Friday, October 23, 2015

Gee, It Might Be Nice to Show Up in Court

Judge annoyed at Lumber Liquidators during sentencing hearing.

Posted By on Fri, Oct 23, 2015 at 9:42 AM

When your company is facing up to $10 million in fines and payments for crimes, showing up in court might be the proper thing to do.

But that’s exactly what Jill Witter, chief compliance officer of Lumber Liquidators, didn't do yesterday when U.S. District Court Judge Raymond A. Jackson reviewed accepting a plea agreement with the firm.

Among its many messes, Lumber Liquidators got caught importing lumber for flooring from the habitat of the endangered Siberian tiger in the Far East of Russia near the city of Khabarovsk. It agreed to a settle that issue, including $10 million in fines and $3 million in forfeitures of goods, by pleading guilty on one felony and four misdemeanors.

The problem was that Witter, who helped negotiate the plea agreement with her Williams Mullen lawyers and signed the documents, was not in court. Taking her place was Gregory A. Whirley Jr., the firm’s interim chief financial officer. Witter was off in China on business, which was ironic because the source of the criminal problems was Lumber Liquidators' Shanghai office.

The judge in the Norfolk court expressed annoyance.

“I don’t know what business she has in China that is more important than the business here,” Jackson said. A lawyer for the company explained that the defense had tried to arrange Witter’s court appearance around her trip but could not do so. In response, Jackson said that he should tell Witter that the next time she appears in his court, “she’s skating on thin ice.”

Skating on thin ice is about the size of things at Lumber Liquidators, which is based on Toano east of Richmond and has facilities in Henrico County.

Earlier this year, the firm got nailed in a “60 Minutes” segment for importing flooring from China that contained dangerously high levels of formaldehyde. The firm fought against the charges, but much will depend on testing being conducted by the Consumer Products Safety Commission. Test results could determine the outcome of many lawsuits about the issue.

According to The Motley Fool, hedge fund operators are having a field day shorting the stock of the troubled firm. Yet another issue was that when all the scandals hit, the firm lost its chief financial officer, its chief executive and then its chief compliance officer.

The environmental crime case dates back a couple of years. In 2013, a company employee noticed something fishy about paperwork involving the shipping of Mongolian oak that was being imported. The papers said it came form Germany, but in fact, it came from Russia where it is protected because of the Siberian tiger habitat.

That invoked a probe involving the Lacey Act, which is a law designed to protect forests and wildlife. No, it doesn’t come from today’s “progressives,” but rather, from the early 1900s when Theodore Roosevelt was pushing much reform in his early “green” movement. Back then, progressives were Republicans.

As part of the settlement, Lumber Liquidators will contribute $880,825 to the National Fish and Wildlife Foundation and $350,000 to the Rhinoceros and Tiger Conservation Fund.

The plea agreement will be finalized Feb. 1, and the sentences will be handed down then. Appropriate Lumber Liquidators officials might be wise to set their schedules accordingly.

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