Two executives of companies that made and sold defective residential dehumidifiers that were implicated in hundreds of house fires nationwide face prison time after a California jury found them guilty of criminal charges.
The convictions came in the first-ever corporate criminal enforcement action under the Consumer Product Safety Act in a case handled by the U.S. attorney’s office for the Central District of California.
The dehumidifiers, which wound up being the subject of numerous recalls, caused more than 450 fires and millions of dollars of damages have been reported. The products were made by Chinese firm Gree Electric Appliances Inc. of Zhuhai and distributed by its subsidiary Gree USA Inc.
Gree USA Chief Administrative Officer Simon Chu, 68, of Chino Hills, Calif., and Gree CEO Charley Loh, 65, of Arcadia, Calif., were found guilty last week of conspiracy to defraud the U.S. Consumer Product Safety Commission and failure to furnish information as required by law.
The jury acquitted the executives of wire fraud.
Prosecutors argued that Loh, Chu and their companies had received multiple reports as early as September 2012 that their dehumidifiers were defective, dangerous and could catch fire. Despite receiving consumer complaints and test results showing the defects, they failed to tell the CPSC about it for at least six months while they kept selling the problem appliances, the government said.
Chu and Loh face a maximum of five years in federal prison on each of the counts; a sentencing hearing is set for March 11 before U.S. District Judge Dale S. Fischer.
CPSC Chair Alex Hoehn-Saric said the verdicts “should serve as a warning to companies that CPSC and its Federal partners will continue to aggressively pursue those who fail to take consumer product safety seriously.”
Gree USA was sentenced in April to pay a $500,000 criminal fine after pleading guilty to failing to notify the CPSC. That fine, along with restitution to victims, was part of a $91 million resolution reached with Gree Electric, Gree USA and Hong Kong Gree Electric Appliances Sales Co. Ltd.
In August, the CPSC announced a new recall of dangerous dehumidifiers, also manufactured by Gree. It also reissued a previous recall and said four people in Ohio, Iowa and Missouri had died in house fires linked to problem dehumidifiers made by Gree.
Consumer advocates worry that the defective dehumidifiers are still widely used in people’s homes and basements.
The products were sold under a variety of well-known brands, including Frigidaire, GE, Kenmore and others, and sold at major retailers including Home Depot, Menards, Walmart and Lowes.
To check your dehumidifier, go online to CPSC.gov or greedehumidifierrecall.com.
