Chinese company avoids lawsuits and pays $91 million for unsafe dehumidifiers

Consumer Council briefing on dehumidifier issues. K Wah Center, North Point. March 16, 2005. (Photo by Jonathan Wong/South China Morning Post via Getty Images)

A Chinese company that has sold millions of faulty dehumidifiers to U.S. customers will pay $91 million for failing to notify regulators that the devices could overheat and catch fire, federal prosecutors said Friday.

Gree Electric Appliances, Inc. of Zuhai, China, and its Hong Kong subsidiary have reached an agreement to avoid criminal charges, the U.S. attorney’s office said. The companies will also provide compensation to victims for damage caused by fires caused by dehumidifiers.

The agreement was filed in federal court in Los Angeles.

The settlements are “the first corporate criminal actions ever brought under the Consumer Product Safety Act,” according to a statement from the U.S. Attorney’s Office.

Gree USA Inc., another subsidiary based in the industry city near Los Angeles, has agreed to plead guilty to willfully failing to disclose consumer product safety information, prosecutors said.

The case involved more than 2 million dehumidifiers sold in the United States between 2007 and 2013 under various brand names at stores including Costco, Lowe’s, Menards and Walmart.

According to court documents, consumers reported some 450 fires and nearly $20 million in property damage. No injuries were reported.

Prosecutors argued that Gree and the subsidiaries knew their dehumidifiers were made with parts that did not meet safety standards and could catch fire, but had not reported it to the US Product Safety Commission for months.

The company only reported issues and eventually recalled the devices after “consumer complaints about the fires and resulting damage continued to escalate,” the statement from the U.S. attorney’s office said.

The 2013 recall came nearly a year after executives were first told of the product’s dangers, authorities said.

“No one should live in fear that a properly used consumer product could cause injury or death to loved ones,” Acting U.S. Attorney Tracy L. Wilkison said in the statement. “We will not allow companies to profit at the expense of consumer health and safety.”

Gree USA’s chief executive and chief executive are also facing criminal charges. They have pleaded not guilty to fraud charges and will be tried next March in Los Angeles.