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Lumber Liquidators CEO Resigns Amid Product Safety Concerns

May 26, 2015

Amid concerns and legal troubles over unsafe levels of formaldehyde in some of its flooring products, Lumber Liquidators' CEO Robert Lynch "unexpectedly" resigned last week.

With Lynch's departure, Lumber Liquidators founder Thomas Sullivan will serve as acting CEO while a national search is conducted for Lynch's replacement. Lynch also leaves the board of directors and John Presley, the lead independent director, will be non-executive chairman of the board. The changes take effect immediately, USA Today reports.

Lumber Liquidators has faced turmoil since a March report on the news magazine 60 Minutes alleging high levels of formaldehyde in the company's laminate flooring products imported from China. Soon after the report, the Consumer Product Safety Commission announced an investigation of Lumber Liquidators for the use of formaldehyde in its products. The company also faces federal criminal charges over importing illegally sourced bamboo products and the company faces lawsuits from consumers. Earlier this month, the company announced that it would stop selling laminate flooring made in China. USA Today reports that shares of the company's stock plummeted 16.5 percent in regular trading to $21.10.

Formaldehyde is found in various industrial products but is considered a probably carcinogen at high levels or lengthy exposure. Regulations limit the amount of formaldehyde that can be contained in consumer products. According to the 60 Minutes report, three Chinese suppliers falsely labeled their products as complying with California's formaldehyde limits. 60 Minutes commissioned tests on flooring bought in the U.S. and 30 of 31 cartons of the flooring emitted as much as 13 times the amount of formaldehyde allowed.

Lumber Liquidators is conducting an internal review of the matter, handled by the Freeh Group International Solutions, an investigative company founded by former FBI director Louis Freeh. Lumber Liquidators said tests conducted by "independent, accredited laboratories" found that "over 97% of customers' homes were within the protective guidelines established by the World Health Organization for formaldehyde levels in indoor air." The company sent approximately 26,000 air-quality test kits to nearly 15,000 customers. About 3,400 kits were returned and those were tested.

Lumber Liquidators' troubles began even before the 60 Minutes broadcast. In its annual report filed in February, the company acknowledged that federal law enforcement officials raided its offices in the fall of 2013 to search for documents relating to its import practices. The Justice Department is seeking criminal charges for violations of the Lacey Act, which prohibits trading goods derived from wildlife, fish and plants that were illegally transported or sold.

The National Cancer Institute says that formaldehyde levels in the air exceeding 0.1 parts per million may cause adverse effects including watery eyes; a burning sensation in the eyes, nose, and throat; coughing; wheezing; nausea; and skin irritation. Formaldehyde is classified as a known human carcinogen by the International Agency for Research on Cancer (IARC), the cancer research arm of the World Health Organization. In 1987, the U.S. Environmental Protection Agency (EPA) classified formaldehyde as a probable human carcinogen under conditions of unusually high or prolonged exposure. In 2011, the National Toxicology Program, a program of the Department of Health and Human Services, listed formaldehyde as a known human carcinogen in its 12th Report on Carcinogens. Research on workers exposed to formaldehyde reveals a potential tie between formaldehyde exposures and such cancers as leukemia and nasopharyngeal cancer.

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