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A recalled Gree USA humidifier caused this fire damage. | Photo courtesy of the U.S. Consumer Product Safety Commission
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The Industry-based subsidiary of a Chinese appliance company was sentenced Monday to pay a $500,000 fine after pleading guilty to failing to notify the U.S. Consumer Product Safety Commission that millions of dehumidifiers sold to U.S. consumers were defective and could catch fire.
Gree USA Inc. pleaded guilty in January to a felony violation of the Consumer Product Safety Act. The fine, along with provisions to pay restitution to victims, was part of a $91 million resolution with three related Gree companies that represented the first corporate criminal enforcement action ever brought under the CPSA, according to the U.S. Department of Justice.
Gree USA Inc.; 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.
The companies were charged with one felony count under the CPSA of willfully failing to report consumer product safety information to the commission. The companies will also provide restitution for any uncompensated victims of fires caused by the companies’ defective dehumidifiers, according to the Justice Department.
According to court filings, 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.
“This corporation endangered the safety of American consumers by failing to promptly report a known problem with their defective humidifiers,” U.S. Attorney Martin Estrada said in a statement.
“Fortunately, authorities were able to stop this practice before Gree USA could cause greater harm. This historic case underscores our commitment to protect the public from dangerous products that could cause consumers real harm and to hold accountable corporate entities who knowing violate our laws in promotion of their greed.”
Charley Loh, 64, of Arcadia, and Simon Chu, 67, of Chino Hills — respectively, 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 and are scheduled for trial in November.
According to court documents, 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.
