Whitney Tilson. "60 Minutes" Hedge fund manager Whitney Tilson, the founder of Kase Capital, is short Lumber Liquidators and has been vocal about alleged safety issues regarding the company's products.

He was also featured in the "60 Minutes" investigation back in March that publicized concerns about the company's Chinese-made laminate.



Tilson shared his thoughts on SeekingAlpha about today's "unexpected" resignation of Lumber Liquidators CEO, Robert Lynch.

Below is an excerpt:

If Lumber Liquidators was a good company with no formaldehyde problem – or was the innocent victim of nefarious Chinese suppliers – Lynch never would have resigned.

The fact that he did – and did so “unexpectedly” – is powerful evidence that the three main things I’ve been saying all along are undoubtedly true:

1) Lumber Liquidators, until only two weeks ago when it finally suspended sales of its Chinese- made laminate flooring, was for years selling American families hundreds of millions of square feet of this product, which contained high levels of formaldehyde, a dangerous chemical and known carcinogen, and thus endangered the health and safety of its customers, especially children.

2) Lumber Liquidators’ senior executives knowingly did this in order to save ~10% on sourcing costs. Why would they do something so immoral and potentially destructive? The oldest reason in the universe: greed. Laminate is one of the company’s most profitable product lines and non- CARB-compliant laminate is ~10% cheaper, so the company saved a lot of money on sourcing costs (not a few pennies, as founder, Chairman and new CEO Tom Sullivan claims), which I think was a major contributor to a quick doubling of margins, which in turn helped send the stock price up eight times from $15 to $119 in less than two years. Sullivan and Lynch recognized a golden opportunity when they saw it, dumping $37 million worth of stock at prices more than triple today’s level in early- to mid- 2013; and

3) Lumber Liquidators is a notorious bad actor: cutting corners at every opportunity, selling very low-quality products, treating customers, vendors, installers and employees badly, and, most damningly, not being serious about compliance.

Tilson initially shorted the stock when it was around $102.69 per share. He has said the first red flag for him was the sudden dramatic increase in Lumber Liquidators' gross margin. He believed the increase was enabled by the sourcing of illegal (and cheaper) wood in Russia, based on a report from the Environmental Investigation Agency.

Tilson shorted the company again in the $57 range after receiving a phone call from someone in China. Tilson's source told him the real story was the company's laminate flooring. His source told Tilson that Lumber Liquidators was buying cheaper laminate that was not CARB (California Air Resources Board) compliant.

Since the beginning of this year, Lumber Liquidators stock has fallen more than 69%.

Shares were down 15% on Thursday.