Hunton Retail Law Resource

The U.S. Department of Justice announced major news in the world of consumer products this month. A federal grand jury recently indicted two corporate executives for their roles in an alleged scheme involving residential dehumidifiers. The executives were charged with conspiracy to commit wire fraud, conspiracy to defraud the CPSC, and failure to furnish timely information under the Consumer Product Safety Act.

The facts alleged in the indictment portray egregious, bad-faith conduct on the executives’ part.  According to indictment, the two executives ran and owned companies that sold dehumidifiers. By September 2012, the executives received multiple consumer reports that the product could catch fire and received test results showing problems with the product. The executives allegedly knew they were required to report this information to the CPSC immediately. Yet the executives failed to disclose the product’s problems for at least six months. Making matters worse, the executives deliberately withheld this information from the retail companies that bought the dehumidifiers for resale, from the insurance companies that paid for damage caused by the product’s fires, and from the CPSC. The executives also allegedly continued to sell the humidifiers to retailers with false certifications that the product met safety standards. When they did report to the CPSC, the report was late and it falsely stated that the dehumidifiers were not defective or hazardous. This scheme continued through April 2013—seven months after first receiving reports of problems with the product. In September 2013, the CPSC announced a recall of 2.2 million dehumidifiers sold by the executives’ companies. If convicted, the executives could face up to 30 years in prison and are subject to forfeiture, fines and criminal penalties.

This month also confirmed the CPSC’s continued focus on off-road vehicles. Three recalls in March addressed defects in off-highway utility vehicles concerning fuel leaks and crash hazards. These recalls come two months after the CPSC’s annual report on all-terrain vehicles (“ATV”). The results were grim: There were 15,250 ATV-related fatalities from 1982 to 2017, and 3,315 of these deaths were of children younger than 16 years old. Further, one year ago, the Commission approved a $27.25 million civil penalty—the largest in CPSC history—for a manufacturer’s alleged failure to immediately report defects in two types of recreational off-road vehicles. These recent developments show that the CPSC should and will increase its efforts at regulating and monitoring the market for off-road vehicles.

Total Recalls: 20

Hazards:  Fire/Burn/Shock (11); Crash (2); Injury (2); Fall (2); Choke (1); Laceration (1); Lock Failure (1)