We’ll note that when tests were done on similar American-made laminate flooring sold by Lumber Liquidators, the formaldehyde levels met emissions standards.)

It’s easy to get fired up about this case and blame Lumber Liquidators. The company did act recklessly, and sold a dangerous product knowing full well just how dangerous it was.

But also it’s important to remember that laminate flooring isn’t the only China-made consumer product to be caught up in safety scandals in recent years. Sadly, a lot of the stuff that is Made in China simply is not safe.

Thousands of people lost their homes and suffered health problems from Chinese-made drywall, leading to a $1 billion settlement in 2015. At least 1,000 dogs died from poisonous treats imported from China, leading chains like Petco and Petsmart to stop selling Chinese-made treats. An independent investigation in 2018 found that nearly one in three toys from China contain heavy metals, while one in 10 contain lead.

And there’s additional safety worries about food, vitamins and even the medicine that comes from China, which does not maintain safety or environmental standards as strict as those in the United States. Given the sheer volume of stuff that is imported from China each year, it’s nearly impossible to test everything to ensure it is safe.