| | | Effective PR

Retailer fined after lying to investors

Editorial Staff

In 2015, a news report said that the flooring products of a listed company, "Lumber Liquidators," contained dangerously high levels of Formaldehyde. The company issued a denial and filed it with the SEC. That denial was untrue.

Filing a form 8K with the SEC is not a trivial matter: "knowingly making false statements in an UK is a [breach] of federal securities laws," said the FBI in a statement on the case.

After the 8K was filed, "investigators learned that the Virginia-based company made materially false or misleading statements in its SEC filing. The SEC requires companies to file 8K forms to publicly disclose information relevant to that company’s stock price."

Investigators found that Lumber Liquidators’ top leaders—all of whom have left the company—knew that they were not complying with applicable regulations in advance of the media report and lied about it anyway. The March 2015 news media report alleged that Lumber Liquidators’ laminate flooring contained dangerously high levels of formaldehyde, a gas that in high amounts has been linked to health issues like sore throat, nausea, headaches, and even cancer. In the 8K, the company claimed it complied with applicable regulations and disputed the test results that had been featured in the news report.

This month, the company and the Department of Justice entered into a dodgy deal, sorry, deferred prosecution agreement, under which the company, while not admitting or denying liability, agreed to pay USD33 million in penalties, fines and asset forfeiture. The settlement agreement says "“Lumber Liquidators engaged in extensive remedial measures, including dedicating significant resources to improving its systems and internal controls" since new management was installed.

Further reading: DoJ PR: https://www.justice.gov/usao-e...

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