Gree U.S. Subsidiary Agrees to Plead Guilty to Felony Charge; Company Executives Previously Indicted in the Investigation.
LOS ANGELES – A Chinese appliance manufacturer and two of its subsidiaries have agreed to resolve criminal charges for failing to notify the U.S. Consumer Product Safety Commission (CPSC) that millions of dehumidifiers they sold to U.S. consumers were defective and could catch fire, the Justice Department announced today.
The resolutions are the first corporate criminal enforcement actions ever brought under the Consumer Product Safety Act (CPSA).
Gree Electric Appliances, Inc. of Zhuhai (Gree Zhuhai), a global appliance manufacturer headquartered in Zhuhai, China, and Hong Kong Gree Electric Appliances Sales Co., Ltd. (Gree Hong Kong) entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed in federal court in Los Angeles. A criminal information filed along with the DPA charges the companies with one felony count under the CPSA of 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 monetary penalty of $91 million and agreed to provide restitution for any uncompensated victims of fires caused by the companies’ defective dehumidifiers.
Gree USA, Inc., a U.S. subsidiary based in the City of Industry, also is charged in the criminal information. Gree USA has agreed to plead guilty to the same charge of willfully failing to report consumer product safety information to the CPSC.
According to court filings, Gree Zhuhai, Gree Hong Kong and Gree USA (collectively, the Gree Companies) knew their dehumidifiers were defective, failed to meet applicable safety standards and could catch fire, but the companies failed to report that information to the CPSC for months. The companies only reported and recalled the dehumidifiers after consumer complaints of fires and resulting harm continued to mount.
Prosecutors with the United States Attorney’s Office and the Consumer Protection Branch of the Justice Department’s Civil Division previously indicted Charley Loh, 63, of Arcadia, and Simon Chu, 66, of Chino Hills – respectively, the chief executive officer and chief administrative officer of Gree USA – on felony CPSA and wire fraud charges for their alleged roles in the failure to report the defective dehumidifiers. Loh and Chu have pleaded not guilty and are scheduled for trial on March 15, 2022, in Los Angeles.
As part of the DPA and plea agreement, the Gree Companies admitted that, between 2007 and 2013, they sold in the United States more than 2 million dehumidifiers manufactured by Gree Zhuhai and imported by Gree Hong Kong. In September 2012, employees of the Gree Companies, including high-level executives, learned that the Gree dehumidifiers had defects that could cause them to overheat and catch fire, and that consumers had reported fires caused by the dehumidifiers. Those same employees also knew of the obligation to report dangerous 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. The Gree Companies delayed reporting knowledge of the fires to the CPSC for approximately six months, and did not report the defects in the dehumidifiers for approximately nine months. Ultimately, Gree Zhuhai recalled the defective dehumidifiers almost a year after learning about the products’ dangerous defects.
As part of the criminal resolutions, the Gree Companies have agreed, among other things, to continue to cooperate with the Justice Department’s Consumer Protection Branch and the United States Attorney’s Office in any ongoing or future investigations and prosecutions. The Gree Companies also agreed to strengthen their compliance programs and to enhanced reporting requirements that will require the submission of yearly reports to the Justice Department regarding the status of their compliance programs and internal controls, policies and procedures aimed at improving product safety and deterring and detecting violations of the CPSA, as well as the status of remediation efforts. Consistent with Justice Department policy, the DPA with Gree Zhuhai and Gree Hong Kong credits the Gree Companies’ earlier payment of $15.45 million in civil penalties to the CPSC against the agreed-upon $91 million total monetary penalty.
Representatives of Gree USA have agreed to appear in United States District Court in Los Angeles on November 8 for an initial appearance in this case.
HSI of the U.S. Department of Homeland Security investigated this case.