Is Drywall the Next Chinese Import Scandal?

By Tim Padgett / Miami

Howard Ehrsam, left, recently founded Chinese Drywall Screening, pulls off an electrical plate to see if the electrical receptacles show any signs of Chinese drywall in a home's construction in Port St. Lucie.

Soon after Danie Beck and her husband bought their two-story townhouse west of Miami in the summer of 2006, she thought an animal had died somewhere behind the walls. The strong sulfurous odor lingered, she says, and she began having dizzy spells that would keep her in bed for days. She began suffering from insomnia and sore, swollen joints. The house, too, appeared to be ailing: Lights began blinking on and off, and Beck noticed discoloring of her wood furniture. The air conditioner, an indispensable appliance in South Florida, kept conking out. "It was an absolute nightmare," the 67-year-old dance teacher. "I felt as if something in this house was hammering me into the ground every day."

It wasn't until her repairman got fed up with fixing inexplicably corroded air-conditioner coils that Beck finally discovered what she and her homebuilder suspect is the source of the poltergeist: the Chinese drywall of the house's interiors. Beck is among hundreds of homeowners in Florida alleging that toxic levels of chemical pollutants such as sulfur are issuing from contaminated drywall made in some Chinese factories. At least four class-action lawsuits have been filed in Florida; others have been filed in California, Louisiana and Alabama.(See pictures of China's electronic waste village.)

The U.S. Consumer Product Safety Commission is also investigating the complaints. If the drywall proves to be the culprit, plaintiff attorneys say tens of thousands of potentially affected homes could see a further drop in house prices already hammered by the credit crisis. "A lot of these people are just getting hit over the head a second time," says David Durkee, a Miami attorney who has filed one of the suits. "This could have a further impact on the mortgage crisis by giving overwhelmed homeowners another incentive to just walk away from their houses."

During the heady but reckless days of the recent U.S. housing construction boom, builders were desperate for materials, and drywall was especially in demand. Before 2005, drywall imports into the U.S. from China had been negligible; since 2006, more than 550 million lbs of it have been shipped here, mostly to Florida. The imports amount to a fraction of the 15 million tons of drywall produced domestically each year, but it was used to build more than 60,000 homes in at least a dozen states — including in some post-Katrina reconstruction in Louisiana.

More than half the homes built with Chinese drywall are in Florida. Some of the suits there target construction companies; others include German drywall manufacturer Knauf and its Chinese subsidiaries — which in turn are being sued by at least one Florida homebuilder, Lennar Corp. Miami-based Lennar, which is also suing the U.S. suppliers from which it bought the Chinese drywall, has confronted the problem and initiated a program to do inspections and remove the offending wallboard in many homes, including Beck's. (The process usually involves moving a family out of the house for at least six months to replace its interior.) Another lawsuit lawsuit defendant, Engle Homes, based in Hollywood, Fla., has also admitted the drywall problem exists in at least a small number of its homes. In a statement regarding houses near Fort Myers, Fla., which are part of Durkee's suit, the company says: "Our initial findings tell us that that this seems to be an isolated incident that has affected a small number of Engle Homes in the Fort Myers, Fla., area and we are currently developing a plan to assist our affected homeowners."

Drywall is made from gypsum, a soft mineral, that is pressed between thick paperboard. Plaintiff attorneys say the allegedly toxic drywall material probably originated in at least one gypsum mine in China and possibly others. (A few years ago, Knauf and other drywall producers had received complaints about a mine in Tianjin, China; Knauf says it stopped using the mine toward the end of 2006.) But Knauf denies that its product is toxic, and argues it is not the only supplier of Chinese-made drywall to the U.S. Contacted by TIME, the company referred to a statement by its subsidiary Knauf Plasterboard Tianjin Ltd.: "Any low levels of sulfur compounds present in the air in homes are not a health risk...The substances identified in testing are in no greater amounts than [in] the air found outside homes or in soil, marshes or the oceans."

The Florida Health Department has not yet concluded its own tests of the drywall in question. But Beck and other homeowners insist the common symptoms suffered by the Chinese-drywalled houses and their occupants can't be mere coincidence. The problem came to light last year as those homeowners began commiserating on the Internet about rotten-egg smells in their houses and rashes of nosebleeds and other ailments. At the same time, exasperated air-conditioner repairmen began complaining to builders about copper coil corrosion in newly built houses. The air-conditioning companies concluded it was caused by high levels of airborne sulfur and other moldy toxins. Wires in outlets, appliances and lamps were going bad, too, as was wood. That in turn raised red flags for consumer protection groups, already alarmed in recent years by the flood of defective Chinese-made products like toothpastes and toys.

Depending on how many homes ultimately prove to be contaminated, the repair costs — Beck says Lennar promised to "tear my house down to the studs" — could run into the tens of millions for builders. And that does not include the unspecified damages sought in the lawsuits. One problem plaintiffs face, however, is that many of the builders being sued have gone bankrupt in the recent housing bust. And even if homes are repaired, they may still carry the taint of having been drywall victims. Beck paid $344,000 for her townhouse; it is now worth $245,000 — less than the amount owed on her mortgage. And she worries that she may not be able to sell it at some point in the future even after Lennar fixes the drywall problem. "I'll admit there are moments when I'm tempted to ask Lennar to just buy the house back," says Beck, whose husband died last year of cancer. (His illness was not related to the drywall.)

Beck's fortunes have taken a pummeling in recent years. She and her husband bought the townhouse after an arson fire destroyed the Miami home they'd live in for 39 years. And she's become accustomed to seeing its value jeopardized by the threat of hurricanes and by Wall Street malfeasance. But she wasn't expecting any trouble from China.

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