Corporate Officers Get Criminal Penalty for Failure to Report Product Safety Concerns

The Department of Justice reports that two businessmen have been sentenced to 38 and 40 months in prison, respectively, for failing to report information related to defective products. The two were also ordered to pay fines of $5,000 and $12,000, respectively.

The Consumer Product Safety Act requires importers, manufacturers, and distributors of consumer products to report immediately to the Consumer Product Safety Commission 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. DOJ notes that this obligation also applies to the individual directors, officers, and agents of such companies.

According to the DOJ, the two men were part owners of corporations that imported and sold residential dehumidifiers made in China. Evidence showed that they had received multiple reports that these goods were defective, dangerous, and could catch fire and that they knew they were required to report this information to the CPSC but that they delayed such notification for at least six months while they continued to sell their products.

In April 2023 one of the companies the men owned was sentenced to pay a $500,000 criminal fine and pay restitution to victims. The DOJ states that these measures were part of a $91 million criminal resolution with several involved companies, which was “the first corporate criminal enforcement action ever brought under the CPSA.” CPSC Acting Chair Peter Feldman said the prosecutions of the co-owners “are a clear message that the CPSC will [also] take a hard line against executives who break American laws and endanger families.”