Interesting piece on 60 Minutes last Sunday on Lumber Liquidators.
You know them. Those guys with the lurid yellow and black logo. The “can this possibly be right” prices for flooring. And all those ads showing happy folks grabbing wood right off the shelf, and heading home to joyfully snap it all into place.
Anyway, the company started off selling liquidated lumber - in West Roxbury, Massachusetts, of all places. (It’s long since decamped to Virginia.) As Lumber Liquidators grew, they added laminate flooring to their mix.
While Lumber Liquidators is the largest hardwood retailer in the country:
More than 100 million square feet of the company's cheaper laminate flooring is installed in American homes every year. (Source: 60 Minutes/CBS)
And why not?
Laminate flooring has a lot of appeal. It might not be as sturdy and attractive as the hardwood floor real thing but, aside from tacking down a linoleum rug, it’s probably the easiest flooring to install. And because it’s cheaper than the real thing, a lot of folks opt for it who like the look of wood. I’m one of them. When(ever) I get around to my kitchen reno, I’m probably going to go with wood. (That would be hardwood. I don’t think that the Beacon Hill poobahs would okay a project that used laminate.)
Where there’s Chinese manufacture, there is a tendency to have a bit of toxicity, and:
… much of its [LL’s] laminate flooring is made in China, and as we discovered during our investigation, may fail to meet health and safety standards, because it contains high levels of formaldehyde, a known cancer causing chemical.
An investigation of the company’s laminate flooring revealed that:
While laminate flooring from Home Depot and Lowes had acceptable levels of formaldehyde, as did Lumber Liquidators American-made laminates, every single sample of Chinese-made laminate flooring from Lumber Liquidators failed to meet California formaldehyde emissions standards. Many by a large margin.
By such a large margin that the investigators thought their measurement equipment wasn’t working properly.
But it wasn’t the equipment that was bad, it was indeed the flooring.
How bad is bad?
Beyond the risk of cancer – oh, that – bad laminate flooring can cause respiratory problems, including asthma, especially in children.
Every box of laminate flooring Lumber Liquidators sells carries this label - stating its CARB Phase 2 Compliant - CARB is an acronym for the California Air Resources Board, which sets strict standards for formaldehyde emissions in wood flooring. Congress adopted California's limits when it passed the Formaldehyde Standards Act in 2010. That law is scheduled to take effect nationwide this year.
Flooring from stores in California as well as stores in states that don’t have California’s strict standards was tested. Of the 31 samples from stores outside of California:
… only one was compliant with formaldehyde emissions standards. Some were more than 13x over the California limit. Both labs told us they had never seen formaldehyde levels that high.
All of the California samples flunked the test.
It was a typical 60 Minutes investigative reporting outing, including the interview with the head guy. And as is typical on a 60 Minutes investigative reporting outing, the head guy being grilled comes across as a weasel supreme.
Founder Tom Sullivan claimed that the tests were bogus. That the guys who’d instigated all the investigating were short sellers, trying to drive down Lumber Liquidators’ share price. And that if there were a problem, he would look into it.
Meanwhile, the sleuths from 60 Minutes went to China for an undercover visit to the plants making the flooring that was labeled compliant when it clearly was not. They found – surprise, surprise – that the factories were producing sub-standard flooring, but claiming it met requirements, in order to keep their costs down.
Hmmmmm. Where have we heard this before?
A few years back, Pink Slip wrote about rotten, Chinese-manufactured sheetrock. Rather than use pure gypsum, some factories were mixing it up and mixing in yucky stuff. This caused walls to smell, wiring to rot, and eyes to water in homes where the bad dry wall was installed.
As it turns out, the formaldehyde-ridden laminate isn’t the first brush with infamy that Lumber Liquidators has had. (Curiously, every time I go to type Lumber Liquidators, I start out with Liquid Lumberators…)
A money manager had been keeping an eye on Lumber Liquidators – and shorting it – because their profit margins had gotten “unusually high.” (This fellow had nothing to do with the short seller who’d backed the pre-60 Minutes investigation.) As a result of their profits, Liquidators’ stock price increased by nearly an order of magnitude between 2011 and 2013.
The money manager’s suspicions, as it turned out, were right on the money.
He learned they were under federal investigation for allegedly buying timber illegally logged in Russia. U.S. agents had raided Lumber Liquidators' headquarters in September 2013. The company denies buying illegally logged wood but announced just this week the Department of Justice may file criminal charges against them.
The tainted flooring, however, may be the bigger deal.
Buying illegally logged lumber is one thing; causing asthma and cancer in unsuspecting customers is quite another.
Can you imagine building your dream house – or just redoing the floor in the new baby’s nursery- only to find out that you’d installed bad Lumber Liquidators “made in China” floors – and that those nifty new floors could be killing your kid?
Greed, as Liquid Lumberators might well find out, is not always good.