A Chinese home appliance maker and two of its subsidiaries have agreed to resolve criminal charges for failing to notify the United States Consumer Product Safety Commission (CPSC) that millions of dehumidifiers they have sold to consumers Americans were defective and could catch fire. The resolutions are the first corporate criminal actions ever brought under the Consumer Product Safety Act (CPSA).
Gree Electric Appliances Inc. of Zhuhai (Gree Zhuhai), a global manufacturer of home appliances headquartered in Zhuhai, China, and Hong Kong Gree Electric Appliances Sales Co. Ltd. (Gree Hong Kong) have reached a Deferred Prosecution Agreement (DPA) in a criminal investigation filed Thursday in U.S. District Court for the Central District of California. Criminal information filed with the DPA accuses the companies of one count under the CPSA of willfully failing to report consumer product safety information to the CPSC. Under the DPA, Gree Zhuhai and Gree Hong Kong agreed to a total fine of $ 91 million and agreed to compensate any unpaid victims of fires caused by the companies’ faulty dehumidifiers.
Gree USA Inc., a US subsidiary based in City of Industry, California, is also charged with criminal information. Gree USA has agreed to plead guilty to the same count of willful failure to report consumer product safety information to the CPSC.
According to court documents, Gree Zhuhai, Gree Hong Kong, and Gree USA (collectively, the Gree Companies) knew their dehumidifiers were faulty, did not meet applicable safety standards, and could catch fire, but the companies did not not reported this information to the CPSC for months. Companies only reported and recalled dehumidifiers after consumer complaints about the fires and resulting damage continued to increase.
The Consumer Protection branch of the Civil Division of the Department of Justice and the United States Attorney’s Office for the Central District of California have previously charged Charley Loh, 63, of Arcadia, Calif., And Simon Chu, 66-year-old from Chino Hills, Calif. – the managing director and executive director of Gree USA, respectively – with charges of CPSA felony and wire fraud for their alleged roles in failing to report faulty dehumidifiers. Loh and Chu have pleaded not guilty and are set to stand trial starting March 15, 2022 in Los Angeles.
“Manufacturers and distributors must immediately report unsafe consumer products to the CPSC so that consumer protection action can be taken as soon as possible,” said Acting Deputy Attorney General Brian M. Boynton of the Civil Division of the Ministry of Justice. âCompanies and executives who deliberately delay reporting to maintain profits will be prosecuted. The Department of Justice will continue to work closely with the CPSC to ensure consumer safety.
“No one should live in fear that a properly used consumer product could cause injury or death to loved ones,” said acting US attorney Tracy L. Wilkison for the Central District of California. âGree’s months-long delay in reporting known issues with their dangerous and faulty dehumidifiers was both criminal and costly. Gree’s decision to delay reporting its defective dehumidifiers resulted in millions of those products being recalled and millions of dollars being paid out. We will not allow businesses to profit at the expense of the health and safety of consumers. “
âThis historic criminal action should mean that the CPSC will fully use its authority to ensure the safety of American families,â said CPSC President Alex Hoehn-Saric. âFailure to report unsafe products puts consumers at unnecessary risk and will not be tolerated. “
“Substandard goods pose a serious threat to the integrity of the consumer product supply chain that the public should trust with confidence,” said Special Agent in Charge David A. Prince for Los Angeles Homeland Security Investigations (HSI). âDefective products like these pose a dangerous threat to consumers, who assume that the products they buy are safe and reliable. HSI will continue to work with our law enforcement partners to aggressively target and investigate those who knowingly compromise public safety in the name of profit. “
As part of the DPA and the plea deal, the Gree Companies admitted that between 2007 and 2013, they sold in the United States more than two million dehumidifiers made by Gree Zhuhai and imported by Gree Hong Kong. In September 2012, employees of Gree companies, including senior executives, learned that the Gree dehumidifiers had defects that could cause them to overheat and catch fire, and that consumers had reported fires caused by the dehumidifiers. These same employees were also aware of the obligation to report unsafe consumer products to the CPSC. Despite this knowledge, Gree USA continued to sell the defective dehumidifiers in the United States for at least six months. The Gree companies delayed reporting fires to the CPSC for about six months and only reported faults on the dehumidifiers for about nine months. Ultimately, Gree Zhuhai recalled the defective dehumidifiers nearly a year after learning of the dangerous product defects.
As part of the criminal resolutions, the Gree Companies have agreed, among other things, to continue to cooperate with the Civil Division of Consumer Protection and the US Attorney’s Office in all ongoing or future investigations and prosecutions. The Gree companies have also agreed to strengthen their compliance programs and improve reporting requirements which will require the submission of annual reports to the Department of Justice regarding the status of their compliance programs and internal controls, policies and procedures. aimed at improving product safety and deterring and detecting CPSA violations, as well as the state of remediation efforts. In accordance with Department of Justice policy, DPA with Gree Zhuhai and Gree Hong Kong credits Gree companies’ prior payment of $ 15.45 million in civil penalties to CPSC against the agreed total monetary penalty of $ 91 million .
Senior Litigation Counsel Allan Gordus and Trial Lawyers Natalie Sanders and Maryann McGuire of the Consumer Protection Division of the Civil Division and Deputy US Lawyers Joseph Johns and Dennis Mitchell of the US Attorney’s Office for the Central District of California pursued the case with the help of Patricia Vieira of the Office of the General Counsel of the CPSC. The US Department of Homeland Security’s HSI investigated the matter.
Additional information on the Consumer Protection Branch and its enforcement efforts can be found at http://www.justice.gov/civil/consumer-protection-branch.