When Silence Speaks: How Saying Nothing Led to a Defunct New Jersey Importer Pleading Guilty to Criminal Charges for Failing to Report to the CPSC

On August 5, 2025, Royal Sovereign International Inc. (Royal Sovereign), a defunct New Jersey importer of portable air conditioners, pled guilty to one count of willfully violating the Consumer Product Safety Act (CPSA) for its failure to report dangerous defects in portable air conditioners that had been linked to multiple fires and one death. The company also agreed to a civil settlement with the Department of Justice and the Consumer Product Safety Commission (CPSC) that included $395,786.48 in restitution to victims and a $16,025,000 civil penalty, which was suspended to $100,000 for inability to pay.

Background

The court documents revealed that Royal Sovereign and its affiliates imported and distributed approximately 33,570 portable air conditioners between 2008 and 2014. The portable air conditioners allegedly contained three separate drain motor defects that, individually and together, could short-circuit and ignite fires. The government emphasized that a predecessor company to Royal Sovereign knew about its reporting responsibilities and previously paid a civil penalty for failure to report on a different product. The government further alleged that in July 2010 Royal Sovereign was aware of approximately 16 fires caused by its portable air conditioners, but submitted a false and misleading report to the CPSC in November 2010 that it was aware of only 2 fires. Even though at least 12 more fires occurred after Royal Sovereign’s false and misleading submission to the CPSC, the company did not provide information about the defective portable air conditioners to the CPSC until June 2021. The defective portable air conditioners were recalled on December 22, 2021.

Related Civil Penalty Paid by Retailer

Almost two years before Royal Sovereign pled guilty and agreed to pay a civil penalty, BJ’s Wholesale Club, Inc. (BJ’s)— one of the retailers of the same portable air conditioners—entered into a settlement agreement with the CPSC to pay a $9,000,000 civil penalty for failure to immediately report to the CPSC that the portable air conditioners manufactured by Royal Sovereign and sold by BJ’s contained a defect that could amount to a substantial product hazard or otherwise create an unreasonable risk of serious injury or death to consumers. The CPSC alleged the retailer, from which the victim of a house fire in 2016 purchased the unit, possessed information that reasonably supported the conclusion that the air conditioners contained a defect that created a substantial product hazard and/or an unreasonable risk of serious injury or death. The CPSC particularly called out in the settlement agreement the fact that the retailer had issued a stop use notice to consumers who had purchased the air conditioners advising that they do not meet “safety standards.” BJ’s maintained that it “relied upon and understood the manufacturer of [the portable air conditioners], Royal Sovereign, would report to the CPSC.”

Key Takeaway

While the CPSC has not historically used criminal enforcement as much as it has used civil enforcement, this plea—along with the recent sentencing of the Gree USA executives—serves as a stark reminder that criminal penalties may be assessed against companies that manufacture, import, distribute, or sell consumer products for failing to report known safety incidents in a timely manner. Moreover, these civil penalties are a reminder that if the CPSC believes the record shows that a retailer had information that triggered reporting to the CPSC, failed to timely report it, and did not have actual knowledge that the CPSC had been adequately informed of the potential issue by either the manufacturer or distributor, the CPSC will not hesitate to seek enforcement against a retailer first. We urge these companies and their executives to review our list of lessons learned from this case, previously covered by our team, to mitigate enforcement action-related risks.