DOJ Settlement Related to Lacey Act Violations

Dear Friends:

We are writing to let you know about the recent settlement of a Department of Justice (“DOJ”) investigation related to violations of the Lacey Act.

As background, the Lacey Act is the oldest wildlife protection statute in the United States, and it protects against the trade of certain plants, fish and wildlife.  In short, the Lacey Act makes it unlawful to:

  • Trade in plants or wildlife products that are taken, possessed, transported, or sold in violation of the laws of the United States, a State, Indian Tribe, or any foreign law protecting plants;
  • Falsify or submit falsified documents, accounts or records of any plant covered under the Lacey Act; and
  • Import plants/plant products without an import declaration.

Last week, Lumber Liquidators announced that it will pay a $10 million settlement to the Environment and Natural Resources Division of the DOJ related to the Company’s import of timber used to make hardwood flooring.  More specifically, the DOJ alleged that Lumber Liquidators violated the Lacy Act by importing timber from foreign suppliers that harvested timber in excess of approved amounts, and falsifying the country of origin and type of timber on its import declarations to conceal the illegality.  A copy of Lumber Liquidator’s press release is available here.

There are several important take-a-ways from this case.

First, despite unsuccessful prosecution attempts in the past, this settlement shows that the DOJ has not lost interest in enforcing the Lacey Act against U.S. importers.  In fact, its worth noting that the DOJ launched its initial inquiry against Lumber Liquidators (that included factory raids) back in 2013.

Second, as illustrated above, the prohibitions of the Lacey Act require companies to exercise due care throughout all levels of the supply chain (i.e., companies are required to have supply chain visibility beyond just purchases from sellers/distributors).  In publicly announcing the settlement, Jill Witter, Lumber Liquidators’ Chief Compliance and Legal Officer revealed that the Company will work with the DOJ to develop a Lacey Act compliance plan to ensure “an unbroken and verified chain of custody and documentation of…products from the store all the way to the forest”.

Finally, in addition to the $10 million settlement, the allegations involved in this investigation have produced an on-going securities fraud claims action (filed in in Virginia federal court) as well as two false advertising complaints (filed in March in California and South Carolina federal courts).  Therefore, this settlement should provide significant incentive for companies to review their products – particularly with respect to purchases/imports of plants and wildlife products – and review their internal controls to ensure they are working effectively.  Otherwise, companies may find themselves embroiled in expensive (and varied) enforcement actions.

We hope that this is helpful.  We have significant experience advising clients with regards to Lacey Act compliance and developing/implementing corresponding compliance plans.

Best regards,

Ted

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