USA: Two corporate executives have been indicted in the first-ever US criminal prosecution for their roles in a scheme involving defective and dangerous domestic dehumidifiers.
Simon Chu, 63, of Chino Hills, California, and Charley Loh, 60, of Arcadia, California, were charged with a multiple-object conspiracy to commit wire fraud, to fail to furnish information under the USA’s Consumer Product Safety Act (CPSA), and to defraud the US Consumer Product Safety Commission (CPSC). In addition to the conspiracy charge, the indictment also charges both defendants with one count of wire fraud and one count of failure to furnish information under the CPSA.
According to the indictment, Simon Chu was part owner and chief administrative officer of two companies in City of Industry, California, that imported, distributed, and sold Chinese-made dehumidifiers to retailers. Loh was part owner and chief executive officer of the same two companies.
The Consumer Product Safety Act requires manufacturers, importers, and distributors of consumer products to report “immediately” to the CPSC information that a product contains a defect that could create a substantial product hazard or creates an unreasonable risk of serious injury or death. This duty also applies to the individual directors, officers, and agents of those companies.
The indictment alleges that as early as September 2012, Chu, Loh, and their companies received multiple reports that their Chinese dehumidifiers were defective, dangerous, and could catch fire. They also allegedly knew that they were required to report this product safety information to the CPSC immediately. Despite their knowledge of consumer complaints of dehumidifier fires and test results showing problems with the dehumidifiers, the indictment alleges that Chu and Loh failed to disclose their dehumidifiers’ defects and hazards for at least six months while they continued to sell their products to retailers for resale to consumers.
“When corporate executives delay reporting defective consumer products to the CPSC, it puts consumers at needless risk for injury or even death,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.
The indictment further alleges that as part of their scheme, Chu and Loh deliberately withheld information about the defective and dangerous Chinese dehumidifiers from the retail companies that bought the dehumidifiers; the insurance companies that paid for damage caused by the fires resulting from the dehumidifiers; and the CPSC.
Loh and Chu allegedly continued to sell the Chinese dehumidifiers to retailers with false certifications that the products met safety standards; caused a company employee to solicit materials that would falsely portray to an insurance company that the dehumidifiers were safe and not defective; and sent an untimely report to the CPSC that falsely stated that the dehumidifiers were not defective or hazardous.