Whtiney Tilson is not ending his crusade against Lumber Liquidators (LL) anytime soon – the following is excerpted from an email which Tilson sent to investors (H/T Max).
Date: Sun, Mar 29, 2015 at 12:10 PM
Subject: LL thoughts; testimonial; my answers to six questions
1) Spot-on comments from a friend:
Appalled general market seems to think breaching Law as to CARB2 is okay under an argument that Formaldehyde may or may not be bad for you over time and certain exposures.
We do not get to select the Laws we abide by based on whether we arbitrarily believe they are good Laws or bad ones. Anarchy would ensue. Why does LL get that ability? The answer is simple, they do not.
LL labeled their products as CARB2 compliant when in fact they were not, end of story. There should be massive penalties, fines and Lawsuits resultant there from and the fall out from that Criminal decision as made by Management (even if it kills the Company) is on their hands.
2) Another tale of woe from a LL customer who emailed me:
The flooring was installed by my husband in 2012, it was Bamboo strand, I thought I was allergic when I began to feel unwell as I do have allergies. It took us over a year to find out what the problem was. No one would believe us or help us here. Our symptoms – I had a terrible cough, sinus problem, extreme fatigue, nausea, rash, shortness of breath, everntually weight loss and was bedridden most of 2012-13 winter with what my doctors thought was a really bad flu. My husband ended up in emerg with a cough so bad that he couldn’t get his breath – and my husband has never had allergies. We still have spent a fortune trying to fix the problem. We still have no help from Insurance though we were well insured – or govt. Fed’s or otherwise. If you know of any wayfor us to enter a Class Action in hte States we’d be grateful.
3) I posted answers on the Seeking Alpha message board to six questions I received (all posted publicly at:http://seekingalpha.com/article/3029526-why-the-u-s-consumer-product-safety-commission-conference-call-portends-a-double-whammy-for-lumber-liquidators#comments_header):
- A) Ray messaged me and asked:
“I value what you do and it is not always easy to be facing off an evil doing company or entity.
What is puzzling to me is that why California CARB regulatory agency has not stepped forward to put an end to the mis-labeling practices of LL or other companies doing the same?
Is there anything that we can do to help?”
Thanks for your question. I’m not surprised that CARB hasn’t taken any action yet. My experience with most regulatory agencies is that they take FOREVER to take action, even in the most obvious cases of wrongdoing. In fairness, it can take time to document everything, to ensure that whatever action they take will hold up in court when the company inevitably countersues/appeals.
I think there’s a lot of scrutiny/pressure on CARB (and other regulatory agencies like the Consumer Product Safety Commission), however, so I’d be surprised if there isn’t meaningful action in the next month or two.
- B) Ken messaged me and asked:
“I see the issue not as “this test vs. that test” but whether or not there was deliberate mis-labeling of product and if LL had knowledge, should have had knowledge or was complicit.
Obviously, the factory workers statement is anecdotal evidence.
My question is simply …
What steps are or can be taken to investigate the veracity of their claims? …. and are they underway or likely to be pursued?
Is there any indication of what tests the mill used to certify the product … was it deconstructive?
Thanks for your questions. To the first one, in addition to a half dozen or so regulatory agencies looking into Lumber Liquidators, there are nearly a dozen lawsuits against the company (here’s a list: http://www.classaction.org/blog/lumber-liquidators-lawsuits-filed-following-60-minutes-report). Most (if not all) of these entities will likely get all of LL’s emails, have the board and management give depositions under oath, etc., so I have little doubt that the truth will come out.
I’ve talked to many knowledgeable people, observed the company’s behavior, and applied common sense – all of which has led me to the conclusion that I’ve published in a number of articles: that they knew they were buying (and selling to their customers) non-CARB-compliant laminate.
To your second question (“Is there any indication of what tests the mill used to certify the product … was it deconstructive?”), the initial tests the company relied on (the only required tests) were of the medium-density fiberboard (MDF) before it was processed into laminate by the Chinese factories. There’s obviously no issue of deconstruction here. Then, the company tested the finished product and, contrary to CARB’s clear guidance, didn’t deconstruct the laminate (i.e., sand off the outer layer). I discuss this at length in three prior articles:
1) Why Lumber Liquidators’ Wood Testing Doesn’t Comply With CARB (http://seekingalpha.com/article/2972606-why-lumber-liquidators-wood-testing-doesnt-comply-with-carb);
2) Lumber Liquidators’ Campaign Of Distraction And Deception (http://seekingalpha.com/article/2990196-lumber-liquidators-campaign-of-distraction-and-deception); and
3) Explaining Lumber Liquidators’ Reckless Strategy And Rebutting Its Claims About Deconstructive Testing (http://seekingalpha.com/article/3001666-explaining-lumber-liquidators-reckless-strategy-and-rebutting-its-claims-about-deconstructive-testing).
- C) Clayton messaged me and asked:
Whitney I was hoping you can comment on LL’s quote on CARB, located on the third line on Page 4: app.quotemedia.com/data/downloadFiling?w...
“CARB has indicated to us that no one in the industry is required to conduct deconstructive testing for compliance purposes ”
Why is CARB apparently telling LL one thing and you another?
Thank you for your question. This is a typical statement from Lumber Liquidators: true but highly misleading and disingenuous. CARB doesn’t require testing of finished laminate at all (only the initial medium-density fiberboard, before it’s made into laminate), but if testing of finished product is done, it specifies clearly that it must first be deconstructed.
If you’re interested in the details of exactly why Lumber Liquidators’ claim that 60 Minutes (and others’) testing is “improper” is wrong – it’s their testing that’s questionable and/or improper – I suggest reading a few of my articles:
Why Lumber Liquidators’ Wood Testing Doesn’t Comply With CARB (http://seekingalpha.com/article/2972606-why-lumber-liquidators-wood-testing-doesnt-comply-with-carb);
Lumber Liquidators’ Campaign Of Distraction And Deception (http://seekingalpha.com/article/2990196-lumber-liquidators-campaign-of-distraction-and-deception);
A Response To Lumber Liquidators (http://seekingalpha.com/article/2996156-a-response-to-lumber-liquidators); and
Explaining Lumber Liquidators’ Reckless Strategy And Rebutting Its Claims About Deconstructive Testing (http://seekingalpha.com/article/3001666-explaining-lumber-liquidators-reckless-strategy-and-rebutting-its-claims-about-deconstructive-testing).
- D) Igsman messaged me and asked:
Now that the government has decided to do testing consistent with the companies view on how it should be tested, the game has changed. Failure of the test will almost certainly result in immediate chapter 11 for the company, as they would be ordered to replace all flooring at their expense. I do not know how and manager with a fiduciary obligation would be able to hold a position into and all or none scenario. they would be liable to for holding.
Thank you for your question. I disagree with your premise that “the government has decided to do testing consistent with the companies view on how it should be tested.” As I explained in my latest article (Why the U.S. Consumer Product Safety Commission Conference Call Portends a Double Whammy for Lumber Liquidators, http://seekingalpha.com/article/3029526-why-the-u-s-consumer-product-safety-commission-conference-call-portends-a-double-whammy-for-lumber-liquidators), there are two types of tests, one of which involves deconstruction and one of which doesn’t. Numerous tests