Gree appliance companies accused of failing to report unsafe dehumidifiers and accepting $91 million resolution | Takeover bid

A Chinese home appliance maker and two of its subsidiaries have agreed to resolve criminal charges for failing to notify the US Consumer Product Safety Commission (CPSC) that millions of dehumidifiers they sold to US consumers were defective and could catch fire. The resolutions are the first corporate criminal actions ever brought under the Consumer Product Safety Act (CPSA).

Zhuhai’s Gree Electric Appliances Inc. (Gree Zhuhai), a global home appliance manufacturer headquartered in Zhuhai, China, and Hong Kong Gree Electric Appliances Sales Co. Ltd. (Gree Hong Kong) have entered into a Deferred Prosecution Agreement (DPA) in connection with a criminal investigation filed Thursday in the U.S. District Court for the Central District of California. A criminal investigation filed with the DPA charges the companies with one count under the CPSA for willfully failing to report consumer product safety information to the CPSC. Under the terms of the DPA, Gree Zhuhai and Gree Hong Kong agreed to a total fine of $91 million and agreed to compensate all uncompensated victims of fires caused by the companies’ faulty dehumidifiers.

Gree USA Inc., a US subsidiary based in City of Industry, Calif., is also charged in the criminal investigation. Gree USA agreed to plead guilty to the same charge of willfully failing 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, failed to meet applicable safety standards, and could catch fire, but the companies failed to report this. information to the CPSC for months. The companies only reported and recalled the dehumidifiers after consumer complaints about the fires and resulting damage continued to rise.

The Justice Department’s Civil Division Consumer Protection Branch and the U.S. Attorney’s Office for the Central District of California previously charged Charley Loh, 63, of Arcadia, Calif., and Simon Chu, 66, with of Chino Hills, Calif. — the Chief Executive Officer and Chief Administrative Officer 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 due to stand trial 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 Assistant Attorney General Brian M. Boynton of the Civil Division of the Ministry of Justice. “Companies 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 U.S. Attorney Tracy L. Wilkison for the Central District of California. “Gree’s months-long delay in reporting known issues with their unsafe and faulty dehumidifiers was both criminal and costly. Gree’s decision to delay reporting its faulty dehumidifiers resulted in the recall of millions of these products and the payment of millions of dollars. We will not allow companies to profit at the expense of consumer health and safety. »

“This historic criminal action should mean that the CPSC will use its full authority to keep American families safe,” said CPSC Chairman Alex Hoehn-Saric. “Failure to flag 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 rely on with confidence,” said Special Agent in Charge David A. Prince for Homeland Security. Investigations (HSI) Los Angeles. “Defective products like these pose a dangerous threat to consumers, who assume the products they buy are safe and reliable. HSI will continue to work with our law enforcement partners to target and investigate any aggressively on those who knowingly endanger public safety in the name of profit.

As part of the DPA and plea agreement, the Gree companies admitted that between 2007 and 2013 they sold more than two million dehumidifiers in the United States manufactured by Gree Zhuhai and imported by Gree Hong Kong. In September 2012, employees of Gree companies, including senior managers, learned that Gree dehumidifiers had defects that could cause overheating and fire, and that consumers had reported fires caused by the dehumidifiers. These same employees were also aware of the requirement 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 another six months. Gree companies delayed reporting fires to the CPSC for about six months and did not report dehumidifier faults for about nine months. Ultimately, Gree Zhuhai recalled the faulty dehumidifiers nearly a year after learning of the products’ dangerous defects.

As part of the criminal resolutions, the Gree Companies have agreed, among other things, to continue to cooperate with the Consumer Protection Division of the Civil Division and the U.S. Attorney’s Office in all pending and future investigations and prosecutions. Gree companies have also agreed to strengthen their compliance programs and strengthen reporting requirements which will require the submission of annual reports to the Department of Justice regarding the status of their compliance programs and their internal controls, policies and procedures. aimed at improving product safety and deterring and detecting CPSA violations, as well as the status of remediation efforts. In accordance with Department of Justice policy, the DPA with Gree Zhuhai and Gree Hong Kong awards the Gree Companies’ prior payment of $15.45 million in civil penalties to the CPSC against the agreed total monetary penalty of $91 million. .

Lead Attorney Allan Gordus and Attorneys Natalie Sanders and Maryann McGuire of the Civil Division’s Consumer Protection Division and Assistant U.S. Attorneys Joseph Johns and Dennis Mitchell of the U.S. Attorney’s Office for the Central District of California sued the case with the assistance of Patricia Vieira of the CPSC’s Office of General Counsel. HSI of the US Department of Homeland Security investigated the matter.

Additional information about the Consumer Protection Branch and its enforcement efforts can be found at http://www.justice.gov/civil/consumer-protection-branch.