Federal Probe of Chinese Drywall Falls Short
For homeowners who are grappling with the trauma caused by defective Chinese drywall, it’s clear: The federal government is woefully unequipped to help them with a product defect so costly.
Palm Coast, FL – December 14, 2010 – For the thousands of U.S. homeowners who are grappling with the financial and emotional trauma caused by defective Chinese drywall, one thing is now clear: The federal government is woefully unequipped to help them with a product defect as expensive and widespread as this one.
Government agencies lack the authority to force Chinese drywall manufacturers or any other foreign companies to recall defective products, reimburse people for problems those products may cause, or even provide basic information about how they were made. And no single federal agency is officially responsible for regulating residential indoor air quality or determining how it is affected by building products.
Because of these gaps, the Consumer Product Safety Commission, the agency that is leading the federal drywall task force, still hasn’t figured out exactly what is causing the drywall to emit so much sulfur gas that it corrodes electrical wiring and triggers breathing problems, bloody noses and headaches. It also hasn’t fully exercised the powers it does have, including the power to sue the U.S. companies that imported, built or distributed the drywall in an effort to make them pay to repair the homes.
The government’s failure has left the homeowners, many of whom are facing foreclosure and bankruptcy, to fend for themselves.
A database compiled by ProPublica and the Sarasota Herald-Tribune shows that at least 6,944 homeowners are seeking help for problems created by contaminated drywall. The database contains addresses from court records in consolidated lawsuits filed in New Orleans federal court and from property tax records in special programs set up for drywall victims by Florida, Louisiana and Virginia. Because many homeowners have taken both steps, the database has been adjusted to eliminate duplications.
The cost of repairing an average-sized house — which means replacing all the drywall, the wiring and the air-conditioning system — usually runs about $100,000. That’s far more than most of the dozens of homeowners interviewed by ProPublica and the Herald-Tribune in the past year can afford. Some of the families interviewed have simply abandoned their homes.
No segment of the population has been spared. Victims range from Florida Lt. Gov. Jeffrey Kottkamp, whose million-dollar home sits vacant as his case winds its way through the courts, to low-income New Orleans families who bought homes from Habitat for Humanity.
Local governments also have suffered. Preliminary property tax estimates from just 20 of Florida’s 67 counties show that at least $650 million worth of homes and condos can now be valued at nearly zero under the state’s tax relief program for drywall victims.
CPSC officials say the agency is doing as much as it can for the homeowners, given the limits of the authority granted to it by Congress. Three CPSC officials spoke at length for this story but declined to be identified by name because the investigation is still ongoing. Only the agency’s spokesman, Scott Wolfson, spoke on the record.
Wolfson said the CPSC’s goal now is to "unwind" the drywall investigation and begin "furthering the hand-off to those who can provide direct assistance." He said that could mean relying on the homeowners’ lawsuits to jar loose funding or passing the ball to Congress to allocate money.
But Congress has shown little inclination to take action on this matter. Last year some lawmakers talked about introducing legislation to assist homeowners and held several hearings. But the piece of legislation considered most likely to pass this year — the Foreign Manufacturer’s Legal Accountability Act — was never brought to the floor for a vote, and not a single hearing has been held about drywall this year.
Former CPSC officials and others close to the investigation suggested that the agencies haven’t done as much as they could to help the affected families.
The CPSC hasn’t asked the Centers for Disease Control to conduct health or epidemiological studies to determine the health effects of continuous exposure to the drywall’s sulfur gases, particularly among vulnerable populations like young children, the elderly and those with conditions such as asthma.
The task force has yet to establish final standards for repairing the homes, a delay that has led to confusion and allowed some contractors to take shortcuts that could leave homeowners vulnerable to continued problems.
No guidelines have been established for physically dealing with contaminated drywall — how it should be disposed of, or even whether the workers who are removing it should wear protective gear.
Colleen Stephens, a Virginia woman who moved out of her tainted home last year, is so frustrated with the government’s inaction that last week she led a rally of drywall victims in Washington, D.C.
"They act like there’s no urgency at all, while we’re the ones who have to bear the burden of dealing with this disaster," Stephens said. "We just can’t hold on forever. We’ve been fighting so long to stay strong, but it’s just draining us emotionally and financially."
CPSC’s Powers Limited
Chinese drywall presents one of the largest and most complicated defective-product problems the government has ever faced.
The CPSC doesn’t have the power to order any company, U.S. or foreign, to recall its products. The agency can try to persuade them to issue voluntary recalls — or it can sue them to try to force a recall. But foreign manufacturers are under no legal obligation to participate in U.S. court proceedings. And if they do participate and lose, they can simply refuse to pay the final judgment, as international trade attorneys say Chinese manufacturers have routinely done in the past.
"We are not yet at a point in our international jurisprudence where each country is willing to participate in another’s legal processes," said Eric Stone, the former director of the legal division office of compliance and field operations of CPSC. "The governments of foreign countries simply won’t enforce our judgments on companies within their borders."
Pamela Gilbert, a former CPSC executive director in the Clinton administration, said the problem runs through the entire regulatory system.
"Our current consumer protection laws don’t adequately address product liability in a globalized economy," Gilbert said. "And these problems are only going to get worse in the future."
The problem is recognized by lawmakers as well as regulators.
"They can avoid liability, and there’s almost nothing we can do about it right now," said Sen. Mark Warner, D-Va., whose office is helping Virginia drywall victims negotiate with their lenders. "You would have some of the same problems if they were from any other country. It’s something we can’t continue to ignore."
Some members of Congress tried to address this regulatory void with the Foreign Manufacturers Legal Accountability Act, which would have required any company that exports products to the United States to have a U.S.-based registered agent. That agent would be liable for any problem the product might cause and would participate in lawsuits.
In testimony supporting the legislation, CPSC attorney Jeremy Baskin said it would help the agency extract valuable information from foreign companies — a problem that has slowed the progress of the drywall investigation.
"In a number of cases, CPSC staff has attempted to send requests for information to Chinese drywall manufacturers, only to have these requested [sic] returned to the commission — refused and unopened," Baskin said.
But trade groups representing U.S. import and export companies lobbied hard against the bill, arguing that it would create an unnecessary trade barrier and that other countries might enact similar rules that would force U.S. companies to abide by decisions made by foreign courts. The European Union also opposed the bill, saying that it would make it difficult for small and medium-sized manufacturers to trade with the United States.
In the past, the CPSC has persuaded U.S. companies that distributed defective foreign products to voluntarily recall them and provide refunds or replacements. But those cases involved portable products like cribs, toys or toasters, not a cumbersome material like drywall, which can be removed only by gutting the interior of a home.
In October Wolfson, the CPSC spokesman, told ProPublica and the Herald-Tribune that U.S. companies involved in the drywall distribution chain weren’t willing to participate in a voluntary recall. When asked about those refusals again last week, Wolfson said he couldn’t disclose details related to that part of the investigation.
The CPSC could sue the U.S. companies to try to force them to participate in a recall, similar to what homeowners are doing in private lawsuits. Wolfson said in October that the agency hadn’t taken that step because it "would need a finding of a health risk — that health is at risk because of the drywall."
But the CPSC has not formally asked the Centers for Disease Control to conduct a health study, a decision that has surprised former CPSC officials and enraged homeowners.
"The health impact claims have been fairly severe. One would think that someone in some position of power would ask the CDC to do this," said Gilbert.
Gilbert said the CDC could have done the study on its own, or a member of Congress could have asked for one. She also said that a lack of a negative health finding was a flimsy rationale for not pursuing litigation.
"Corrosion of appliances and wires and smoke alarms is, in and of itself, a safety issue," Gilbert said. "Besides, there seems to be enough initial evidence of a health risk that the CPSC would have plenty to at least file a complaint."
Last week Wolfson said the CPSC is waiting for more tests to determine whether the corroded electrical equipment poses a fire hazard.
‘A Really Bad Answer’
The Chinese drywall problem has laid bare another longstanding and controversial point of confusion among regulators: Which agency is actually responsible for dealing with residential indoor air quality problems caused by building materials?
The government has never established federal indoor air quality rules or standards for homes. When either the CPSC or the EPA have been called upon to deal with indoor air pollution complaints, they have few guidelines to turn to for advice.
Gilbert said indoor air quality has been a regulatory black hole for decades.
"When I started doing product safety in the 1980s, people were always asking if it was CPSC or EPA, and it would fall through the cracks. It was kind of both," she said. "’Both’ is a really bad answer when it comes to getting anything done, because ‘both’ often means nobody."
E-mails obtained by the Herald-Tribune and ProPublica under the Freedom of Information Act show confusion within the drywall task force over exactly this point.
Barnes Johnson, an official in the EPA’s Office of Air and Radiation, sent an e-mail to drywall team members in April 2009 saying it was "very important to recognize that EPA’s task" was "not to determine why this is happening" or "whether the exposures that people are experiencing are of concern."
Instead, he said, that was for the CPSC and Centers for Disease Control to worry about.
David Wright, director of the EPA’s Environmental Response Team, responded that the EPA was "definitely not focusing on product defects, corrosion and engineering issues" and that it was the responsibility of other agencies to do a "risk assessment" of the drywall. The "bottom line," he wrote, was that EPA "will stay in our lane."
In an interview Wright said his unit usually deals with air pollution that enters homes from hazardous waste sites or industrial facilities — not with contamination generated by the houses themselves.
"It’s not that drywall is an unusual product, but the route by which it was creating a problem, that was unique," Wright said. "It was more difficult to figure out how to deal with it."
The infighting among the federal agencies has infuriated members of Congress who represent states where the drywall problem is concentrated.
"It’s been this footsie game, where it’s been strung out for this whole period of time," said a congressional aide who spoke on the condition he not be named. "We had to push and push the CPSC and the other agencies. At first they said, ‘We need more time.’ But now, it’s past the point where that’s an excuse."
Scope Underestimated
One of the biggest challenges the government has faced in its investigation has been gauging how many homes have been affected by defective drywall.
The CPSC says shipping records show that 6.5 million sheets of Chinese drywall have been imported into more than a dozen U.S. ports since December 2005. It determined that 422,000 of those sheets were stockpiled and never used.
That leaves about 6.1 million sheets, which building experts say is enough to build about 61,000 homes. But CPSC officials estimate that only about 6,500 homes were built with Chinese drywall.
In order for that to be true, however, roughly 5.5 million sheets of Chinese drywall would have had to have been wasted during construction or damaged in transit.
Tracking where in the United States the drywall was shipped has also been a challenge.
Many of the ports of entry were in the South, where the hot, humid climate is thought to exacerbate the release of sulfur gases. But some ports were in states and areas with cooler or drier climates, including New York, Southern California, Chicago and Washington. Earlier this year, a New York builder filed a drywall lawsuit after discovering foul smells and corrosion in a luxury model home built with the material.
CPSC officials said they have tried to track the shipments to specific homes, but they often failed because many businesses in the drywall distribution chain do not keep detailed records.
"The problem is the material goes into a commodity status," a CPSC investigator said. "When it gets down to the supply company level, it basically says half-inch drywall. It doesn’t say which brand."
Suppliers routinely stocked Chinese and domestic brands side by side, which explains why many houses ended up with some of both. When a builder called, the supplier pulled off whatever was in stock, often without recording what brand or brands were being put on the truck.
The CPSC also has tried another approach: contacting builders directly and asking how many homes they built with Chinese drywall and where the homes are located. But builders are "cooperating reluctantly," a CPSC official said. "Honestly, they don’t like it."
The official said that while tracking down all the Chinese drywall is still a "priority," in the end it simply might not be possible.
Scope of Problem Still Unknown
The CPSC has also tried to get a grasp of the problem by counting consumer complaints.
The running total on the agency’s website this week showed it had received 3,731 complaints from residents in 40 states, the District of Columbia, American Samoa and Puerto Rico. That running total is used in most media reports and by government officials to describe the scope of the problem.
But buried elsewhere on the website is another estimate — 6,300 — that the agency began using last summer in its dealings with Congress. In interviews, CPSC officials talked about a slightly higher number of 6,500. Wolfson said that the larger number is based on all the records the agency has gathered, including not only the complaints but also data from builders and suppliers, tax records and other sources.
The CPSC declined to make the information used to reach that larger number available to ProPublica and the Herald-Tribune. It also refused to provide breakdowns by state, region or county.
The database of 6,944 addresses that ProPublica and the Herald-Tribune created is larger than either of the CPSC’s estimates and was created independently from the CPSC information. It contains only addresses that can be cross-referenced to avoid duplication.
But the true number of affected homes is likely far larger than even the database indicates.
The database does not include homes mentioned in 211 complaints the CPSC has received from other states or all of the 500 to 700 homes built with suspect Chinese drywall used by and distributed by New Orleans Area Habitat for Humanity. It also does not include addresses of people in states that do not have tax relief programs established for drywall victims — or homeowners who filed lawsuits in state courts, suits that could number as many as 2,000.
Even without these addresses, the ProPublica and Herald-Tribune database reveals striking disparities when compared to the consumer complaint county-by-county data the CPSC provided in late October.
In Florida’s Palm Beach County, the database shows more than 740 homeowners have defective drywall, while the CPSC’s count is 185. In Collier County, the database shows that 264 homes are affected, while the CPSC shows only 44. In Lee County, Fla. — the most severely impacted county in the database, with 1,546 affected homes — the CPSC showed only about 522.
This lopsided pattern is not limited to Florida. In Baldwin County, Ala., the news organizations’ database shows 209 affected households, while the CPSC’s official total is 43. In Jackson County, Miss., the disparity is 113 vs. 35; in St. Tammany Parish, La., 281 vs. 208.
In a written statement to ProPublica and the Herald-Tribune, Wolfson, the CPSC spokesman, defended the CPSC’s estimate.
"While determining the total count of drywall boards has been a challenging part of the investigation, we remain confident that our statements to the Congress and homeowners accurately reflect the scope," he said.
Federal Remediation Standards Lacking
The CPSC’s main safety concern in the drywall investigation has been the risk of fire from corroded wiring, gas lines and fire detection equipment.
On April 2, the agency released a three-page document offering preliminary recommendations for how contractors should repair the damage. But some of the guidelines are so vague and contradictory that they have created a wide disparity in the work.
For instance, the document lists the components that need to be removed, including all wiring and fire detection equipment and gas lines. But many builders and contractors ignore that recommendation because a subsequent paragraph says federal officials might reconsider their standards when "additional study" is completed.
A more comprehensive set of guidelines has been issued by the federal judge who is overseeing the national drywall litigation in New Orleans. That 100-plus-page document from U.S. District Court Judge Eldon E. Fallon says all the drywall should be removed, along with the electrical system, air-conditioning and heating systems, copper pipes and other appliances that could be damaged by corrosion.
Many contractors are using the CPSC’s guidelines as a baseline and Judge Fallon’s guidelines as the "ideal" fix and then picking something in between, the Herald-Tribune and ProPublica investigation found. Some are not even following the minimum CPSC guidelines.
"Everything you can imagine is going on out there," said Chris Pacitto, a branch manager for GFA International, a Florida engineering firm that has consulted on numerous Chinese drywall repair projects. "There’s everything from complete remediations to minor band-aids being put on homes."
Pacitto said he and many companies he has dealt with consider removing the wiring to be unnecessary and that some continued to leave the wiring behind long after the CPSC’s initial guidelines were released.
"Forget just about houses that I’ve worked on or my company has worked on, there are hundreds of houses out there where this is common practice in the remediation industry,"Pacitto said. "I don’t want to say it’s happening on all of the houses, but absolutely it’s happening out there."
Pacitto thinks the final guidelines will probably eliminate the wiring-removal provision. He said, "it would help if CPSC said, ‘We’ve done the study, and we’ve determined that the wiring does indeed need to be removed.’"
Wolfson, the CPSC spokesman, said the agency’s interim guidelines are "based on good science" and that the CPSC will "continue to pursue all options as we await the results of our remaining studies, which we will use to finalize our remediation protocols."
Wolfson said he does not know when those final standards will be released.
‘They Don’t Want to Deal With This’
The ambiguities in the repair standards have left homeowners confused and frustrated. Dan Tibbetts, who lives in a large housing development in Manatee County, Fla., thought his problems were over when his builder, Miami-based Lennar Corp., began tearing out the drywall in his home and others on his street in early 2009. In exchange, he agreed to waive all future legal rights to sue Lennar.
But the protocol Lennar was using at the time, developed with environmental consultant Environ International, did not include taking out all the wiring. Lennar and Environ have since changed the protocol and now remove wiring from contaminated homes. But Lennar has refused to replace the wiring in the Tibbetts home and two dozen or so other Florida houses that were among the first to be repaired.
"Lennar is just ignoring us, they don’t want to deal with this," Tibbetts said. "My wife and I look at each other and ask, what’s going to happen if our house burns down a year from now, or five years from now? It’s just an awful feeling, knowing those things are still back behind the walls."
Lennar’s regional vice president, Darin McMurray, did not return calls seeking comment about the Tibbetts’ home. A company spokesman provided a one-sentence written statement: "We stand behind our drywall repairs and will continue to make any necessary repairs, just as we promised our homeowners."
Earlier this year, Tibbetts said Lennar replaced the air-conditioning coils in several homes on his street, including his. He said he was told that the repair had nothing to do with any lingering problems from Chinese drywall but was instead caused by something Lennar called "dirty sock syndrome."
"I thought it was a joke. Something like that exists? But that’s what they held to," said Tibbetts, who now worries that he will never be able to sell his home.
"You’ve got the United States government and the courts saying those wires have to go, that they’re a threat to safety. Who’s going to buy a house with old Chinese drywall wires in it? I wouldn’t," Tibbetts said.
In Englewood, Fla., about an hour south of Tibbetts’ home, 11 houses built with Chinese drywall were taken over by a local bank and then purchased last fall by Habitat for Humanity of Charlotte County. The nonprofit worked on the homes and then sold them to low-income buyers.
But the repairs, made before the CPSC issued its interim guidelines, did not include removing the wiring.
Michael Foreman—a Sarasota, Fla., construction consultant who has become one of the foremost experts on Chinese drywall repairs—said that when Habitat was repairing the Englewood homes, it allowed his company to test an experimental treatment that he hoped would eliminate odors during reconstruction. When he saw that the old wiring had been left in place, Foreman said he warned Habitat officials to remove it.
"They wanted me to endorse their method, and I said no way," Foreman said.
Mike Mansfield, executive director of Charlotte County Habitat for Humanity, said nobody told his organization to remove the wiring. He said Habitat decided that cutting back the wires’ ends at outlets would suffice and that he is still comfortable with that decision.
"I don’t see any problem with those wires," he said. "There’s no safety issue in those homes."
The CBS News Investigative Unit contributed research for this report.
Source: Propublica
Sec 15(b) of CPSA
Defective drywall is a consumer product just like aluminum wiring was back in the 70s. CPSC ordered a re-call.
There is no question this type of drywall is defective and comes under CPSC’s jurisdiction.
Any imported product must have an "importer of record". (distributor)
Section 15(b) of the Consumer Product Safety Act is the applicable regulation to address this issue.
CPSC have the authority to "re-call" (remove it from the house at the importer’s expense)the defective product.
Why this didn’t happen is a mystery to me. Somebody is protecting the importers and manufacturers of the defective product.
Another Failed Fed Bureaucracy
This is more clear evidence that huge federal government just doesn’t work anymore, if it ever did, more reason for the states to push back and re-take control of more of what goes on in each individual state. Jefferson was right!!