DOJ Announces Second Corporate Plea Agreement for Violation Of Reporting Requirements Under the Consumer Product Safety Act

On August 5, 2025, the U.S. Department of Justice (DOJ) announced that an importer of portable air conditioners pleaded guilty to charges that it violated the reporting requirements under the Consumer Product Safety Act (CPSA). Royal Sovereign International, Inc. (Royal Sovereign), a New Jersey corporation, pleaded guilty to a criminal information stating that the company knowingly and willfully failed to report immediately to the U.S. Consumer Product Safety Commission (CPSC) that its portable air conditioners contained a defect that could create a substantial product hazard and an unreasonable risk of serious injury or death as was required under Section 15(b) of the CPSA. In connection with the guilty plea, Royal Sovereign must pay $395,786.48 in restitution to victims. Royal Sovereign also agreed to a civil settlement that includes a $16,025,000 civil penalty — the maximum civil penalty authorized by the CPSA — although all but $100,000 is suspended for inability to pay.

This marks the second time that a company has pleaded guilty to criminal late reporting charges under Section 15(b). In 2021, DOJ announced that Gree Electric Appliances Inc. of Zhuhai and a subsidiary entered into a deferred prosecution, and another subsidiary — Gree USA Inc. — pleaded guilty to charges that it delayed reporting defective humidifiers to CPSC despite knowing that they could catch fire. As we wrote previously, the Gree companies faced $91 million in monetary penalties and forfeitures. Two Gree executives were subsequently convicted at trial and received prison sentences.

Summary

DOJ’s information states that, between 2008 and 2014, Royal Sovereign sold more than 33,000 defective portable air conditioners. The portable air conditioners were defective because they contained a faulty drain motor that could short and catch fire, posing fire and burn hazards to consumers and a risk of serious injury or death.¹

On November 3, 2010, CPSC sent Royal Sovereign’s CEO Takwan Lim a letter to notify the company of an incident in which a Royal Sovereign portable air conditioner caught fire at a medical facility in Albuquerque, New Mexico. Royal Sovereign submitted a report to CPSC stating that it was aware of only two fires involving the model from the New Mexico incident, that the model was discontinued and contained no known defect, and that Royal Sovereign possessed no additional units. Through its investigation, however, DOJ learned that (1) from an internal email from July 2010, a Royal Sovereign employee informed the CEO that there had been at least 16 fires involving the portable air conditioners by the time that Royal Sovereign submitted its report to CPSC; and (2) Royal Sovereign continued selling the portable air conditioners for several more years, ending sales in 2014.

Under Section 15(b) of the CPSA, Royal Sovereign submitted a Full Report on August 17, 2021, which stated that the company was aware of at least 42 fires caused by the portable air conditioners. These fires included an August 2016 fire in Smithtown, New York, which resulted in the death of a 36-year-old mother and injuries to her two young children. CPSC and Royal Sovereign announced a voluntary recall of the portable air conditioners on December 22, 2021.

Since the recall, former CEO Takwan Lim died, and Royal Sovereign permanently ceased all operations related to consumer products.

As part of the company’s plea agreement with the U.S. Attorney’s Office for the District of New Jersey, the parties agreed that a criminal fine should not be imposed because Royal Sovereign is unable and unlikely to become able to pay the minimum fine set by the U.S. Sentencing Guidelines. Royal Sovereign agreed to pay $395,786.48 in restitution to compensate consumers who experienced bodily injury or property damage from the portable air conditioners. The plea agreement is subject to court approval.

Royal Sovereign also agreed to a civil settlement that included the maximum civil penalty of $16,025,000. Due to the company’s limited ability to pay the civil penalty, all but $100,000 was suspended, which is payable in four quarterly installments of $25,000. In addition to the monetary civil penalty, and similar to other settlement agreements in recent years, Royal Sovereign is required to submit annual reports of its compliance program for three years.

Key Takeaways

Both the criminal plea agreement and the civil settlement agreement show that CPSC and DOJ continue to prioritize enforcement of Section 15(b) of the CPSA. Both agencies appear willing to use all available tools — even in instances where the responsible officers or employees are no longer living and the company involved has permanently ceased all operations related to consumer products.

The $16 million penalty (although largely suspended) and criminal plea agreement demonstrate that CPSC, with DOJ’s support, continues to seek substantial penalties for late reporting violations where it believes warranted. The risk of such penalties should serve as a reminder for companies to be vigilant when assessing their Section 15 reporting obligations.

For questions about notification requirements under Section 15(b) of the CPSA, CPSC, and DOJ enforcement practices, or other product safety matters, please reach out to the authors of this post, who are part of Arnold & Porter’s leading Consumer Product Safety team and White Collar Defense & Investigations group.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.