Timber Giant’s Problems Mount Embattled Louisiana-Pacific Faces Flood Of Lawsuits, Product Liability Claims

Jan and Mark Green are growing some of the most expensive mushrooms in the world without even trying, all along the rotting edges of their Louisiana-Pacific Corp. siding.

The couple say it will take more than $20,000 to get rid of the mushrooms by repairing the defective siding on their house in the Portland suburb of Tualatin.

The defective siding may end up costing Louisiana-Pacific hundreds of millions of dollars.

The Portland-based wood products company faces warranty claims in Oregon and huge class-action lawsuits in California, Florida and Washington, alleging the siding swells with moisture and deteriorates.

The company has several mills in the Inland Northwest and a regional operations headquarters in Hayden Lake. Louisiana-Pacific’s Chilco, Idaho, mill makes oriented strand board, or OSB, which is used in some cases for home siding.

The mushroom-growing siding is just one in a series of expensive problems for Louisiana-Pacific.

The company also was indicted on criminal charges for allegedly violating environmental laws and falsifying records at a Colorado plant, resulting in at least nine shareholder lawsuits.

Louisiana-Pacific stock closed at 24 7/8 Thursday, down nearly 20 percent from prices just before reports last month the indictment was expected. The company has lost more than half its value since it hit a high of $48 a share early last year.

Company Chairman Harry Merlo and two other top Louisiana-Pacific executives also face an unresolved sexual harassment lawsuit filed in Portland by a former secretary who claims the company hired only young, attractive women as top executive assistants to please Merlo.

Louisiana-Pacific has pleaded innocent to the criminal charges in Colorado, and is battling the various lawsuits in courtrooms around the country - especially Florida, where an estimated $150 million in siding claims is at stake.

The company already has paid $39 million in damages on 15,000 homeowner complaints about its InnerSeal siding, according to documents filed with the Securities and Exchange Commission in New York.

Louisiana-Pacific contends the siding was installed wrong, or improperly painted, or that homeowners let shrubs grow too close to it, or let their sprinklers soak it. But it never has admitted any defect.

“It’s crazy for Louisiana-Pacific to say there’s no design defect,” said Jan Green, who asked for an arbitrator to settle her warranty claim after the company offered to pay only $6,000 to replace the siding. “We have a two-story house and mushrooms are growing all the way from bottom to top. It has nothing to do with shrubs or any sprinkler.”

She blames the entire problem on a lack of leadership by Merlo, a former Georgia-Pacific executive who has built Louisiana-Pacific into a Fortune 500 company that sold $3 billion worth of building products and paper pulp last year.

“I don’t think he’s taking responsibility for the situation at all,” she said.

Merlo, who rarely grants interviews, was not available for comment.

But company spokesman Barry Lacter, said Merlo has been upbeat.

“I think Harry puts it into perspective,” Lacter said. “He’s the kind of guy who can turn adversity into opportunity.”

Sources said Merlo is fiercely proud of the company and his accomplishments as an industry innovator who has established a reputation for environmentally sound policies.

The Colorado charges resulted from manufacturing practices in the late 1980s, when plant workers allegedly cut quality to boost production of oriented strand board, a plywood substitute created by bonding wood fibers with resin.

The 56-count indictment charges the company conspired to violate the federal Clean Air Act by tampering with an air emissions monitoring device, filed false statements about the emissions, and falsified samples to be tested by the American Plywood Association, an independent non-profit trade association.

Lacter called the charges “negative, and disturbing and unfortunate,” but he said Louisiana-Pacific stands behind its products, which have only a 0.2 percent rate of complaints overall.

“You need to keep in mind that these things charged in the indictment happened some time ago,” Lacter said. “It’s just a blip on the company history.”

Despite the indictment and the unrelated siding lawsuits, the company is in the best financial shape in nearly the entire timber industry, with $160 million in cash, an untapped $100 million line of credit and a relatively small debt of about $200 million.

“This is not a fly-by-night outfit,” said Jay Shackford of the National Association of Homebuilders in Washington, D.C., which represents about 185,000 companies. “They’re one of the major players in the industry.”

Arthur S. Langlie, a Seattle attorney and general counsel to the American Plywood Association, based in Tacoma, said that years of random audits of Louisiana-Pacific siding and oriented strand board have never shown any serious problems.

“I don’t think there should be any cause for concern or alarm,” Langlie said. “The products have had a very fine performance history.”

, DataTimes ILLUSTRATION: Photo

The following fields overflowed: BYLINE = William McCall Associated Press Staff writer Eric Torbenson contributed to this report.