Recalls of defective products that may overheat and cause fires are certainly not uncommon. But chief executives going to jail for defective products is unique. What events led to the criminal verdicts?
It all started with recalls of about 2,5 million dehumidifiers between from 2013 to 2017. The defective dehumidifiers led to thousands of reports of overheating, hundreds of fires and millions of dollars of property damage. The saddest news is that four deaths are potentially linked to the recalled products. There was another recall of 1,5 million dehumidifiers in August 2023 from the same company.
Of course, refunds for millions of dehumidifiers sold for a few hundred dollars each are very expensive, and destroying brand image likewise. However, further consequential damage can be prevented by timely reporting defects, conducting a thorough risk analysis and working closely with the authorities. And that is where things went completely adverse in this case.
The US Consumer Product Safety Act (CPSA) requires companies to report defective products “immediately” if they could cause serious injury or death.
Gree, the manufacturer of the dehumidifiers, deliberately failed to inform the authorities about the defects for at least 6 months, although they were aware of their obligation. The company continued to sell their products via retailers to consumers.
In April 2023 Gree USA was sentenced to $ 500,000 criminal fine after pleading guilty. The fine was part of a $ 91 million resolution with three related Gree subsidiaries.
Not only the company itself, but also individuals, namely two corporate executive officers are being held criminally accountable. They have the dubious honour of being the first to be convicted of such an offence; putting lives at risk by failing to comply with their legal product compliance obligations.
This month the US government asked for 10-year prison sentences for both executives. They are found guilty of conspiracy to defraud the US CPSC and failing to satisfy the reporting obligation of the CPSA.
A sentencing hearing is scheduled for June 15.
