Law and Regulations

Senator urges US to probe Lumber Liquidators

Lumber Liquidators down more than 9%

Sen. Bill Nelson on Wednesday called for a federal investigation of Lumber Liquidators amid allegations that it sold an imported laminate that could pose health risks.

The Florida Democrat sent a letter to federal agencies asking them to independently test the company's flooring products. He also sought to discover whether the company made potentially false marketing claims about its product's compliance with safety standards.

"Because this could affect millions of homeowners, it's imperative we get some answers quickly," Nelson said in a release.

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Shares in Lumber Liquidators were down about 12 percent Wednesday afternoon.

Options trading in the retailer spiked after Nelson's statement, according to Jon Najarian of OptionMonster and a CNBC contributor. More than 20,000 put options in Lumber Liquidators traded in the 40 minutes following Nelson's announcement.

Volume had already surged since the "60 Minutes" report. The three-month average put trade in Lumber Liquidators before it aired was about 3,300 contracts, according to Najarian.

Mike Blake | Reuters

The retailer has been in hot water since CBS' "60 Minutes" reported on Sunday that laminate imported from China contained levels of formaldehyde that exceeded California safety standards. The chemical can cause cancer.

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Lumber Liquidators said in a statement Wednesday that it "shares Senator Bill Nelson's desire for consumer safety."

"Over the past few years, Lumber Liquidators has been actively engaged with the California Air Resources Board (CARB) and the Environmental Protection Agency (EPA) attending workshops, offering support and providing comments. We support the development of uniform regulations that are clear, practical, and safe," the company said.

It continued: "We are committed to safety and will continue to deliver the best quality product at the best price to our customers."

In a previous statement, Lumber Liquidators said "60 Minutes" had used an improper test in its report and that its suppliers in China had confirmed that the product complied with all regulations.

The company had previously said the allegations were "driven by a small group of short-selling investors who are working together for the sole purpose of making money by lowering our stock price."

In Wednesday's letter, Nelson appealed to the Consumer Product Safety Commission, Centers for Disease Control and Prevention and Federal Trade Commission.

"We share Senator Nelson's perspective that this is an issue we must respond to," CPSC spokesman Scott Wolfson told CNBC.

He also noted that the Environmental Protection Agency has a role in setting and regulating standards on the product in question.

The FTC and CDC confirmed that they received the letter but declined to comment further.

The EPA did not immediately respond to CNBC's request to comment on Nelson's letter.

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Reuters contributed to this report.