Supplier, Maker Knew Of Defective Drywall Years Ago

A Florida homeowner displays the corrosionon her air conditioner's coils caused by Chinese drywall. i i

A homeowner in Parkland, Fla., displays the black dust that is covering the copper tubes in the air conditioner. Chinese drywall was used in the construction of her house and is now causing problems, including corroding copper pipes and wiring, and the house has a smell. J. Pat Carter/AP hide caption

itoggle caption J. Pat Carter/AP
A Florida homeowner displays the corrosionon her air conditioner's coils caused by Chinese drywall.

A homeowner in Parkland, Fla., displays the black dust that is covering the copper tubes in the air conditioner. Chinese drywall was used in the construction of her house and is now causing problems, including corroding copper pipes and wiring, and the house has a smell.

J. Pat Carter/AP

Years before it was made public, manufacturers, distributors and builders knew there was a big problem with imported drywall from China, according to documents introduced at a Miami trial. The problem with the drywall has affected thousands of homeowners.

During the building boom between 2004 and 2007, in Florida, Louisiana and other states, there was a drywall shortage. Distributors looked outside the United States and imported a half-billion tons of drywall from China.

It was sold by distributors like Banner Supply — the company that provided the drywall for a home built for Armin and Lisa Seifart.

Attorney Ervin Gonzalez is representing the Seifarts in a case against Banner Supply being heard in Miami. The Seifarts moved into their new home in 2008 and soon realized it had a funny smell, Gonzalez says.

"Then they start noticing that their air conditioning coils were turning black, and that their appliances started to fail," Gonzalez says. "And they were curious as to why that's happening in a new home."

A few months later, Gonzales says, the Seifarts began seeing articles about problems associated with Chinese drywall, and they realized they were having the same issues.

A New Twist In The Case

In the past two years, it's become an all-too-common story — homeowners forced from their homes by the smell and corrosive effects of Chinese drywall. Tens of thousands of homes may be affected in what's become the largest defective building products case ever.

But with this trial, there's something new. The Seifarts moved into their home in 2008. Gonzales says that was two years after the problem with Chinese drywall had been identified by Banner Supply.

"There's clear evidence in the record that they knew in 2006 about this problem, and they didn't become the hero of the homeowners by preventing them from buying homes with Chinese drywall," Gonzales says of Banner.

Correspondence introduced at the trial shows that by late 2006, subcontractors, builders, Banner Supply and the manufacturer, Knauf, knew the drywall was tainted.

In one e-mail, Knauf's lead scientist, Hans-Ulrich Hummel, writes, "Of course, I am aware of big problems with Knauf boards from China."

Eventually, Knauf reached a settlement with Banner Supply to replace all the Chinese drywall with drywall manufactured in the U.S.

In return, Banner agreed to keep all details of the settlement — and information about the tainted drywall — confidential.

At the trial in Miami — the first Chinese drywall case before a jury — Banner Supply's lawyer, Peter Spillis, said the company was reassured by Knauf that the defective drywall was an isolated case. By returning it, he says, Knauf thought it had solved the problem.

"They think that it's over," Spillis told the jury. "Maybe it was a bad batch. 'We've taken care of those folks. We're not selling any more board.' They think it's over."

As it turned out, Banner Supply's defective drywall wasn't an isolated case, and the crisis was just beginning.

'Well-Known' Problem Swept Under Carpet

Banner isn't disputing the contention that it should pay for all costs associated with replacing the Seifarts' defective drywall — some $700,000. But the company maintains that it did nothing wrong and shouldn't be penalized further.

This is a bellwether case being watched closely by lawyers, insurance companies and others with a stake in the legal mess surrounding Chinese drywall. This trial will help set reimbursement levels for the hundreds of other lawsuits.

According to Gonzales, who's on the national plaintiffs' steering committee for Chinese drywall, the case is important in another way as well.

"This is the first inkling that we have that Knauf had real knowledge of the problem," he says.

Knauf is a German-based multinational and the largest manufacturer of Chinese drywall used in the U.S. The company is the defendant in a series of lawsuits being heard in federal court in New Orleans.

In a statement, Knauf confirms that it investigated customer complaints of odor in 2006 and conducted tests, but it found that the drywall "had no adverse impact on homeowners' health."

As to why it didn't issue a recall of its product, Knauf says it "can only act on complaints filed by its customers."

Attorney Victor Diaz, who represents about 150 South Florida homeowners in a class-action lawsuit, says Knauf and Banner Supply weren't the only companies that knew early on there was a problem with Chinese drywall.

"We already have evidence that five or six builders in South Florida had complained about this problem and asked that the drywall be removed and replaced with U.S. board," he says. "As we press this discovery further, I suspect that we'll find it was fairly well-known in the industry."

It now appears that one reason Chinese drywall became such a major problem is that for at least two years, it was swept under the rug by manufacturers and others in the homebuilding industry.

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