After knowingly importing and selling defective dehumidifiers since 2012, executives Simon Chu and Charley Loh have been charged with failure to furnish information under the Consumer Product Safety Act (CPSA), as well as committing fraud against the U.S. Consumer Product Safety Commission (CPSC). The defendants were also charged with conspiracy to commit wire fraud. As the first criminal prosecution for the failure to furnish information under the Consumer Product Safety Act, this indictment shows the growing resolve of the U.S. government to combat corporate fraud of all forms.
According to the indictment, Chu and Loh imported the dehumidifiers from China and sold them out of companies that remained unnamed in the indictment. In 2012, the executives received a video from a consumer that showed the dehumidifier catching on fire. To follow-up with the claims of the video, Chu and Loh had the plastic components of their dehumidifiers tested, which confirmed that the parts used could easily catch on fire due to their non-compliance with safety standards.
However, these issues were not initially reported to the U.S. Consumer Product Safety Commission in an effort to avoid a recall, which would result in costly fees for the executives. After inconsistent reports regarding the safety of the dehumidifiers, the CPSC eventually ordered a massive recall for the dehumidifiers sold by Chu and Loh, as well as other Chinese imported dehumidifiers. In total, the recall involved 2.2 million dehumidifiers in September of 2013.
Under the Consumer Product Safety Act, manufacturers, importers, and distributors of consumer products are required to report any potentially harmful defects to the U.S Consumer Product Safety Commission immediately. However, prior to this indictment, there have been no criminal prosecutions under the CPSA. This case is representative of the determination of government agencies to investigate corporate fraud of all types and hold those guilty parties responsible for their actions. Going forward, it is possible that the case against Chu and Loh represents the first of many criminal prosecutions under the Consumer Product Safety Act. But, until then it is increasingly important for employees of corporations to come forward with the knowledge of any wrongdoing to aid in the prosecution of these crimes.
To learn more about this case or other types of fraud, check out the Jeffrey Newman Law Whistleblower Help Center and blog!