WASHINGTON, D.C. – The U.S. Consumer Product Safety Commission (CPSC) announced today that HMI Industries Inc., of Strongsville, Ohio, has agreed to pay a $725,000 civil penalty. The penalty agreement has been accepted provisionally by the Commission in a 2 to 1 vote.
The settlement resolves CPSC staff’s charges that the firm knowingly failed to report to CPSC immediately, as required by federal law, a defect involving Majestic 360 floor cleaners. HMI sold the floor cleaners nationwide from September 2004 through August 2006, for about $1,800. CPSC staff charged that the floor cleaners’ wiring can overheat, causing electrical arcing and melting, which poses a burn hazard. Additionally, staff charged that the firm underreported the number of incidents and injuries associated with the floor cleaners, which constituted a material misrepresentation to staff.
HMI did not file its full report with CPSC until February 2009. By that time, the firm had received approximately 2,000 reports of arcing, 120 consumer reports of overheating and property damage, and injuries to two consumers. However, HMI told CPSC staff that the firm knew of only 40 consumer complaints of overheating and damage to carpets, with no reports of injury. On April 29, 2009, HMI and CPSC announced the recall of 44,000 floor cleaners.
Federal law requires manufacturers, distributors, and retailers to report to CPSC immediately (within 24 hours) after obtaining information reasonably supporting the conclusion that a product contains a defect which could create a substantial product hazard, creates an unreasonable risk of serious injury or death, or fails to comply with any consumer product safety rule or any other rule, regulation, standard or ban enforced by CPSC.
In addition to paying a monetary penalty, HMI has agreed to implement and maintain a compliance program designed to ensure compliance with the safety statutes and regulations enforced by the Commission. HMI has also agreed to maintain and enforce a system of internal controls and procedures designed to ensure that:
- information required to be disclosed by the firm to the Commission is recorded processed and reported, in accordance with applicable law;
- all reporting made to the Commission is timely, truthful, complete and accurate; and
- prompt disclosure is made to HMI management of any significant deficiencies or material weaknesses in the design or operation of such internal controls that are reasonably likely to affect adversely, in any material respect, the company’s ability to record, process and report to the Commission.
HMI agreed to provide written documentation of such improvements, processes and controls, upon request of CPSC staff; to cooperate fully and truthfully with CPSC staff; and to make available all information, materials and personnel deemed necessary to staff to evaluate the company’s compliance with the terms of the agreement.
CPSC staff agreed to the settlement amount and terms, which include a $325,000 suspended portion of the penalty and monthly installment payments, in reliance upon HMI’s status as a small business, and its demonstration of and contractual representations regarding its inability to pay a greater penalty due to its financial condition. The Consumer Product Safety Act requires CPSC to consider the appropriateness of the penalty to the size of the business of the person charged, including how to address undue adverse economic impacts on small businesses.
HMI’s agreement to the settlement does not constitute an admission by HMI that HMI violated the CPSA.