A jury found Simon Chu and Charley Loh of conspiracy to defraud the United States Consumer Product Safety Commission (CPSC) and failure to furnish required information to the Consumer Produce Safety Act. ( CPSA). The criminal charges involved distributing and selling defective residential dehumidifiers linked to multiple fires. The jury acquitted both men of one wire fraud count. Chu and Loh face a maximum sentence of five years in federal prison for each conspiracy, and the failure to furnish information counts.
Chu's and Loh's two corporations sold defective dehumidifiers that had been recalled because more than 450 reported fires and millions of dollars in property damage were linked to the recalled dehumidifiers. Chu was part owner and chief administrative officer of Gree USA Inc. and another corporation. Loh was part owner and CEO of the same two corporations. The companies distributed and sold to retailers for consumer purchase dehumidifiers made by a company in China.
The CPSA 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 create an unreasonable risk of severe injury or death. This duty also applies to those companies' individual directors, officers, and agents.
In September 2012, Chu, Loh, and their companies received reports that their Chinese dehumidifiers were defective, dangerous, and could catch fire. They also knew the law required them to report the product safety information to the CPSC immediately. Even though they knew about consumer complaints of dehumidifier fires and test results showing defects in the dehumidifiers, Chu and Loh failed to disclose their dehumidifiers' defects and hazards for at least six months while they continued to sell their products to retailers for resale to consumers.
Gree USA was sentenced on April 24 to pay a $500,000 criminal fine after pleading guilty to failing to notify the CPSC about the problems with the dehumidifiers. The fine and provisions to pay restitution to victims were part of a $91 million criminal resolution with Gree USA, Gree Zhuhai, and another related Gree company, Hong Kong Gree Electric Appliances Sales Co. Ltd.