UPDATE 2-Lumber Liquidators cooperating in wood imports probe

Fri Sep 27, 2013 12:39pm EDT

* Lumber Liquidators offices searched by federal agents

* Feds looking at importation of wood flooring products

* Shares down 9 percent (Adds analyst comments, details on scene, updates stock activity)

Sept 27 (Reuters) - Lumber Liquidators Holdings said on Friday it is cooperating with authorities after federal agents raided its headquarters and another office in a probe of imports of wood flooring products.

The retailer's shares were down 9 percent at $102.87 in midday trading. The shares posted even steeper declines in premarket trading after the raids, conducted on Thursday, were reported by the Associated Press.

Special agents from Immigration and Customs Enforcement's Homeland Security Investigations, the Fish and Wildlife Service and the Department of Justice executed search warrants at Lumber Liquidators' headquarters in Toano, Virginia, and a company office in Richmond, Virginia, said ICE spokesman Brandon Montgomery.

"The warrants are sealed and no further details are available at this time of the investigation," Montgomery said.

When asked what the agents seized during the raids, Montgomery said, "To my knowledge, ICE did not remove any product from the locations."

On Friday, WAVY-TV in Norfolk, Virginia, showed video of Lumber Liquidators employees stopping every car pulling up to the Toano headquarters, asking the drivers why they were there.

Lumber Liquidators, which sells hardwood flooring at more than 305 stores in the United States and Canada, said in a statement, "The company takes its sourcing and compliance very seriously, and is cooperating with authorities to provide them with requested information."

It did not specify what information was being sought, and the company could not be reached for further comment.

It said it is subject to a range of international and domestic regulations, which it did not name. It said it sources its products from about 110 domestic and international mills and has policies and procedures designed to comply with regulations, with more than 60 people performing and monitoring its compliance and regulatory work.

The U.S. Fish and Wildlife Service is charged with enforcing the provisions of the Lacey Act, which aims to curb trafficking in wildlife, fish and plant products, including illegally obtained timber.

Height Securities LLC analyst Andrew Parmentier said in a note, "Ultimately, the fines related to potential violations are somewhat limited based on our interpretation of the Lacey Act ... though (Lumber Liquidators') business may sustain broader damage from costs related to prolonged investigations and potential forfeiture of illegally obtained products."

SunTrust Robinson Humphrey analyst David Magee said the situation reminded him of a wood-related investigation at Gibson Guitar Corp.

Gibson agreed to pay a $300,000 fine last year to avoid criminal charges after allegations that it illegally bought and imported ebony wood from Madagascar and rosewood and ebony from India, in violation of the Lacey Act. Federal agents raided Gibson facilities and seized rosewood, ebony and finished guitars in 2009 and 2011.

Magee, who has a "neutral" rating on Lumber Liquidators, said the stock was vulnerable as it has already doubled in price this year. The shares hit a new high of $115.59 on Sept. 19.

Still, he said the company's business trends "are likely strong."

The Fish and Wildlife Service did not immediately respond to a request for comment. (Reporting by Jessica Wohl in Chicago, Deborah Charles in Washington and Gary Robertson in Richmond, Virginia; Editing by John Wallace)

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