Chinese Appliance Companies Plead Guilty to Importing, Selling Faulty Dehumidifiers

Chinese appliance manufacturer Gree Electric Appliances Inc. and two of its subsidiaries pleaded guilty to failing to tell the Consumer Product Safety Commission that millions of its dehumidifiers it sold to U.S. customers were defective and could catch fire, the Department of Justice said. Resolving the first corporate criminal enforcement actions ever brought under the Consumer Product Safety Act, Gree entered into a deferred prosecution agreement, agreeing to pay a total penalty of $91 million and provide restitution for any uncompensated victims of fires caused by the dehumidifiers.

During 2007-2013, Gree sold more than 2 million dehumidifiers in the U.S. made by Gree Zhuhai and imported by Gree Hong Kong, DOJ said. High-level executives at the Gree Companies learned that these dehumidifiers could overheat and catch fire in 2012, but continued to ship them into the U.S. for another six months. In all, the Gree Companies agreed to cooperating with the Civil Divison's Consumer Protection Branch and the U.S. Attorney's Office in all future investigations, strengthening their compliance programs and enhancing reporting requirements to DOJ

“Manufacturers and distributors must immediately report dangerous consumer products to the CPSC so that actions to protect consumers may be taken as soon as possible,” said Acting Assistant Attorney General Brian Boynton of the DOJ Civil Division. “Companies and executives that purposefully delay reporting to maintain profits will be prosecuted. The Department of Justice will continue to work closely with the CPSC to ensure consumers’ safety.”

According to the plea agreement, the Gree Companies agreed to adopt compliance programs, which include internal controls, compliance policies and procedures to ensure product safety in compliance with the Consumer Product Safety Act. As part of this, the Gree Companies will have to keep written standards, policies and procedures with enough resources to investigate and respond to allegations of product hazards. Further, the plea agreement established a confidential employee reporting program for the Gree Companies, whereby the companies will publicize the existence of the program to their employees and enact a non-retribution policy for reporters. Also, the plea agreement requires the Gree Companies to retain an independent compliance expert on their staff. The Gree Companies will also have to report to the government at least every 12 months for the next three years regarding the implementation of these provisions.