LOS ANGELES—A Chinese appliance manufacturer and two of its subsidiaries will pay $91 million for failing to notify the U.S. Consumer Product Safety Commission (CPSC) that millions of dehumidifiers sold to U.S. consumers were defective and could catch fire, federal prosecutors said Oct. 29.
Gree Electric Appliances Inc.. an appliance manufacturer headquartered in Zhuhai, China, and Hong Kong Gree Electric Appliances Sales Co. Ltd. struck the deal with prosecutors to resolve criminal charges in federal court in Los Angeles.
“No one should live in fear that a properly used consumer product might cause injury or death to their loved ones,” Acting U.S. Attorney Tracy L. Wilkison said in a statement. “Gree’s months-long delay in reporting known problems with their dangerous and defective dehumidifiers was both criminal and costly. Gree’s decision to delay the reporting of its defective dehumidifiers has resulted in the recall of millions of those products and the payment of millions of dollars. We will not allow companies to profit at the expense of consumers’ health and safety.”
The companies were charged with one felony count under the Consumer Product Saftey Act of willfully failing to report consumer product safety information to the commission.
The companies knew their dehumidifiers were defective, failed to meet safety standards, and could catch fire. But the companies only reported and recalled the dehumidifiers after consumer complaints of fires, according to court filings.
The companies admitted selling more than 2 million dehumidifiers in the United States between 2007 and 2013. They also agreed to continue cooperating with federal prosecutors, according to court documents.
Charley Loh, 63, of Arcadia, and Simon Chu, 66, of Chino Hills—the chief executive officer and chief administrative officer of Gree USA—were previously indicted on felony charges for their alleged roles in failing to report the defective dehumidifiers. Both have pleaded not guilty
The resolutions are considered the first corporate criminal enforcement actions ever brought under the Consumer Product Safety Act, according to the Department of Justice (DOJ).
The agreement calls for Gree Zhuhai and Gree Hong Kong to pay a total penalty of $91 million.
The companies will also provide restitution for any uncompensated victims of fires caused by the companies’ defective dehumidifiers, according to the DOJ.
Gree USA Inc., a subsidiary based in Industry, agreed to plead guilty to the same charge of willfully failing to report consumer product safety information to the CPSC, according to prosecutors.
Representatives of Gree USA are set to appear in Los Angeles federal court on Nov. 8 for an initial appearance.