Investing.com -- Shares in Lumber Liquidators Holdings Inc (NYSE:LL) surged as much as 13% in after-hours trading after the Virginia-based hardwood flooring retailer announced on Wednesday that it has reached a $10 million agreement with the Department of Justice to settle charges related to violations of the Lacey Act.
As part of the settlement, Lumber Liquidators agreed to pay a fine of $7.8 million, donations of $880,825 and $350,000 to the National Fish and Wildlife Foundation and the Rhinoceros and Tiger Conservation Fund respectively, as well as a forfeiture of $969,000. The Lacey Act is a U.S. Conservation law which pertains to the protection of plants, fish and wildlife. The settlement stems from failures in Lumber Liquidators compliance program that permitted the company to harvest more timber than their permits allowed in foreign jurisdictions such as Eastern Russia and timber imports from such orders.
The settlement is unrelated to a highly-publicized expose which accused Lumber Liquidators of purchasing laminate wood flooring from distributors in China with toxic levels of formaldehyde. Shares in the company plummeted in early-March, following the investigative report on the CBS News magazine 60 Minutes. According to the report, the flooring from Lumber Liquidators' distributors contained levels of formaldehyde significantly higher than those allowed by California state standards.
The presence of formaldehyde at high exposure levels can reportedly cause myeloid leukemia, as well as nasopharyngeal cancer. In lower amounts, formaldehyde is also believed to cause eye, nose and throat irritation.
The agreement on Wednesday includes four misdemeanor charges for violations of the Lacey Act and one felony charge for making false statements. The company, however, did not stipulate that it acted with deliberate or willful intent in committing the violations.
"We are pleased to reach this agreement and resolve a legacy issue related to the Lacey Act," said John Presley, Chairman of the Board of Directors, Lumber Liquidators. "We will continue to focus on strengthening Lumber Liquidators across every area of the organization and executing on our value proposition to improve operational efficiencies and deliver value to our stakeholders."
Shares in Lumber Liquidators gained 1.52 or 10.43% in after-hours trading to 16.10.