Latest Lacey Act Prosecution Underscores Need for Due Diligence in Wood Products Supply Chain

According to Lumber Liquidators’ most recent Securities and Exchange (SEC) disclosures, the US Department of Justice (DOJ) is pursuing criminal charges against the company under the Lacey Act (16 U.S.C. §§ 3371-3378) for allegedly importing products containing illegally harvested wood.

On the day the charges were disclosed, Lumber Liquidators’ share price dropped 17.5 percent. Additionally, the company now faces several class action lawsuits related to these allegations. These developments are an important reminder for all companies that buy, sell, manufacture, import, or export lumber or other wood products that they must implement effective Lacey Act compliance measures.
The Lacey Act is a US conservation law that prohibits trade in wildlife, fish, and plants that have been illegally taken, possessed, transported or sold.[1] In 2008, the Lacey Act was amended to cover a wider variety of prohibited plants and plant products. Under the Lacey Act, as amended, it is unlawful to import certain products without an import declaration, such as illegally harvested wood.[2] The 2008 amendment also eliminated the de minimis exception to the prohibition.  
Violators of the Lacey Act, whether companies or individuals, face serious civil and criminal penalties.[3] On the civil side, violators face forfeiture of goods and fines of up to $10,000 for each violation.[4] On the criminal side, violators face a range of misdemeanor to felony penalties. Misdemeanor penalties for the negligent commission of Lacey Act violations include fines of $200,000 for corporations and fines of $100,000 and up to one year in prison for individuals.[5] Felony penalties for the knowing commission of prohibited acts include fines of up to $500,000 for corporations and fines of up to $250,000 and up to five years in prison for individuals.[6]
The Lacey Act also contains whistleblower provisions providing rewards for any information leading to an arrest, criminal conviction, civil penalty assessment, or forfeiture of property for any violation under the Act.[7] These whistleblower provisions may increase the likelihood of an enforcement investigation or other litigation, such as claims under the False Claims Act.
As the recent charges against Lumber Liquidators demonstrate, companies that manufacture, sell, import, or buy wood products such as paper, furniture, and timber should implement a compliance program to ensure that their wood products are legally sourced and transported.

[1] See 16 U.S.C. § 3372(a).

[2] See 16 U.S.C. § 3371(f).

[3] Note that the Criminal Fines Improvement Act increases the  amount of potential criminal fines above the maximum limits set forth in the Lacey Act.

[4] See 16 U.S.C. § 3373(a).

[5] See 16 U.S.C. § 3373(d)(2).

[6] See 16 U.S.C. § 3373(d)(1).

[7] See 16 U.S.C. § 3375(d).


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