UPDATED: Guildmaster indicted for counterfeit UL stickers, files Chapter 11
Casual Living Staff -- Casual Living, December 17, 2012
According to the indictment, filed in the Western District of Missouri, "Guildmaster intentionally trafficked and attempted to traffic in goods, specifically portable lamps of various designs ... while knowingly using on and in connection with such goods counterfeit marks, namely spurious marks identical to and substantially indistinguishable from ‘Portable Luminaire' labels bearing the UL Mark, marks that were in use and registered on the principal register of the United States Patent and Trademark Office, the use of which counterfeit marks were likely to cause confusion, to cause mistake, and to deceive."
These charges represent a Class C felony, with maximum penalty of five years of probation and a $5 million fine, or twice the gain or loss, the indictment states. If convicted on any of the nine counts, the company also could face forfeiture of the seized inventory, of which the indictment estimated the domestic value at $1,936,190.
An official with Guildmaster said on Monday that the company continues to ship lamps and all other products in its line, conducting business as usual as the legal and financial matters progress.
UL is an independent product safety certification organization. UL certifies representative samples of products to be in compliance with its safety requirements, and conducts follow-up inspections of those products and their manufacturers. By way of contracts with participating manufacturers, UL authorizes the manufacturers to identify products meeting UL safety standards with labels bearing UL's federally-registered certification mark, consisting of the letters "UL" inside a circle. As a certification mark, the UL Mark on a product is a manufacturer's representation and advertisement to the public that the product met UL's safety requirements, the indictment states.
The indictment states that between 2009 and March 2012, Guildmaster imported into the United States shipments of lamps manufactured at the Dongguan Yangming Hardware Crafts Limited, a Chinese lamp factory that Guildmaster acquired in October 2011. On those lamps were affixed counterfeit labels, which the indictment described as "substantially indistinguishable from genuine ‘Portable Luminaire' labels bearing the UL Mark."
The indictment said that UL terminated its relationship with Guildmaster in 2007 after about 17 years because the company failed to pay outstanding invoices. It added that no contractual relationship ever existed between UL and Dongguan Yangming.
According to the indictment, U.S. Customs and Border Protection intercepted and seized 10 shipments of lamps bearing counterfeit labels between Jan. 10 and March 21, 2012, as well as raiding the company's Springfield, Mo. warehouse. Approximately 5,150 lamps bearing the counterfeit stickers were seized.
The indictment goes on to say that in February, the company, through its Chinese subsidiary, began to affix to some of its lamps genuine "Portable Luminaire" labels bearing the UL Mark, which had been provided by UL to another company for its exclusive use - labels which were not authorized for use on Guildmaster lamps. Three more seizures in February accounted for 567 lamps with genuine but unauthorized labels.
President and CEO Steve Crowder told Home Accents Today, prior to the indictment, that the Chapter 11 filing would be made to restructure the company's debt incurred after the seizures, which accounted for more than $900,000 in inventory, lost sales and a denial of surety bonds.
According to a statement from the company:
"It is well documented through CBP agent interviews of Guildmaster employees in the U.S. and China and through our documentation that the 'questionable stickers' were part of a process in existence at a factory that Guildmaster purchased in October 2011.
"The previous company owners believed that they were in compliance with U.S. laws by purchasing the stickers from an agency of the Chinese government. Guildmaster never implied or marketed that the lamps were UL-certified. The lamps are sold at market or through a print media with the lamp shade attached. The 'questionable sticker' is affixed to the lamp socket which is not visible when the lamps are purchased.
"To allege that we somehow used the UL certification or trademark to leverage the value of the UL trademark is ridiculous. If that were that case we would have not only advertised that the lamps were UL listed but we would have merchandised them so that the customer would be aware that they were UL listed. It is an extreme stretch to imply that this is a criminal activity."
Crowder said that that beginning in March, the government allowed the company to resume shipments of its lamps, without the offending sticker.
The Chapter 11 filing said that GuildMaster employs about 25 employees in Springfield and nearly 375 employees in Indonesia and China.
In 2011, its annual sales were more than $12.5 million and the company has more than 4,000 large and small retail accounts, the filing said. It lists about $3.4 million in assets and $3.5 million in liabilities. It also lists accounts receivable as of Dec. 11 at $399,260.
Its largest shareholder, according to the Chapter 11 filing, is SRC Holding, which owns about 40% of the company's shares.
In addition to its financial backers, factories and logistics providers, the company's top 20 unsecured creditors include its sales representation partners, In Detail of Dallas, J. Douglas of Atlanta and Casa Bella of Chicago; as well as its market showroom lease-holders, including Americasmart, Dallas Market Center and High Point's Commerce & Design Building for November 2012 lease payments.
This story is developing. Please continue to check HomeAccentsToday.com for updated information.
Furniture Today staff writer Heath Combs contributed to this article.