Company sale snarls recall effort

WASHINGTON — Simplicity, a well-known maker of children's products, was already in serious financial straits when 4-month-old Katelyn Marie Simon, of Noel, Mo., died in a Simplicity bassinet Sept. 29.

Less than two months later, the Reading, Pa., firm was losing money and its lender forced it to find a buyer or new financing. The sale of Simplicity's assets in April to SFCA, an affiliate of a Bethesda, Md. private-equity fund, complicated efforts by federal safety regulators to get the bassinets recalled after the death of a second infant Aug. 21.

The chain of events illustrates the difficult task facing the Consumer Product Safety Commission (CPSC) even after Congress enhanced its powers this summer, and the balancing act the agency faces when trying to get companies to recall products without putting them out of business, which leaves consumers with no remedy.

Simplicity's recall last year of more than 1 million defective cribs was a major reason the company was forced to sell its assets, subsequently leaving the CPSC unable to force new owners to recall the bassinets.

"When we negotiate with a company, we do take into consideration whether the company will be able to financially to support the recall. In some cases, it doesn't work out that way," CPSC spokeswoman Julie Vallese said. "First and foremost is the safety of the consumer."

Kenneth Waldman, the former president of Simplicity, and his father, William Waldman, declined through an attorney to be interviewed for this story.

Simplicity was founded in 1988. The company designed children's furniture and nursery products and manufactured them in countries such as China, Indonesia and Vietnam, a May 2008 National City Capital Markets release said.

Simplicity quickly grew into a major brand distributed at big-box retailers such as Wal-Mart, Target, J.C. Penney and Big Lots!. The company at one time made more than $100 million in revenue, according to Scott Victor, an investment banker with National City Capital Markets who worked on the sale of the company's assets.

In May 2005, it recalled 575 cribs because the white paint chipped off, posing a choking hazard. In December 2005, Simplicity recalled about 104,000 Aspen 3-in-1 cribs sold under the Graco brand after eight reports of children getting trapped when the wooden mattress support came loose, including one case where a child turned blue.

The month after the recall, an infant died in an Aspen 3-in-1 crib, and the company and the CPSC alerted the public again about the crib in February 2006.

In June 2007, it recalled 40,000 Nursery-in-a-Box cribs because they came with incorrect instructions for installing a drop-side rail. When installed upside-down, it could come off, creating a gap where infants could get caught and suffocate.

The company had known of the hazard. That month, it settled a wrongful-death case with the California family of Liam Johns, a 9-month-old who died when his crib's drop side came off in April 2005, said Charles Kelly, the lawyer for the boy's family.

Two other infants died when drop sides came off, leading the company in September 2007 to recall 1 million cribs, the largest crib recall in U.S. history.

A little more than a week after that recall, Katelyn Simon died in a Simplicity bassinet. Authorities notified the CPSC. Her family also notified Simplicity and Wal-Mart, where the crib was purchased, said Jeff Slaton, the family's lawyer.

By November, Simplicity was facing a class-action lawsuit.

The privately held company was losing money and its lender, the Wilmington Savings Fund Society, forced it to explore a sale or refinancing, said Victor. Victor found a buyer, SFCA, an affiliate of Blackstreet Capital Management.

SFCA bought the right to sell products under the Simplicity brand but did not take legal responsibility for products made under its previous owners, the Waldman family.

So when a second infant, a 6 1/2-month-old from Kansas died in a Simplicity bassinet Aug. 21 and the CPSC asked SFCA to recall the products, the company refused.

That forced the CPSC to issue its warning to consumers Wednesday to stop using Simplicity 3-in-1 and 4-in-1 convertible bassinets and to direct retailers Thursday to recall the products and issue refunds.