The U.S. Department of Justice said that a Chinese appliance company agreed to a $91 million fine and pled guilty to charges that it failed to tell safety regulators that it sold millions of defective dehumidifiers in the first corporate criminal action under federal consumer safety law.
The DOJ said that global appliance maker Gree Electric Appliances Inc. and two subsidiaries entered into a deferred prosecution agreement for not notifying the U.S. Consumer Product Safety Commission that it had sold millions of dehumidifiers that could catch fire to Americans. Gree also agreed to provide restitution to victims of fires caused by the dehumidifiers under the agreement.
The dehumidifiers caused hundreds of fires in consumers’ homes and millions of dollars in property damage.
Gree and its subsidiaries — one based in Hong Kong and the other in California — knew that their dehumidifiers were defective and could catch fire, but sat on that information for months. The dehumidifiers were only recalled after mounting consumer complaints.
Under the terms of the prosecution and plea agreements, Gree admitted that it sold more than 2 million dehumidifiers in the U.S. from 2007 to 2013 and that in fall of 2012 high-level Gree executives learned about the fire defect and consumers’ reports of fires caused by the dehumidifiers. Those employees also knew that dangerous consumer products must be reported to the CPSC, but Gree kept selling the appliances for at least six months.
Almost a year after learning about the defect, Gree finally recalled the dehumidifiers.
The U.S. Attorney’s Office for the Central District of California has also indicted Charley Loh, the chief executive officer of Gree USA, and Simon Chu, the subsidiary’s chief administrative officer, with felony wire fraud and Consumer Product Safety Act charges for their alleged roles in the company’s failure to report the defects.
They have both pled not guilty and their trial is scheduled to start on March 15 in Los Angeles.