08-491. Vornado Liquidating Trust for and on Behalf of Vornado Air Circulation Systems, Inc., a Trust, Provisional Acceptance of a Settlement Agreement and Order

AGENCY:

Consumer Product Safety Commission.

ACTION:

Notice.

SUMMARY:

It is the policy of the Commission to publish settlements which is provisionally accepts under the Consumer Product Safety Act in the Federal Register in accordance with the terms of 16 CFR 1118.20(e0). Published below is a provisionally-accepted Settlement Agreement with Vornado Liquidating Trust for and on behalf of Vornado Air Circulation Systems, Inc., a Trust, containing a civil penalty of $500,000.

DATES:

Any interested person may ask the Commission not to accept this agreement or otherwise comment on its contents by filing a written request with the Office of the Secretary by February 20, 2008.

ADDRESSES:

Persons wishing to comment on this Settlement Agreement should send written comments to the Comment 08-C0003, Office of the Secretary, Consumer Product Safety Commission, 4330 East West Highway, Room 502, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT:

Ronald G. Yelnik, Trial Attorney, Office of Compliance and Field Operations, Consumer Product Safety Commission, 4330 East West Highway, Bethesda, Maryland 20814-4408; telephone [phone].

SUPPLEMENTARY INFORMATION:

The text of the Agreement and Order appears below.

Dated: January 30, 2008.

Todd A. Stevenson,

Secretary.

United States of America Consumer Product Safety Commission, CPSC Docket No. 08-C0003

In the Matter of Vornado Liquidating Trust for and on Behalf of Vornado Air Circulation Systems, Inc. a Trust

Settlement Agreement and Order

1. This Settlement Agreement is made by and between the staff (the “staff”) of the U.S. Consumer Product Safety Commission (the “Commission”) and the Vornado Liquidating Trust, a trust acting for and on behalf of Vornado Air Circulation Systems, Inc., a dissolved Kansas corporation, and established for the sole benefit of the corporation's shareholders, in accordance with 16 CFR 1118.20 of the Commission's Procedures for Investigations, Inspections, and Inquiries under the Consumer Product Safety Act (“CPSA”). This Settlement Agreement and the incorporated attached Order resolve the staff's allegations set forth below.

The Parties

2. The Commission is an independent federal regulatory agency responsible for the enforcement of the CPSA, 15 U.S.C. 2051-2084.

3. Vornado Air Circulation Systems, Inc. was a corporation organized and existing under the laws of the State of Kansas, with its principal corporate office located in Andover, Kansas. On December 29, 2006, Vornado Air Circulation Systems, Inc. ceased operations and sold most of its operating assets to a private equity group which formed a new company, Vornado Air LLC, a Delaware company. Vornado Air Circulation Systems, Inc.'s remaining assets and its proceeds from the asset sale were assigned to the Vornado Liquidating Trust, which was established as of December 29, 2006, for the purpose of satisfying Vornado Air Circulation Systems Inc.'s remaining liabilities, including the claims asserted by the Commission which are the subject of this Settlement Agreement. Vornado Air Circulation Systems, Inc. was legally dissolved in September 2007. Vornado Air Circulation Systems, Inc. and the Vornado Liquidating Trust are hereinafter referred to collectively as “Vornado” or the “firm.”

4. At all times relevant herein, Vornado designed, manufactured and sold portable electric heaters, including those that are the subject of this Settlement Agreement and Order.

Staff Allegations

5. Between July 1991 and January 2004, Vornado manufactured and sold approximately one million of the subject portable electric heaters, model numbers 180VH ®, Intellitemp ®, EVH ® (collectively, “Heaters” or “Products”), which were sold at retailers and distributors nationwide as well as through Vornado's Web site, for between $50 and $120.

6. The Heaters are “consumer product(s)” and, at the times relevant herein, Vornado was a “manufacturer” of “consumer product(s),” which were “distributed in commerce” as those terms are defined or used in sections 3(a)(1), (4), (11) and (12) of the CPSA, 15 USC 2052(a)(1), (4), (11) and (12).

7. The Heaters are defective because a faulty electrical connection can cause the Product to overheat and stop working, thereby posing a fire hazard to consumers. More specifically, certain of the Heaters are defective and pose a fire hazard to consumers because they contain a faulty crimp involving insulated connectors (“quick connects”), a flaw which can cause the Heaters to overheat.

8. Vornado received its first report of an overheating incident in January 1993. By the end of 1993, Vornado knew of at least 22 reports of Heater incidents involving melting, smoking, burning, actual fire or the emission of flame.

9. On or about October 27, 1997, Vornado changed the design of its Heaters to incorporate insulated quick connects on the white wires between the heating element and the switch. The redesigned Heaters were sold from the fall of 1998 through 2003.

10. Although Vornado had received reports of Products overheating prior to the design change described in paragraph 9, the firm asserts that this design change caused the faulty crimp problem which resulted in the majority of the overheating incidents that eventually came to Its attention.

11. After implementing the design change in question, Vornado received many reports of over-heating incidents with the Heaters, some of which involved fires and the emission of flames. These reports continued for several years thereafter.

12. Despite being aware of the information set forth in paragraphs 5 through 11, Vornado did not report to the Commission about the overheating issue involving the heaters until February 20, 2004, and even then only when requested to do so by the Commission staff.

13. By the time of its February 20, 2004 report to the CPSC, Vornado was aware of at least 300 reports of overheating incidents involving the subject Heaters. More than 100 of these incident reports involved Heaters catching fire and/or emitting flames, while the remainder related to units burning, melting and smoking.

14. Although Vornado had obtained sufficient information to reasonably support the conclusion that the Heaters contained a defect which could create a substantial product hazard, or created an unreasonable risk of serious injury or death, it failed to inform the Commission of such defect or risk as required by sections 15(b)(2) and (3) of the CPSA, 15 U.S.C. 2064(b)(2) and (3). In failing to do so, Vornado “knowingly” violated section 19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4), as the term “knowingly” is defined in section 20(d) of the CPSA, 15 U.S.C. 2069(d).

15. Pursuant to section 20 of the CPSA, 15 U.S.C. 2069, Vornado is subject to civil penalties for its failure to report as required under section 15(b) of the CPSA, 15 U.S.C. 2064(b).

Response of Vornado

16. Vornado contests and denies the staff's allegations. Vornado asserts that it acted responsibly and reasonably to investigate and respond to incident reports it received involving the Products, including its implementation of a successful product recall in cooperation with the Commission on August 3, 2004. Vornado denies it was aware of facts that arguably could have given rise to a reporting obligation under the CPSA until the time it actually filed a report with the Commission on February 20, 2004. Likewise, the firm denies that any alleged violation of the CPSA's reporting requirements was committed “knowingly.”

17. Vornado has entered this settlement in order to resolve this claim without the expense and distraction of litigation.

Agreement of the Parties

18. The commission has jurisdiction over this matter and over Vornado under the CPSs, 15 U.S.C. 2051-2084.

19. In settlement of the staff's allegations, Vornado agrees to pay a civil penalty of five hundred thousand dollars ($500,000.00) within twenty (20) calendar days of receiving service of the Final Order of the Commission accepting this Settlement Agreement. This payment shall be made by cashier's check payable to the order of the United States Treasury.

20. The parties enter this Settlement Agreement for settlement purposes only. the Settlement Agreement does not constitute an admission by Vornado or a determination by the Commission that Vornado violated the CPSA's reporting requirements.

21. Upon provisional acceptance of this Settlement Agreement and Order by the Commission, the Commission shall place this Agreement and Order on the public record and shall publish it in the Federal Register in accordance with the procedure set forth in 16 CFR 1118.20(e). If the commission does not receive any written requests not to accept the Settlement Agreement and Order within 15 calendar days, the Agreement and Order shall be deemed finally accepted on the 16th calendar day after the date it is published in the Federal Register, in accordance with 16 CFR 1118.20(f).

22. Upon final acceptance of this Settlement Agreement by the Commission and issuance of the Final Order, Vornado knowingly, voluntarily and completely waives any rights it may have in this matter to the following: (i) An administrative or judicial hearing; (ii) judicial review or other challenge or contest of the commission's actions; (iii) a determination by the Commission as to whether Vornado failed to comply with the CPSA and the underlying regulations; (iv) a statement of findings of fact and conclusions of law; and (v) any claims under the Equal Access to Justice Act.

23. The Commission may publicize the terms of the Settlement Agreement and Order.

24. This Settlement Agreement shall apply to, and be binding upon Vornado and each of its successors and assigns.

25. The commission's Order in this matter is issued under the provisions of the CPSA, 15 U.S.C. 2051-2084, and a violation of the Order may subject those referenced in paragraph 24 above to appropriate legal action.

26. This Settlement Agreement may be used in interpreting the Order Agreements, understandings, representations, or interpretations made outside of this Settlement Agreement and Order may not be used to vary or to contradict its terms.

27. This Settlement Agreement and Order shall not be waived, changed, amended, modified, or otherwise altered, without written agreement thereto executed by the party against whom such amendment, modification, alteration, or waiver is sought to be enforced, and approval by the Commission.

28. If, after the effective date hereof, any provision of this Settelement Agreement and Order is held to be illegal, invalid, or unenforceable under present or future laws effective during the terms of the Settlement Agreement and Order, such provision shall be fully severable. The rest of the Settlement Agreement and Order shall remain in full effect, unless the commission and Vornado determine that serving the provision materially changes the purpose of the Settlement Agreement and Order.

The Vornado Liquidating Trust for and on Behalf of Vornado Air Circulation Systems, Inc.

Dated: January 14, 2008.

By: Charles Wear,

Co-Trustee, 2705 West 112th Street, Leawood, Kansas 66211.

Dated: January 14, 2008.

By: Kay Reed,

Co-Trustee, 14021 E. Whitewood, Wichita, Kansas 67230.

Dated: January 15, 2008.

By Christopher Smith,

Sonnenschein Nath & Rosenthal LLP, 1301 K Street, NW., Suite 600, East Tower, Washington, DC 20005-3364, Counsel for the Vornado Liquidating Trust.

U.S. CONSUMER PRODUCT SAFETY COMMISSION.

John Gibson Mullan,

Assistant Executive Director, Office of Compliance and Field Operations.

Dated: January 17, 2008.

By: Ronald G. Yelenik,

Acting Director,

M. Reza Malihi,

Trial Attorney, Legal Division, Office of Compliance and Field Operations.

United States of America Consumer Product Safety Commission, CPSC Docket No. 08-C0003

In the Matter of Vornado Liquidating Trust for and on Behalf of Vornado Air Circulation systems, Inc., a Trust

Order

Upon consideration of the Settlement Agreement entered into between the Vornado Liquidating Trust, a trust acting for an on behalf of Vornado Air Circulation Systems, Inc., a dissolved Kansas corporation, and established for the sole benefit of the corporation's shareholders (collectively, “Vornado”), and the staff of the U.S. Consumer Product Safety Commission (the “Commission”), and the Commission having jurisdiction over the subject matter and over Vornado, and it appearing the Settlement Agreement is in the public interest, it is

Ordered, that the Settlement Agreement be, and hereby is, accepted; and it is

Further ordered, that Vornado shall pay a civil penalty in the amount of five hundred thousand dollars ($500,000.00). This payment shall be made payable to the order of the United States Treasury within twenty (20) calendar days of service of the Final Order of the Commission upon Vornado. Upon the failure of Vornado to make full payment in the prescribed time, interest on the outstanding balance shall accrue and be paid at the federal rate of interest under the provisions of 28 U.S.C. section 1961(a) and (b).

Provisionally accepted and Provisional Order issued on the 30th day of January, 2008.

By Order of the Commission:

Todd A. Stevenson,

Secretary, Consumer Product Safety Commission.