First-Ever Criminal Indictments for Failure to Report a Potential Hazard to the U.S. Consumer Product Safety Commission

Two individual former corporate officers of Chinese appliance manufacturer Gree Electric Appliances have been criminally indicted in the first-ever criminal prosecution for failure to report under the Consumer Product Safety Act (CPSA).

The CPSA grants the U.S. Consumer Product Safety Commission (CPSC) the authority to pursue both civil and criminal penalties for violations of the statutes it enforces. As summarized in a Department of Justice press release, Section 15 of “[t]he Consumer Product Safety Act requires manufacturers, importers, and distributors of consumer products to report ‘immediately’ to the CPSC information that reasonably supports the conclusion that a product contains a defect that could create a substantial product hazard or creates an unreasonable risk of serious injury or death. This duty also applies to the individual directors, officers, and agents of those companies.”

In the past, the CPSC has sought criminal prosecution for other issues, such as the repeated importation of banned products, but it has never before sought criminal prosecution for a company’s failure to report information suggesting their product may be defective, noncompliant, or hazardous under Section 15 of the CPSA.

Through the Consumer Protection Branch of the Department of Justice, the CPSC has accused the two former corporate officers of failure to report that the company’s dehumidifiers presented fire hazards, in addition to deliberately withholding information from insurance companies that paid for damage caused by the resulting fires and the CPSC. In addition, the criminal defendants allegedly continued to sell the product to retailers with false certifications that the products satisfied safety standards, and sent an untimely report to the CPSC that falsely stated the dehumidifiers were not defective or hazardous.

If convicted, the two former executives face up to five years imprisonment and substantial fines, respectively. The indictments come at a time when Gree Electric is facing an owner shakeup overseas in Zhuhai, as a state-owned shareholder is looking to sell its controlling stake in the home appliance company.